Tuesday, April 15, 2008

My Ethical Viewpoint

A reader recently questioned indirectly my ethics, especially due to me making choices recently to tackle other items ahead of debt payments. Here's the points in no particular order:

- Tree removal versus Debt

Yes, for most situations removing trees in your property are luxuries. Here's our reasons besides the "nice to have done" point:

1. Safety: We had 2 trees that were within 15 feet of our house (and our neighbor's house). Like clockwork every July we have had huge limbs come off the trees (20+ feet). They had missed the houses in the past, but the only ones really left were aimed for the houses. I don't need a 5-10K repair bill because I wanted to stay focus on our debt obligations.

2. Timing: The better times to cut down trees is when there are no leaves on them. It speeds up the process, less brush, etc. That prevents us from paying more money.

3. Time of year discount: During the summer months, tree cutters are a lot more busy because that's when everyone thinks of their outside projects. By doing it now instead of right before the storm, it prevented us from paying more money later.

- Replacement car versus Debt

Yes, we are a 2 car family even though I'm the only one that goes to a job during the week. Here's the main reason we decided to replace my car instead of paying more to debt: My wife's emotional well-being. I know my wife, we have fought a couple rounds of depression together. I know that when she does not have a car at the house, she fights loneliness, feeling trapped, unable to get together with others. Say what you will, but my wife comes before any debt.

- Fun money versus Debt

Theoretically, our fun money should be at $0 since we made prior obligations to our creditors. It's a great idea, but in real life it doesn't work too well.

1. We need to keep running the race. I tried the $0 fun money, it was not worth it. I'd much rather work an extra hour or two than be in that situation.

2. Our "free" entertainment items break down sometimes. My wife has her sewing machine that has brought her many days of entertainment, I have my computer. In the past couple of months we have had a power supply need to be replaced on my computer and some parts replaced on her sewing machine. The money came from our fun money.

- Debt settlement

I view it ethically ok to make settlement offers. Here's when:

1. When the alternative is bankruptcy. Almost 2 years ago I lost my full-time job and started working at Taco Bell. They don't pay much, but we had a whole lot of debt. Everyone was saying I should file for bankruptcy since I was unable to pay. I'd much rather give them something than nothing.

2. The debt has become "old". During that rough period of time when we couldn't pay, most of our creditors ended up selling our debt to collectors. The collectors paid pennies on the dollar in the hopes of collecting something more in the future.

3. They are offering settlements or are willing to listen to one.

4. Bringing the account "current" would be equal to the settlement amount. Because of the many months we could not pay anything, the amount to become current kept growing. At this point in time, if I asked them how much to be current, they would pretty much say as much as the settlement amount.

5. You don't have the money in the bank to pay them everything they want.

- Not making monthly payments on all debts

1. To be current is impossible: We went through a time where we could barely pay the mortgage, let alone any debts. Because we couldn't make payments back then, the amount to bring these accounts current is astronomical.

2. What we could give them would not be enough: This goes back to #1 regarding being current. I've only had 1 creditor be reasonable regarding paying them something monthly until we could do more, which we have done fairly consistently the whole time I've had this blog (except for 1 month, which was really tight).

PS: I've been mulling this post over for over a week, there's probably more I could have put in, but I'm wanting to get this up.

7 comments:

Jim ~ mydebtblog.com said...

I figured you were thinking about how to go about explaining what you're doing. Regarding the tree removal, part of that is safety but the flipside was to put a garden in. Transportation and peace of mind is important so I understand your car situation. Fun money is important too as long as you keep it low or put it to good use like your garden. It's very important to make sure the family is taken care of before the debt even becomes an issue.

Here are my issues with the debt settlement. Debt can be paid monthly, settled, not paid at all, or BK. Obviously not paying them at all is what got you into the situation you're in. Job loss is what it is. Since they sold the debt off as bad debt, you have no choice but to settle or file BK. Not being current on a debt or making a large payment to become current is another story. If you stop paying someone for a period of time of course they're willing to do a settlement. Filing for BK just wipes out old bad debts but does nothing to your student loans. All you can do with those loans is defer them until your cash flow increases, then try to make larger payments on them to get them to go away.

I guess I don't understand your ethics when it comes to debt. You got into it, had a job loss and couldn't pay it, so it became old and bad and now you're settling it. An old bad debt being paid is better than not paying it. Obviously you're going to do what is best for you and your family, the settlements just rub me the wrong way. At least you're doing monthly payments with one creditor. If you're not making enough money to live within your means, then it sounds like you're living beyond it and not meeting your obligation to make payments on your debt. You claim it's impossible to keep all your debts current, but have a mortgage. Maybe going deeper in debt in a mortgage to buy a house was a problem, even though you have renters to help you make the payment? I'm not going to change your position on this subject, it's just my two cents.

Dan said...

Jim - I find it funny that you have a lot to say when your blog states that "public opinion can be harsh" and "I’m not sure about how much detail I will go into regarding my postings about specific personal matters"

It seems that you are also behind financially and were/are living above your means. Just because you have the luxury of being able to stay current does not make you any better then the blogger that you think is not ethical. It would be interesting to see what position you would be in if you lost your income.

I think he is doing the best he can in a tough situation on top of a bad economy. I doubt selling his house in this market would even help. From what I have read, it seems that he is working as hard as he can as well as taking in boarders which I am sure is not the most pleasant situation!

Some of the blame also has to be placed on the creditors, they should not be lending in excess of what someone can afford. A great example of this is the sub prime mess which is just another example of corporate and stock holder greed at the expense of the less fortunate.

Dan said...

Jim - I find it funny that you have a lot to say when your blog states that "public opinion can be harsh" and "I’m not sure about how much detail I will go into regarding my postings about specific personal matters"

It seems that you are also behind financially and were/are living above your means. Just because you have the luxury of being able to stay current does not make you any better then the blogger that you think is not ethical. It would be interesting to see what position you would be in if you lost your income.

I think he is doing the best he can in a tough situation on top of a bad economy. I doubt selling his house in this market would even help. From what I have read, it seems that he is working as hard as he can as well as taking in boarders which I am sure is not the most pleasant situation!

Some of the blame also has to be placed on the creditors, they should not be lending in excess of what someone can afford. A great example of this is the sub prime mess which is just another example of corporate and stock holder greed at the expense of the less fortunate.

Rebecca said...

Jim - After viewing your blog, I also find it questionable for you to be so judgemental on this blog. Your blog shows that you made a large (and in my opinion) unnecessary purchade of a tv recently while you still have unpaid financial obligations.

Goodbye Debt - Keep up the good work! It seems like you have a very practical plan in place. Debt settlement is simply a business transaction to these large companies. If the agree to settling, then, in my opinion, your obligation to them is met. I think I will tell my friend who is in a similar financial situation about debt settlement.

Jim ~ mydebtblog.com said...

I love being criticized on another blog regarding things from my own but that was expected. We're all going to see things from a different perspective. I just question not paying creditors at all while spending money on other things. Believe me when I say it though, family always comes first. Food, shelter, utilities, clothes, transportation, and then the extra can go towards debt or whatever.

Dan I never asked for detailed specific stuff, just trying to grasp the ethics of debt settlement. I'm living well within and below my means but am paying for the period when I wasn't (i.e. college). Using the phrase of 'lost income' is so cliché, go create the income doing something else! If my job was gone tomorrow I wouldn't be running to fast food expecting the same pay rate. The economy isn't bad, it's slow, and you bring up sub prime lending like it’s the reason the creditors are screwing people over. Just ride it out.

Rebecca brings up that I bought a TV but still have prior financial obligations. It is your opinion that my purchase was unnecessary, and I certainly don't think it's a need, it's something I wanted. The difference is every single financial obligation I have is being kept current. I'm also paying off a lot of debt and have no problem buying something without going into debt to do it.

Rebecca said...

Jim – As someone who has been there, done that with my own past history of credit card debt, I feel that I may be a voice of experience for you. Almost 9 years ago my husband graduated from law school with a significant amount of credit card and student loan debt. After a few years of hard work and sacrifice, we not only paid off that debt, but now we have savings and investments.

I am currently working on my doctorate in clinical psychology which has brought me to the internet world of debt blogs. I did a project in one of my classes about the psychology of debt and while, mainly, my research was mostly conducted through research journals, I got hooked on a few debt blogs after conducting a random internet search. I like checking back from time to time and am always happy to see the great progress everyone is making.

I don’t comment on your blog because even though I might disagree with your decisions, I respect the fact that you are free to make your own decisions about your financial plan. In the world of anonymity through the internet, it is all too easy to criticize someone else’s decisions on a blog just to make ourselves feel better about our own situations. Isn’t that why you took a break from your own blog? I have read your comments on this blog and on DebtKid’s blog and it intrigues me how you could so easily criticize people who are in the same situation as you. And, yes, you are in the same situation as Goodbye Debt and DebtKid - just with different balances.

Until your debt is paid off, you have savings in the bank and have planned for your retirement, maybe your comments on others’ blogs should be more supportive instead of critical. Good luck on your financial path, Goodbye Debt and Jim. It might take what seems like a long time, but you will be so proud of yourselves when you have accomplished your goal.

Jim ~ mydebtblog.com said...

The only common situation I'm in with Sick of Debt and DK, or any PF blog is we all have debt we're trying to pay off in order to create wealth. I just think there is a problem when it comes to paying off debt when you're not even paying on debt. Not keeping a debt current just lets the fire burn more. Sure I may not be reducing my debt as much as I would like month to month, but I keep all the accounts current. That is what my criticism has to do with, and it shouldn't be taken personally either. I can't imagine what they go through when the creditors or collectors call to squeeze blood from a stone.

By the way I do have savings and retirement while paying off debt. Some financial planners believe you should STOP contributions to retirement in order to pay off debt. I don't agree with that plan at all. I shut down my blog for my wife and needed a personal break from it, we all do from time to time. The reason I turned it back on is motivational and to encourage other people to get out of debt. My advice is free and most of the time free advice is worth what you pay for it.