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The Biggest Losers (of Debt): How a Family Shed $106,000 in Debt

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    The Biggest Losers (of Debt): How a Family Shed $106,000 in Debt

    September 18, 2009

    "How we paid off $106,000 in debt..."

    Meet the Hildebrandts; their frugal ways lost debt, won an award

    Five years ago, the Hildebrandt family of New Richmond, Wis., was juggling more than $100,000 in credit card and personal debt. Through frugality, determination and hard work, they are now -- other than a mortgage -- debt-free.

    At the time, Russell and Kandy Hildebrandts' credit card balances totaled about $89,000, and they owed $17,000 to a family member. While they were current on all the payments, the card companies had begun raising their interest rates, adding hundreds to their minimum monthly payments. Kandy acknowledges that they presented a higher credit risk, given how their balances had ballooned. Even so, with the bump in the required payments, covering the monthly payments was a struggle. "We had to change," Kandy says.

    Change they did. For their debt-fighting prowess, the Hildebrandts were on Tuesday night named the winners of the Professional Achievement and Counseling Excellence (PACE) 2009 Graduate Client of the Year Award. This national award, given by the National Foundation for Credit Counseling, recognizes the hard work and commitment they demonstrated in repaying their debts, and their willingness to become effective managers of their money and change their lifestyle. (Disclosure: CreditCards.com Senior Reporter Connie Prater served as a judge in the awards.)

    Slow Decline Into Debt

    Not that the Hildebrandts' lifestyle was lavish. The couple, along with their twin daughters, Heidi and Holly, lived in a rented 1,000 square foot townhome. Vacations consisted of visits to extended family members in the Midwest. Russell was a chemist with a Twin Cities-based environmental testing laboratory; Kandy was a stay-at-home mom and home-schooled their daughters.

    Russell and Kathy Hildebrandt of New Richmond, Wis., won an award for successfully tackling $106,000 in credit card and personal debt through thrifty spending, a second job and bit-by-bit payments on their credit card balances. They're shown outside their home surrounded by their three children, 14-year-old twins Heidi (left) and Holly, and 3-year-old Joey.

    While the Hildebrandts weren't living extravagantly, they also weren't frugal, Kandy notes. They purchased most items, such as clothes for the girls, new. In addition, they had medical expenses related to Russell's diabetes and several miscarriages that Kandy suffered. At the same time, they remained committed to tithing, or giving 10 percent of their income to their church. The accumulation of day-to-day expenses left the family going a bit more into debt each year.

    Bankruptcy? No Thanks

    Several family friends recommended that they file for bankruptcy. That was out of the question, Russell says. "We were committed to paying off our debts." They also resolved to continue to tithe and home-school their daughters.

    To get started, Kandy met with Linda Humburg, a manager with FamilyMeans Consumer Credit Counseling Service (CCCS) in Stillwater, Minn. Linda reviewed their finances, and developed a five-year debt management plan. While the schedule was daunting, the Hildebrandts signed on. "If we didn't make it, we knew that we would go out trying," Russell says.

    Several steps were key to making the plan work. Kandy and Russell eliminated discretionary spending. Kandy began buying generic food and frequenting thrift stores for clothing purchases. They stopped exchanging Christmas and birthday gifts with each other and their relatives.

    Even with the drastic cutbacks, the Hildebrandts couldn't cover the $2,000 they were sending to CCCS each month to be distributed to their creditors. At that time, the sum amounted to about half of Russell's take-home pay. So Russell took on a second job cleaning a local grocery store several nights a week from midnight to 4:30 a.m. He would arrive home from his day job, eat dinner, catch a few hours of sleep and head to work. After his shift, he would go back home, sleep a few more hours and then get up for his day job.

    Slow Progress

    The first two years were particularly tough. Russell's work schedule was grueling, while Kandy managed just about everything at home on her own. Moreover, while their credit card balances were going down, the drop wasn't yet noticeable. For about a year, the Hildebrandts made do with one car, until they received a used van from Kandy's family.

    Even so, "they didn't let anything deter them from progress," Humburg says. "If the money wasn't available, they simply did without." Equally, important the Hildebrandts kept their goal -- becoming debt-free -- in mind.

    After the first few years, the Hildebrandts' efforts finally seemed to be bearing fruit. Their card balances were coming down, and some were getting paid off. As one card reached zero, CCCS would apply the money that had gone to it to the remaining balances. As a result, those cards would get paid off even more quickly.

    About this time, Kandy became pregnant with Joey, who's now 3. While recognizing that a new child would mean additional expenses, the couple was thrilled. "The joy he brought to a negative, grinding situation was the light we needed," she says.

    Dream Home Appears

    By the fall of 2008, the Hildebrandts had one year to go on the payment plan. Russell even started daydreaming about a new home when he saw a three-bedroom rambler for sale in New Richmond. It had all that they were looking for, including a large yard and a separate bedroom for Joey. Russell let a real estate agent know that they liked the house, but added that the family would have to pay off their debts before taking on a mortgage.

    Several months later the agent called and asked if the Hildebrandts would be interested in a rent-to-own agreement. The current owner of the house had some health concerns and was eager to move. The monthly rent would be $1,000, which included $200 to be escrowed for closing costs. They could manage it.

    Earlier this year, the owner wanted to accelerate the sale process. In April, using the tax credit for first-time home buyers, the Hildebrandts were able to swing the purchase and pay off the remaining balances on their credit cards about six months ahead of schedule.

    Now, the Hildebrandts are content in their new home and free of debt, other than their mortgage. Russell has been able to quit his second job and spend more time with his family -- and catch up on sleep.

    Frugal Habits Stick

    Several things haven't changed, however. Kandy remains a dedicated bargain hunter. Shopping online, she found eight bar stools for their kitchen island and basement family room for $24; at a yard sale, she bought a $2 desk for the girls. The Hildebrandts "had to completely rethink how they spent and what was a need versus a want," Humburg says.

    Both Russell and Kandy say that while bankruptcy might have seemed like an easier option at the outset, it would not have been as satisfying. They wouldn't have learned to take control over their money and spending. What's more, with a bankruptcy on their credit record, they wouldn't have been able to purchase a house when they did.

    Their advice to others? "Get out of debt," Kandy says. "It's a chokehold."

    Source:
    Yahoo Finance
    http://customsites.yahoo.com/financi...106000-in-debt
    Last edited by Flamingo; 09-19-2009, 12:09 PM.
    _________________________________________
    Filed 5 Year Chapter 13: April 2002
    Early Buy-Out: April 2006
    Discharge: August 2006

    "A credit card is a snake in your pocket"

    #2
    Actually, its kinda sad.

    Just think where they would be if they had file BK at the time, made those changes, and SAVED that extra money.

    Comment


      #3
      Originally posted by HHM View Post
      Actually, its kinda sad.

      Just think where they would be if they had file BK at the time, made those changes, and SAVED that extra money.
      Yeah I agree. Although it's still admirable. Stupid but admirable.
      Filed: 6-7-2010 341: 7-15-2010 DISCHARGED: 9/17/2010

      Comment


        #4
        I just read this article on yahoo before signing on to the forum and I was thinking the very same thing. I read it mostly because I wanted to know how they paid off that amount of debt, ok, they used CCCS, so did we. We had a 5 year plan but I was dumb enough not to put all our cards in the plan so while paying on the CCCS balance, I was also paying a $400 minimum payment every month to American Express Blue. Then "life" happened. I needed to change my payment date to later in the month with Blue and they said sure but it would take 2 months to go into effect and in the meantime as a reward they were jacking my interest rate up because I was going to be late. Then a family member stole my identity, racked up credit card charges on multiple cards and I didn't want to prosecute them.

        Anyway, I admire the family in the article for doing what they feel is right for them but if they think bk is the easy way out, shows they are not very knowledgeable at all.
        Filed: 8-19-09
        341: 9-21-09
        Notice of Discharge: 11-28-09

        Comment


          #5
          Let's just do the math on this real quick. As best as I can figure, they were paying $2,000 into CCCS for 54 months (near the end, it says they paid everything off 6 months early).

          Since this is over 5 years ago, if they filed BK at the time, they would have been old law, probably would have been able to do new law chapter 7 (probably could do a chapter 7 new law).

          So, if they filed chapter 7 54 months ago, made the "same" changes, and were able to save $2,000 a month, at the 5 year mark, they would have $138,578 in the bank (this assumes a simple interest rate of 5%), if the money was more smartly invested, who knows how much they could have had.

          Instead, they have zero money in the bank, a mortgage, and a bunch of second hand clothes. Granted, they are out of debt, which is a huge benefit, but I am not really sure they are better off than if they had filed bankruptcy.

          As was previously stated, admirable; stupid, but admirable.
          Last edited by HHM; 09-20-2009, 07:04 AM.

          Comment


            #6
            I have to agree to their character, but not wisdom. Once the CCs started raising their interest on previously spent balances, that would have justified bk to me.

            However, in this story, it shows one vital truth. For those who think they just can't go frugal, and must have this or that, it can be done. Those people had a real goal, and lived on nothing compared with what they were making in income. If they can do all this with an income those of us on a fixed or no income can make it through until better times.

            Some of our "Newbies" (and we all were there) believe that better times will never come. It always does come though. That is what is wonderful about time. Time does heal all things. Patience is the medicine for the healing. 'Hub
            If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

            Comment


              #7
              Stupid indeed. I even would go as far as to question the character of the father. Not in the fact that he was trying to pay the bills, but that he spend all of his time trying to obtain that dollar or asleep. What about the time he should have been spending with his wife and kids?

              My version of character means placing your family first.
              All information contained in this post is for informational and amusement purposes only.
              Bankruptcy is a process, not an event.......

              Comment


                #8
                Originally posted by frogger View Post
                Stupid indeed. I even would go as far as to question the character of the father. Not in the fact that he was trying to pay the bills, but that he spend all of his time trying to obtain that dollar or asleep. What about the time he should have been spending with his wife and kids?
                My version of character means placing your family first.


                Bingo!... A slavery of life$$..

                Comment


                  #9
                  Regarding going frugal, you can only go frugal to a point, it really depends on how much income you have. A person making $90,000 per year can go frugal and save a bunch of money, a person making $25,000 per year, is already living frugal by necessity, not much room to improve.

                  Also, good point about family time. You are right, this family made a "choice" to be slaves to debt.

                  Comment


                    #10
                    the folks who destroyed the economy over the past several years were fortunate enough to have other friends who run the printing presses of america.

                    if the regular person had a clue, they'd stop paying their debts.

                    "Moral" is a good thing...as long as those preaching it hold themselves to the same standards and not use it as a means to control others.

                    I don't think this is even admirable. I think it is stupid beyond compare.

                    Comment


                      #11
                      Originally posted by poorold View Post
                      the folks who destroyed the economy over the past several years were fortunate enough to have other friends who run the printing presses of america.

                      if the regular person had a clue, they'd stop paying their debts.

                      "Moral" is a good thing...as long as those preaching it hold themselves to the same standards and not use it as a means to control others.

                      I don't think this is even admirable. I think it is stupid beyond compare.
                      Well yes and no. We cannot have a country or economy where every person goes out, racks up credits card debt buying crap they cannot afford and then says oh well banks problem now.

                      When people do this it's us regular people who lose in the long run. It causes high unemployment and a long term recession. I am as guilty of this as the next person but I do not agree with people amassing debt and then washing their hands of it. There are people from various states that the country should be really angry with.
                      My comments are solely based on my opinion. The information and links that I have
                      posted are provided solely for informational purposes, and do not constitute legal advice

                      Comment


                        #12
                        Let's not devolve this thread to politics, us vs them, big business is bad, etc. Let's stay on point.

                        Comment


                          #13
                          This has nothing to do with politics. Everyone filing bankruptcy is not good for the nation. We already have record high unemployment rates. I am certainly not judging anyone but I will never endorse people recklessly amassing debt and then filing. I will never endorse the sneaky lending practices or property flipping craze that lead to this financial mess either.
                          My comments are solely based on my opinion. The information and links that I have
                          posted are provided solely for informational purposes, and do not constitute legal advice

                          Comment


                            #14
                            The amount of unsecured debt discharged in the country, in a year, amounts to LESS THAN 0.75% (for the numbers challenged, that is three quarters of one percent) of the assets under control of the 4 largest banks (Citigroup, JP Morgan Chase, Bank of America, and Wells Fargo). Those four banks control over $7 Trillion in assets. Bankruptcy, IS NOT hurting the country.

                            See this blog for some perspective.
                            http://askmethner.com/?p=709

                            endorse people recklessly amassing debt
                            That is a "fatal" assumption. It was that sort of "assumption" that lead to the 2005 bankruptcy amendments, no one has ever put forth evidence that those who file BK amass their debt recklessly. Just because it is "possible" does not mean it is "reality."

                            The other issues, regardless, what other option is there. If we did not have bankruptcy to help people get out of debt, what would happen...do you want debtor's prisons. If these people cannot pay their debts, what happens to them, they would probably become a burden on society in a direct way with welfare etc. What I cannot endorse is small mindedness and unfounded assumptions when it comes to this issue.
                            Last edited by HHM; 09-20-2009, 08:10 AM.

                            Comment


                              #15
                              HHM,

                              I appreciate your perspective and if you had asked me my views before I found myself desperate, I would not have been so forgiving.

                              I was "raised" to be responsible and never once would have thought I would ever be in a position where I would be filing for bankruptcy nor ever "morally" thinking I would.

                              I was a CPA and have an MBA in Finance. I was the Director of Planning and Analysis (BUDGETS!!!) for a large company.

                              I took risks with investments, real property and my career that all went south over a period of 4 years.

                              And I've suffered and learned.

                              First, not to judge (except I do judge those who think they "deserve" their lifestyle).

                              Second, the banks and credit card companies are more guilty than the debtors BECAUSE it is THEIR job to evaluate the creditworthiness of a borrower.

                              The banks and credit card companies got it WRONG because they used little models (based on credit scores) that were cheap and easy to use instead of really looking at someone's ability to repay.

                              And when the Banks and Credit card companies went bankrupt, their FRIENDS at the Treasury and Federal Reserve made them WHOLE, even allowing them to keep their jobs and bonuses and so on and so forth on the BACKS of the american taxpayer--and there are fewer of those every year too..

                              Understanding THAT makes me realize how screwed up the system is.

                              Comment

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