Huge Debt Paid Off!
I’ve got a very special treat for you today. My cyber-friend and fellow personal finance blogger Travis Pizel, along with his wife Vonnie, recently made the last of 56 payments through a Debt Management Plan (DMP) to erase a whopping $109,000 in credit card debt. I am genuinely astounded by their achievement, and I asked Travis to share their story.
I know you’ll appreciate Travis’ candor and openness about how he accumulated a six-figure credit card debt. After working as a credit counselor, I know how tough it is, and the sacrifices required, to fulfill a DMP. During my time as a counselor, I had exactly one client who came to me with credit card debt in excess of $100,000. When that individual learned the size of the monthly DMP payment she’d need to make for 60 months, she effectively fled my office.
What Travis and Vonnie have done is truly incredible and demonstrates that, with commitment, huge debts can be tackled successfully without bankruptcy.
By the way, in my opinion, a DMP is the best way for most people most of the time to repay unsecured debt, like credit cards.
Repaying $109,000 in Credit Card Debt: One Couple’s Amazing Story
MC: I can’t imagine how you and Vonnie must have felt when you pressed the button on that final DMP payment on $109,000. What words come to mind when you think of that moment?
Travis: The first word that pops into my mind is the word, “Disbelief.” When something life changing happens, movies have ingrained into us that something spectacular happens. In this case it was simply a phone call. Vonnie and I kind of looked at each other and said, “We’re really done?”
From very early in our marriage we’ve had to dedicate a significant amount of our income each month towards our credit card bills. It’s just been a way of life, at that moment in time we didn’t know life could be any different.
March is our first month where our budget does not have to include that huge payment. The word that comes to mind is still, “Disbelief.” I cannot believe that that money is now at our disposal instead of marked for a bill.
Then came a feeling of relief. Big time relief. I can literally breathe easier knowing that the debt monkey is off our backs.
MC: Let’s back up for a minute. How did you let $109,000 in credit card debt accumulate? Was it simply spending more than you earned for a long time, or were you hit by job loss or other hardship?
Travis: It was simply over spending over the course of the thirteen years of our marriage. I felt like to be a successful father, husband and provider I needed to be able to give my family anything they wanted. To say, “We can’t afford that” was to admit to being a failure. So, I found ways to keep our finances treading water.
I would apply for new lines of credit with a promotional low interest rate, and transfer balances around. It would save from having to make a monthly payment, and many times lower the monthly payment until the promotion ended. When we ran out of money I would supplement our income with credit cards. My wife knew we were in credit card debt, but she didn’t know how much. After things started snowballing I hid from her the severity of the situation. After a while the hope of getting out of debt no longer even entered my mind. My goal was simply to get through the next two weeks until the next payday.
I broke the trust between my wife and I, and honestly when we finally were forced to make significant changes, coming clean to her about our true financial state was the most horrifying conversation I’ve ever had. I honestly didn’t know if she was going to stay with me. Lucky for me, she did. We now communicate about our finances in some way almost every day. We have scheduled financial meetings twice a week. We have come out of this experience with a stronger relationship and a stronger marriage.
MC: Do you know, or can you guess, your monthly credit card interest expense just before you enrolled in the DMP?
Travis: If I had to guess, I would say the interest totaled around $2000 a month. Our total credit card payments were very similar to our debt management payment – which was $2489. So, only a few hundred dollars went towards the balance before we enrolled in the program.
MC: Many people—probably most in my view—in your place five years ago would have chosen bankruptcy as the way out. Did you consider bankruptcy, and why did you opt for the DMP instead?
Travis: We viewed bankruptcy as a last resort. Knowing that there would be court proceedings and the toll it would take on our credit (not that we should have cared at the time) we wanted to explore every avenue possible before going that route.
We searched the internet for debt relief options. Quite honestly, we didn’t even know what our options were. Over the course of about a week I self educated myself on Debt Management Programs, Debt Settlement Programs, and the difference between the two. I also investigated several debt relief companies, and ended up going with one who’s customer base was overwhelmingly positive in their online community.
MC: You made, what, 60 monthly DMP payments? What was the size of the payment, and what changes did you have to make to your lifestyle to fit such a large payment into your monthly budget?
Travis: We made 55 payments of $2,489, and one final partial payment. To be honest with you, it was a slowly whittling down of our monthly expenses and lifestyle changes. In the beginning it was really tough as we had never really done a budget or lived within our means. We had a lot of month left at the end of our money. We basically cut every discretionary activity possible. Each month we looked at every monthly expense and tossed everything that didn’t bring essential value to our lives. We really had no idea how much we needed to change our lifestyle in the beginning, but we learned over time. I would say we finally hit our stride about eighteen months ago.
Over the course of the last four and a half years, our perspective of what is important in life has changed significantly. We have learned to value the people we love, and the relationships we have with them. Instead of throwing a dinner party where we invite the whole neighborhood over and foot the bill for all the food and drinks, we just invite our close friends over and sit on the deck, joke around, and have a beer (bring your own, of course). We’ve learned to love family movie night where we all snuggle on the couch and enjoy time together. We’ve made a lot of GREAT memories over the last 55 months.
MC: Okay—now you’ve got an “extra” $2,500 in your budget every month that was dedicated to the DMP. What are your plans for this surplus?
Travis: We’ve had this discussion several times, and we’re starting out by dividing up the funds this way:
1.) increasing our monthly budget a little just to make life a little easier on ourselves.
2.) Paying off other debt – we do have two lines of credit remaining: one that we could not include in our program, and one that we (stupidly) chose not to.
3.) Playing catch up with our retirement accounts
4.) Starting college funds for the kids
We toyed with the idea of allocating all of the funds to paying off the remaining consumer debt, but to be honest with you we are experiencing a bit of debt fatigue. We are well past needing the assistance of a debt relief program, have our budget and spending under control, and now feel like we want to take a bit of a break from hard core debt pay off. Maybe after a few months we’ll shift our funds again and attack those debts with a new sense of intensity
MC: Though you’ve persevered magnificently, I’m sure your experience with this debt and the DMP is not something you’d wish on anyone. In a nutshell, what’s your advice to people who want to avoid a situation like you found yourself in five years ago?
Travis: Our biggest problem was a lack of communication and a sense of entitlement that we deserved to spend the money the way that we did. It’s OK to not be able to afford everything right away when you start out on your own. Communicate with your significant other from the start, and build your finances and your lives together.
MC: Travis, thank you so much for sharing this unbelievable and inspiring story. Best of luck to you and Vonnie as you savor life unburdened by that huge debt!