Family Conquers the Debt Management Plan

Robin Geller’s eyes burst into stars when she walked into a local furniture store and saw a family room arrangement that she knew belonged in her home.

The couch, the ottoman, the recliners, the color, the size, the comfort … it was dazzling. So was the price tag: $4,000, but that didn’t faze Robin.

“There was an ad on the couch that said ‘No payments for two years’ ” she said. “That was just too enticing.”

Robin is a project manager at Duke University and her husband, Greg, is a supervisor for an HVAC company in Roxboro, N.C. This was the summer of 2008 and they had some bills – two car payments, a mortgage, credit cards, two children about to enter college – but so did everyone else.

“I really wasn’t worried when we bought it,” Robin said. “I figured we had two years to save and we could probably pay off the whole thing by then.”

Not quite. The economy went south and so did just about everyone’s budget with it. The Gellers hustled to make monthly car and mortgage payments, but carried balances on all four of their credit cards. There was never a chance to save money for the family room furniture.

When the first bills showed up from the store – with an interest rate of 26.9 percent tacked on – the best Robin could manage was the minimum payment of $28 a month, $20 of which was interest.

She kept paying the minimum for two years. When she looked at the balance in the summer of 2010, she still owed about $4,000.

“At the rate I was going, I realized I’d be throwing that couch in the dump about the same time I finally paid it off,” she said.

Reaching Out For Credit Counseling

That’s when she called InCharge for consumer credit counseling that turned around the family’s finances. The call lasted about 30 minutes as she described her financial situation. When the counselor suggested a Debt Management Plan that looked feasible, Robin’s eyes got all starry again.

“I went home and told my husband ‘I think we’re headed in the right direction,’” she said. “After years of scrambling, I could see a way out.”

The way out wasn’t easy or quick. It took four years of partnership between InCharge and the Geller family.

How A The Debt Management Plan Helped

InCharge secured lower interest rates with the Geller family’s creditors, dropping the rate on the four credit cards to between nine and 11 percent from the 21-28 percent the family was paying. The furniture store dropped its interest rate from 26.9 to 11 percent.

InCharge consolidated the family’s bills into one monthly debt management plan payment that was debited from the family account.

“They did the hard part by getting out interest rates down and giving us a manageable number to make every month,” Robin said. “All we had to do was be smarter with our money. We basically had to stop throwing it out the window.”

That started their debt management plan by eliminating the credit cards. Trips to restaurants were rare. The Gellers started eating dinner at home every night. They bought clothes out of necessity, not on a whim. All purchases were made with cash.

“That was a big change,” Robin said. “We were used to buying with a credit card and worrying about paying for it later.

“Now, we pay cash for everything and when you reach into your purse to get out cash, it makes you think about whether you really need to buy this thing.”

Four years later, the Gellers are just one payment away from being debt free. Along the way, they got their 23-year-old daughter through college and their 20-year-old son has just two more years to go.

The family did open a new credit card – “For emergencies only!” Geller exclaimed – and she and her husband counsel their children constantly on prudent financial behavior.

“We’re giving them the same advice we got from InCharge,” Geller said. “We tell them to think about their spending habits, pay cash whenever possible and, if you’re going to use a credit card, make sure you can pay off the balance at the end of every month.”