Debt got you down? Get ready to tackle your toughest money worries with the info you’ll learn in this episode. Tune in as Tori sits down with Leslie H. Tayne, Esq.— a leading financial attorney with over two decades of experience in debt relief and credit solutions, to discuss everything from crushing medical bills to navigating the student loan maze.
This episode is your financial lifeline. Learn how to fight back against creditors, avoid common debt pitfalls, and find the path to financial freedom. Whether you’re drowning in debt or just want to be smarter with your money, Leslie’s no-nonsense advice will help you reclaim control of your finances.
Key takeaways:
- Debt is emotional: Leslie emphasizes that debt isn’t just a financial burden but also an emotional one. People often feel shame, anxiety, and isolation when facing debt, which can compound the issue. Acknowledging the emotional aspect is critical to beginning the journey toward financial stability.
- Understand your debt: Whether it’s medical bills, credit card debt, or student loans, Leslie breaks down the various options consumers have. She stresses the importance of knowing the differences between private and federal student loans, as well as exploring solutions like income-driven repayment plans and debt settlement options.
- Proactively manage your debt: Leslie encourages proactive communication with creditors, especially when dealing with medical debt. Hospitals and providers are generally open to negotiating payment plans, often interest-free, making it easier to manage large medical bills.
- Know the truth about debt settlement: While debt settlement can be a successful solution for many, Leslie warns that it’s not a quick fix. It requires a long-term commitment and can come with risks like lawsuits and credit damage if not handled correctly. However, when done right, it can lead to financial relief and improved credit scores.
Notable quotes
“I always say, never, ever consolidate a federal loan into a private loan. You will lose all federal advantages and any future programs that might help you. Once you make that move, there’s no going back”
“When you take out student loans, you’re essentially mortgaging your education and career. It’s not a five-year plan; it’s designed to be a 20 to 30-year repayment. That’s something people need to understand upfront.”
“Medical debt is actually one of the easiest to work with. Hospitals and providers just want to get paid, so you can negotiate interest-free payment plans. They’re not trying to take advantage of you—they just want their money.”
Episode at-a-glance:
≫ 00:00 Introduction: The Fragility of Credit
≫ 02:28 Understanding Debt and Debt Relief
≫ 12:28 The Debt Collection Process
≫ 16:36 Medical Debt: Challenges and Solutions
≫ 24:33 Credit Card Debt: Managing and Avoiding Pitfalls
≫ 35:42 The Emotional Toll of Debt
≫ 37:04 Recognizing When You Need Help
≫ 37:28 Finding the Right Debt Settlement Expert
≫ 39:01 Understanding Debt Settlement
≫ 40:04 The Reality of Long-Term Debt
≫ 43:35 Navigating Student Loans
≫ 47:08 Income-Driven Repayment Plans
≫ 47:31 The Pitfalls of Private Student Loans
≫ 48:33 The Importance of Proactive Loan Management
≫ 56:22 Considering Bankruptcy
Leslie’s Links:
Website: taynelaw.com
Instagram: https://www.instagram.com/lesliehtayne/
Book: Life and Debt
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Meet Leslie
Leslie H. Tayne, Esq., is an award-winning financial attorney and a best-selling author. With over two decades of experience, she’s been celebrated as a top authority in the credit and debt relief industry.
As the founder of NY-based Tayne Law Group, P.C., Leslie assists individuals and business owners in navigating complex debt-related challenges. With a holistic and customized approach, she utilizes debt relief strategies to resolve financial issues and foster long-term financial stability for each client.
Transcript:
Leslie Tayne:
Building credit takes a really long time, but damaging it could take a day. It could take you years to get to that 740, 760, 780 credit score, and you’re super proud of it, but the moment you miss a payment and you go behind, it could tank it by 100 points, and rebuilding it takes time.
Tori Dunlap:
Hi, Financial Feminists, I’m going to give you a fun fact that I learned at trivia the other night because I love this and it kind of blew my mind. If you’re new here, hi, we talk about how money affects women differently. I fight the patriarchy by making you rich. I’m a multimillionaire, five million social media [inaudible 00:00:35] New York Times Bestseller, all of that. And if you’re an oldy but a goody, you knew that.
Okay, here’s the thing. This is going to blow your mind. Okay, so Mission Impossible, right? Best movies, I love the Mission Impossible movies. If you are not watching the new Mission Impossible movies, especially the one that just came out, it’s on Paramount Plus, this is not sponsored. They’re incredible. They’re so good. I love them, and Tom Cruise does all of his own stunts and, yeah, fuck Tom Cruise, but also, it’s incredible.
Okay, so the theme song, we all know it, “Duh-duh, duh-duh, duh-duh, duh-duh, duh-duh,” right? Fun fact, in 5/4 time, which music nerds know is not very common, but the fun fact I learned at trivia. Dash, dash, dot, dot, dash, dash, dot, dot, dash, dash, it’s M-I in Morse code. Isn’t that so cool? Dash, dash, dot, dot, dash, dash, dot, dot, dash, dash, dot, dot. It’s so cool. It just makes me really happy. I love figuring out stuff like this about it. So if you knew that already, cool, great. And if you didn’t, I hope I just blew your mind because it kind of blew mine. This is why I spend most of my day on IMDb, for shit like this.
Today’s guest has nothing to do with Mission Impossible, but we’re really excited to have her. Leslie H. Tayne, Esquire, is an award-winning financial attorney and a bestselling author. With over two decades of experience, she’s been celebrated as a top authority in the credit and debt relief industry. As the founder of New York based Tayne Law Group P.C., Leslie assists individuals and business owners in navigating complex debt related challenges. With a holistic and customized approach, she utilizes debt relief strategies to resolve financial issues and foster long-term financial stability for each client.
This is such an important episode, great episode for anyone who has ever dealt with or currently dealing with debt. And we know from statistics that that’s most of our listeners. So any questions about debt, especially debt relief strategies like 0% APR for credit cards, debt consolidation, debt relief, student loan forgiveness. Anything if you’ve ever wondered, can I use a get out of jail free card for my debts? We’re going to talk about it. So we go over your options and rights as a consumer when it comes to debt collectors, understanding different kinds of debt and how you can manage them, again, from student loans to credit cards and more. And then what options you have when it comes to filing for bankruptcy, as well as some myths behind it. “I declare bankruptcy,” as Michael Scott would say, and we talk more about that. So again, if you have any questions about debt, if you’ve ever thought maybe just bankruptcy is easiest, we talk about that. Highly requested in this episode.
If you like this episode as well as you’re going through it, feel free to share, especially this is really important information. We want to make sure that you’re protected and that you know your rights around debt. So please share this episode and distribute it widely. This is incredibly important information that no one talks about. And if you love our mission and these kinds of episodes, you can subscribe to support the show. Okay, let’s get into it. But first, a word from our sponsors.
Thanks for being here. I love asking folks in business and personal finance what their first money memory was. What is the first time you remember thinking about money?
Leslie Tayne:
So my first money memory was not a positive one, and I could tell you that the challenge was that money was very negative in the household that I grew up in and there was always strife and stress surrounding it. I remember a limitation of money and that it was something negative. And so I grew up kind of in this household of this thought process that, you don’t talk about it, it’s not my business. My dad would say, “You have a roof over your head. It’s none of your business what goes on,” but yet you’re there and you’re sort of absorbing it as a little kid and you’re seeing your parents interact and have conversations and the struggle. And my parents definitely struggled, certainly when we were little and growing up, financially for a lot of different reasons. And so money was, surrounded a lot of conversations, arguments and issues. And so my earliest memory is nothing good.
And although that definitely shaped me, it left a lasting impact about money and something that I became uber conscious about later on. How was I going to be as a parent? What my thoughts were on money and spending, and it led me to be very independent, financially. From early on, I took jobs and I was working at a young age so that I could be independent and not rely on anybody because it just came with such strife and it was so stressful. Unfortunately, that’s my earliest memory of money, and that definitely shaped my financial future.
Tori Dunlap:
Yeah, I think a lot of people when I ask that question, their memories are not entirely positive. I have that practice in my book and I reflect back to the reader of like, okay, if your money memory isn’t positive, one, that’s completely normal. And two, it typically says a lot about how you manage money. It’s either very similar to how you manage money or it’s the exact opposite, where if your family didn’t maybe grow up with a lot, you’re now overly conscious about money, almost as an attempt to make up for that or to correct it. I always say money gives you options, and it sounds like that was the lived experience, which is like, I don’t want to be dependent on anybody. I want to use money as a form of independence, and that’s, I would argue, it’s best gift.
What specifically drew you to working with clients on debt solution?
Leslie Tayne:
So my first job out of law school, I was advocating for those who were underprivileged in the prison system, and I saw it made a really big difference, but not as much of an impact as I really wanted and I was frustrated about that.
So I had my daughter, my first daughter was very young, she was an infant, and I wanted some more flexibility also with work. And I ended up taking a job as in-house counsel and working in the financial field and learning about debt. And I saw a real need for those… The consumers just had no idea where to go, who to get help from.
A lot of these companies were just popping up these debt settlement companies and people didn’t know whether they could trust them and they didn’t really understand also, the situations that they were in. And I noticed that I could really change them, that I took them from this dark place of financial, what I would even call despair, and to a place of, wow, oh my God, I’m out of debt, and you made such a difference in my life. And so that inspired me a lot to not only branch out on my own, but also try to use my expertise and my skills as an attorney, not only to try to change the face of attorneys and be more accessible and approachable, but also help those with a specific financial need and marry the two together. And that really kind of set me up for where I am today. And it has always been my mission to make a difference, not only in my profession, but also for those that I’ve helped. And nothing brings me more joy than somebody saying to me, “You made such a difference in my life, and yeah, I get what you’re saying. And okay, we can fix this? It’s not the end of the world?” That really inspired me to continue what I do.
And it’s definitely not an easy area. Clients are difficult at times and challenging, and the environment is very challenging, financially, it’s always changing. The landscape is always changing. Creditors are obviously difficult at times as well. But my motivation is really based on the end result and the clients, they’re just so happy and I just get such a high from it and I can really make a difference.
So for me, when I look at the difference of really fixing financial problems, I can fix any financial problem now and I can see it clearly and come up with a plan and be creative with it and move something so rock solid to another spot. And so that’s why I ended up where I am and the place I’m at. And that’s why the debt solution field for me has been something that I really actually enjoy it. Not everybody thinks it’s so fun, but I actually really enjoy what I do.
Tori Dunlap:
Yeah. When you look at debt and folks who get into debt, especially when it gets really, really gnarly, what do you see as the worst culprit of it for your clients?
Leslie Tayne:
There isn’t one thing that’s the worst culprit, it’s kind of a snowball, an impact that is occurring as a result of a number of things. It’s sort of like if you think of it like you’re tripping. You trip and how stable are you? And if you are stable enough, you can catch yourself, but if you’re not stable, it’ll just snowball and you can just spiral and fall, and so that’s sort of debt. If you’re stable financially and you run into a problem, you might trip, but you’ll stand back up on your feet pretty fast. But if you trip and that could be tripping, you got divorced, lost a job, changed your job, family, medical issues, there’s so many reasons why in life a life event occurs that you might trip or have to make an adjustment. But the question is, what happens with that adjustment? Do you have the funds to manage through that challenge? Have you planned appropriately? Where is your money? Where are your debts? And so kind of a perfect storm comes together, it ends up being a serious financial issue.
So I wouldn’t say there’s one culprit. Sometimes it’s mismanagement, sometimes it’s a life event, and sometimes it’s a misunderstanding and a miscommunication with money and finances and debt. And so all of those together will create a situation where you could end up in very serious financial constraints, including debt that you can’t pay.
Tori Dunlap:
The other thing I see too is that people, they’ll say, “Okay, I have 50K of debt. What’s another 10,000?” Because they’re like, “I’m already fucked, so what’s the point? I’m already gone, so let me just add more to this.” I think just people end up getting into a worse scenario because they’re like, well, it’s already bad, so it’s already terrible. Oh, I already ate half the pizza, so I may as well eat the whole pizza, because it’s like I’ve already went over what I told myself I was going to do. I see that a lot with people getting into debt.
Leslie Tayne:
Right, that it’s like, I might as well just… In for a penny, in for a pound, and be done with it.
Tori Dunlap:
Yes, yes. So they actually make their situation even worse because they believe themselves to be a lost cause and it’s like, well, it’s already bad, it can’t really get worse. And I’m like, no, it can get worse. $10,000 of debt on top of 50K is still $10,000 of debt.
Leslie Tayne:
It is, and I understand that mindset because actually when I first graduated from law school, I had so much debt. I had so much law school debt, and I remember I was in a store, they’re like, “Do you want to apply for a store credit card?” I’m like, that’s never going to happen. I’m never getting this card. And I thought like, well, I guess I’m stuck in this position forever and I’m never going to get myself out of it.
Tori Dunlap:
Right, fuck it, doesn’t matter, yeah.
I have so many questions about debt collectors and creditors, and it’s something that I admittedly, even though I’m a financial expert, I don’t know a lot about because I feel like it’s very, I don’t know, it’s very scary. And then a lot of people don’t talk about it because of the shame that comes with debt. So, at what point in the process do creditors usually start coming after the things you own or even wages? What can people do in that scenario and also, what are they not allowed to take?
Leslie Tayne:
So the debt collection processes is somewhat complex. So the way that it works initially, they’re not going to come after you initially. And there are lots of laws that protect consumers. So usually what happens is you’d have to be delinquent for at least 30 days before that starts, and it starts kind of on the slow process. It depends on the kind of debt, but let’s say it’s credit card debt, it sort of starts a little slow. Hey, you missed a payment, you may get an email, a text message, stuff like that. When it gets out of control, you’re talking months down the road where now you have, it’s with a collection agency, it’s been outsourced from the original creditor. The original creditor tried to collect, couldn’t collect, and then outsourced it to a third party.
And many people actually think that it gets sold. Just because it’s a third party collecting that it’s been sold and they call me up and they’re like, “I know my debt’s been sold and I want to settle it for pennies on the dollar,” but it doesn’t get sold like that these days. And it’s not that quick a process. So even if it’s with a third party, that doesn’t mean that they bought the debt for pennies on the dollar. Many times they’re just a outsourcing agency that is trying to collect what’s called a secondary level. You’ll get calls and stuff.
We don’t see what we saw in the past 20 years ago where you were called a deadbeat or like, “We’re going to come kidnap your dog,” or something like that. We don’t see that kind of stuff anymore. The Fair Debt Collection Practices Act, which is the law that regulates the consumer debt collectors, not original creditors. Original creditor would be like American Express, Discover, Capital One, those people. Once it cycles into a collection agency, that’s when that particular law kicks in. And there’s a lot of regulation on it these days, and we really don’t see too many rogue debt collection activities where you’re getting calls in the middle of the night, which they’re not allowed to do, calling you names, disclosing to third parties and saying, “Hey, you know your coworker doesn’t pay their bills?” We don’t see that kind of stuff anymore.
Where we see that stuff is in the business world, business debt, something called merchant cash advances, which is not an actual loan, it’s like a futures purchase, and I see that a lot. I have a lot of women entrepreneur clients, and when you don’t have the requisite personal credit, you start to look for alternative sources of funding and that can get you into trouble with these type of businesses, which will then be extremely aggressive.
But the debt collection practice, the biggest impact really is on your credit. Right? You can block the calls, you can try to ignore them and that kind of stuff, but the moment you’re behind 30 days, it’s going to be reported on your credit and building credit takes a really long time, but damaging it could take a day. So it could take you years to get to that 740, 760, 780 credit score and you’re super proud of it, but the moment you miss a payment and you go behind, it could tank it by 100 points. And rebuilding it takes time.
So when you’re looking at it as somebody who you’re trying to empower yourself and what is it that you need to do? If you ignore it, the credit piece, and it’s not like you could say, like you said, can I ignore this? And then in for a penny in for a pound, and who cares? It will catch up with you because at some point someone’s going to need to check your credit and without requisite credit, you’re going to have a really hard time getting anything from apartments to cars to even cell phones and other things like that. So it’s definitely not advisable to ignore it, but once they start calling you and kind of harassing you, and again, I don’t really call it harassment, it’s kind of a methodical process. It’s put into what’s called a dialer. So it comes from overseas and they put it into dialers and computers and the computer spits it out every certain amount of time. So, it’s not like it was when I first started in this business where, boy, you could be called up at your home by a debt collector and made to feel really bad.
Tori Dunlap:
I had to go to the ER a couple of months ago, I’m fine, but I’m checking literally, you’re making me nervous in a good way where I’m like, did I pay that bill? I want to make sure I paid that bill. But that leads me into, I think a common type of debt that we get asked about that doesn’t feel as much like “your fault,” it’s more your circumstances, is something like medical debt. And I think it’s so frustrating because with that, it’s kind of unavoidable. And especially in the United States, healthcare just costs so much money. So, what options does somebody have if medical debt is a factor in their financial picture right now?
Leslie Tayne:
So the laws are changing actually, on medical debt. So the Biden Administration announced that next year they’re going to eliminate all medical debt from credit reports. So, and that’s a good thing for those that are suffering with a $25 missed copay, but that’s now going to be a thing of the past. But that doesn’t mean you can’t be sued.
So just because something doesn’t appear on your credit shouldn’t be the motivation to not pay it. And unfortunately with medical debt, and I see this with many of my clients, is that it’s not just a copay. If you’re sick, if you’re really ill, unfortunately, there’s bills that come from if you go into a hospital emergency room or you get admitted, you could end up with 15 different bills from every single person who came in to see you and it’s very overwhelming. And you don’t know going into a hospital asking the question, “Does everybody who’s treating me take my insurance?” Because sometimes you find that anesthesia doesn’t take your insurance or whatever is happening to you doesn’t take your insurance. So 10 out of the 15 people take your insurance and that’s paid, but all of a sudden now there’s these other bills and you don’t understand why.
Tori Dunlap:
Well, and it’s the last question you think to ask, too. If you’re in a medical situation, especially one that feels dire or stressful, let’s say you get some sort of diagnosis, especially like cancer, the last thing I’m thinking about is asking, “Hi, do you take my insurance? What are the protocols here?” I’m thinking about how-
Leslie Tayne:
So, I do.
Tori Dunlap:
Yeah, of course, but if I get a cancer diagnosis, I mean, maybe because of personal finance, that would be more on my mind, but the average person, you’re just dealing with the emotional ramifications of hearing a lot of information at once.
Leslie Tayne:
And it’s scary, sometimes those are emergency situations.
Tori Dunlap:
Right, right.
Leslie Tayne:
Heart attacks, all kinds of things happen, and you’re not thinking about it.
Tori Dunlap:
Strokes, yep.
Leslie Tayne:
But if you’re going into a hospital, and what I noticed today in hospital admission is it’s all electronic. So you’re signing everything electronically, you can’t even read it. But traditionally, you can ask them to print it. If you have the thought process, you can ask them to print the documents and not sign it electronically. You could say, “I want to make sure everything is covered.” And then I have in the past, personally, made notes, anytime I’ve had, let’s say colonoscopy, endoscopies, any of these regular things that, yeah, my doctor takes it, but how do I know the anesthesiologist takes it? When my mind is coherent, I’m writing, “All services must be covered under my insurance. I am not providing approval for out-of-network services.” So while again, the average person doesn’t think that, and then when you’re in emergency situation, you’re not thinking it, but it is something to consider when you’re going into medical because my clients come, I mean, I’ve seen hundreds of thousands of dollars in medical bills.
And so that, on the heels of let’s say like you said, a cancer diagnosis, God forbid, or a heart attack or a loved one gets injured or something happens. And then so while you’re healing, all the bills come and then you’re like, you’re first like, I’m out of work. I haven’t been able to work, so I don’t have any money really coming in, and my bills are piling up at home, and now I have the medical debt. How am I going to pay this? And again, it’s not about the credit report because the providers can sue you and they do sue in medical circumstances, and it’s very hard to fight that because as the consumer, you’re really at a disadvantage with the medical stuff because you don’t know what was submitted really to the insurance company. Was it checked properly, done properly, the paperwork? It’s very hard for the consumer on the medical end.
Tori Dunlap:
And I have so many friends, and obviously our community is largely women. The fun side of healthcare, okay, I’ve gotten pregnant, I want to give birth, the cost of that. Right? We’re talking like cancer diagnoses and strokes and all of that. But the other side of it is like, cool, I just had a great medical procedure, which is I gave birth, but the cost of that is extraordinarily expensive too.
Leslie Tayne:
It is. I remember when I was pregnant with my first daughter and I was using a doctor and they were like, “Here, we came up with a whole payment plan.” I’m like, “What do you mean, a payment plan?”
Tori Dunlap:
Payment plan?
Leslie Tayne:
“I have insurance.”
Tori Dunlap:
Right.
Leslie Tayne:
So I just ended up switching doctors because it wasn’t in my network and at the time we just didn’t have the money to do that, and so we ended up switching. But my daughter actually was born with a very interesting transient issue, a blood disorder. And so she ended up being in the NICU for eight days and then needing subsequent care for something. So, right, you have this baby and then you end up with other issues and you have no idea what’s going to happen next.
So yeah, positive things, but again, trying to just navigate that and be your own advocate because I find that if you don’t ask the question, and it doesn’t matter if you offend somebody at the hospital or your doctor’s office, like they kind of guilted me a little bit into changing doctors like, don’t you want the best care? And I’m like, but I’m in New York. I can get the best care and still get it in my insurance.
Tori Dunlap:
Right, also, I have to be able to afford the best care. Yeah.
Leslie Tayne:
Right, right, and I can’t go into debt having this baby. I had student loan debt still and we didn’t have any money, and that didn’t make sense. And so people could try to guilt you into it and I was like, I’m pregnant and this is not going to work. And so you have to advocate for yourself, feel comfortable saying, creating boundaries financially, and saying, “No,” or, “What is this going to really cost me? What am I looking at here from start to finish with anything that you’re doing?” Especially medical wise.
Tori Dunlap:
So for somebody who does find themselves with medical debt that they can’t pay, what happens next and what are their best options?
Leslie Tayne:
So unlike other debt, medical debt is super easy to work with. Hospitals and providers, they’re just happy to get paid. So you can call them up and it’s always interest free, and you call them up and say, “Listen, can I give you 50 bucks a month?” First of all, figure out your budget because I find I had a client today say to me, they signed an agreement and then they were like, “I can’t keep up with the agreement.” So I’m like, “Why did you sign the agreement?” “Well, I thought it would hold me over for several months.” I’m like, “It doesn’t hold you over, you have a settlement agreement.” So don’t go into it with like, hold me over for a couple months and make an agreement you can’t keep. Really look at your budget and say okay, so you have to pay the bill. So where in your budget can you fit this in comfortably and say, “All right, so $50 a month makes sense.” Have a conversation with the provider.
I have found in the medical debt arena that it’s really unnecessary at times to go to somebody even like myself who does this for a living, because in the medical arena, they really are very willing to take your payments. They just want you to pay the bill. They’re not looking to screw you over, they don’t want to sue you. It’s a different ballgame, different than credit card. The credit card debt, that’s a different ballgame, but in the medical arena, call them up even ahead of time. So let’s say you need major dental work, all right, which costs thousands of dollars or something like that. You can say, “Listen, I need major dental work. Is there a way I can start the payment plan now? Can I give you money per week, per month, bi-weekly?” Whatever your pay schedule is, and build up and get to that point where I can cover most of what I need to cover or kind of be proactive about it, if you can.
Tori Dunlap:
You perfectly asked my next question, which is like, let’s talk about credit card debt because I feel like that is one of those slippery slope, and we probably get asked about it a lot. And I see it’s probably the most common debt with our audience, and it’s typically some of the most expensive debt, right? Because we’re not talking student loans, where your average interest rate is something like four to 7%, we’re talking about 18 on a good day, 30% on a bad day. So credit card debt, what are your options? And then if it goes into debt settlements and debt settlement companies, I feel like there is this belief of like, oh, I can hit the staples that was easy button and just settle with a company. But is that the option that you want to do?
Leslie Tayne:
So we’ll start with settlement and work backwards. So debt settlement is uber successful if it’s done right under the right circumstances, but it’s a catastrophic failure when it’s done incorrectly and there’s so many nuances to it. But if you’re getting to this debt settlement side of things and you’re considering, what do I do with my credit card debt? You’re already at a point where, you’re at a pain point and at that pain point, you need to consider different options. And certainly debt settlement is one.
When you are starting out with credit cards in the first place, you kind of feel very grown up-like, having your own credit card, but it’s probably one of the most expensive ways to borrow money. And I think most people don’t realize that, that you are borrowing money. It’s essentially similar to a loan, and you’re borrowing money at astronomical rates. I mean, you want to complain about student loan rates and you want to complain about other rates these days. The credit cards have notoriously, this is nothing new, that they’ve been 18 to 26% for 25, 30 years, since I’ve been in this business. And you miss a payment, you default, you are up at the default rates, and they have a lot of control over the process. They can lower your available credit, thereby increasing your utilization ratio, and therefore impacting your credit. They can make it more difficult for you to use that card.
And so I always ask people, “Why do you have credit cards? Why do you have your credit cards? And do you need 25 credit cards? I mean, yeah, why not one or two?” So let’s break it down. So in the credit card world, you only need two to four credit cards. Maybe you have, and I’m not going to tell which ones are better than others, but you only need one or two, right? And there’s different kinds and some stores take different ones than others. So, and they all offer different benefits.
So when you’re taking your credit card, if you’re going to pay it off, then you don’t care about the interest rate. Who cares what the interest rate is if you pay it off every month. But if you get into a situation where you’re going to float that money, meaning you can’t pay it off and you’re going to carry a balance from month to month, then the interest rate is really important. And the benefits that you get from that card will be completely negated by the interest. So you could get cash back, you could get airline points, you could do anything you want, but when you don’t pay that bill and your interest rate is 18 to 25%, you have negated every benefit that card has given you, and right in one month, depending on the balance. So while they’re enticing, there’s lots of enticements to take credit cards, it becomes a problem if you’re not managing it appropriately. So, and they can really work for you. They’re a great financial tool to achieve all kinds of things if you use it to your advantage.
And so, how do you use it to your advantage? Well, you can’t rely on it as income. So if you are supplementing your income with credit cards because you don’t have enough money to pay your day-to-day expenses, you have a problem and you’re in debt and you have to figure out, why do I not have enough money and why am I using my credit cards? Because if you’re using your credit cards for that purpose, that means that you won’t pay the balance in full. You’re going to make minimum payments. So every month that’s going to compound, meaning the balance is going to get higher because there’s interest, and that interest the following month is going to be compounded to principle, and then there’s interest on top of it. So there’s your slippery slope.
So if you’re using it to supplement your income, then you have to look and say, “Hey, I have a problem. I don’t have enough money to pay my bills, so I need to use credit cards and I can’t pay it off every month.” So that’s the time where you have to dial it back and take a look at what’s happening financially. Is it the summer months? Maybe you’re a teacher and you’re not being paid over the summer, or maybe your summers are better months than others, but you have to budget better. And so you have to figure out, why am I using those cards? Once you figure out why you’re using the cards, then you know what the deal is.
Most people who come to me are using the cards because they don’t have enough money to meet their financial obligations. Something got out of control and the card now has snowballed into this, I need this card, I can’t live without this card. And then you end up taking more and more cards. You look for other options like balance transferring, that’s my favorite fail in many cases because it’s a fail in most cases. And it’s a fail because they’re not looking at the… Same thing with the credit cards, if you don’t know your interest rate and you don’t know when your billing statement turns over, at what point it cuts off for that month, and you’re not checking your online dashboard or whatever it is that you use to manage these things regularly to see what your spending is that month, or keeping track of it, it’s going to be completely out of control. And you’ll have no grip on what’s happening.
And credit card debt can spiral so fast. And most people say to me, “Oh, I wish I came to you like nine months ago or a year ago.” That seems to be like that sweet spot. And so once you’re in that situation, now you have to figure out, what can I do? And if you’re that person who’s using it to supplement and you can’t keep up because you have a cashflow issue, then you’re going to be starting to look for things like debt settlement.
And the challenge with debt settlement, which we could do a whole show on debt settlement, is that it is wildly successful. Like my clients who come out of debt settlement end up with higher credit scores, more cashflow, and understanding of their debt, management of credit cards a lot better. But the reverse of that is lawsuits, tax issues, irreparable damage to their credit, looking at bankruptcy now as options when it’s not done right. And the challenge is that in this environment, in any environment, it’s very easy to take advantage of consumers who are vulnerable. And when you’re vulnerable, when you’re in the vulnerable population for whatever reason, whether you’re not understanding finance as well, which makes you vulnerable. Whether you are financially vulnerable because you have a limitation, you have other stressors that are making you vulnerable, you could be taken advantage of. And many of these companies pop up and have popped up over time and have taken it unfortunately, advantage of consumers.
And now there’s lots of state laws that prohibit it. Connecticut prohibits it, Wisconsin, Maryland. There’s all kinds of states that prohibit some of this activity, as a result of the bad apples that pop up taking advantage of consumers. But again, the consumer, then you don’t even realize you’re being taken advantage of because you’re not understanding what’s happening. And I had somebody else on another program tell me, “Three years I was in a program and I didn’t even know that it was debt settlement.” You have to read the fine print and ask the question to be your advocate. What’s happening to me? Who am I going to? Who are these people and where do they come from? And am I talking to a salesperson or am I talking to somebody who really understands? And is it being outsourced? There’s so many questions that you would need to ask.
But again, going back to that spiraling of the credit card debt situation, it is the number one debt problem. There’s no doubt that, and aside from the student loan issues, the credit card debt is so easy to get into. It’s just pulling out your credit card or it happens so easily. You’re on vacation and you’re like, screw it, we’re on vacation. I’m going to buy this for vacation, I’m going to buy that for vacation. I’m watching it actually with my own daughter who’s going to be heading out on a vacation with her friends, and she’s like, “I just need one more outfit. I just need one more outfit.” And I’m like, “What are you doing? What are you doing? This is the one and done. You’re going to this place and you’re going… Can you really budget this?” And you can see how it just ends up spiraling like, oh, I just need this and I just need that. And so I hardly ever go on vacation, so I’m going to use my credit card, or you’re getting someplace and you don’t realize what it costs to get around. So your car service situation costs a lot.
Tori Dunlap:
Taking an Uber, or, yep, yeah.
Leslie Tayne:
So it’s not always just mismanagement or a misunderstanding or you’re living off of it. If you get divorced or if you have to move suddenly for whatever reason, those expenses are very high. You need a new appliance or your child is ill or needs something, and you end up putting lots of money onto credit cards that you didn’t have a savings account for, you didn’t have the emergency funds or the emergency fund fell short, and you ended up needing to use the credit cards and now you’re faced with this mountain of debt. And let’s say you spend over the summer, innocently, you’re on vacation, it’s the summertime, it’s great, but now we get into the fall, guess what’s around the corner? Holidays. So before you could even pay off your summer debt, you’re already looking at the holiday season.
Tori Dunlap:
Well, and back to school in between, if you have children, right?
Leslie Tayne:
Right.
Tori Dunlap:
We’ve got backpacks and we’ve got new clothes, and we’ve got new shoes, and we’ve got, yeah. I mean, I remember going to college and being like, okay, every semester is another $2,000 of books.
Leslie Tayne:
That, and the kids, I remember when the kids went back to school, I needed to give money for the PTA, I needed to give money for supplies, I needed to give money for this, at school trips. All these things would come up.
So every month, life is going to have expenses that are unexpected and challenging. So it takes tremendous discipline, and I want to say that, that it’s not easy.
Tori Dunlap:
No.
Leslie Tayne:
It’s not easy at all, and I tell people, “Don’t be hard on yourself,” that this is not easy. It’s a struggle. It’s a struggle for me as somebody who’s a financial expert, and I resolved debt for thousands of people for years. Billions of dollars, millions of dollars at this point. But the, it’s a struggle to focus and remember that, hey, I just used the credit card for something. Do I want to be using it again for something else? Or, I just recently moved, so those moving expenses were really high. And so am I going to be… It’s a conscious thought process, and it should be conscious regardless of how much money you have, because it’s just being financially smart and really being your own advocate and saying, when is enough, enough? What boundaries do you need to set with yourself and with other people, your family members and situations? And it’s hard, it’s really hard.
Tori Dunlap:
Yeah, I echo all of that. And there’s one thing I think we do really well in our work, which is the empathetic version of all of this. It’s like, yeah, it’s really easy to fall into and it’s really hard to get out of, and it’s also so emotional. There’s so much shame, there’s so much anxiety. There’s, I can’t talk about it with other people. I can’t tell everybody what’s going on. Oh, I can’t not spend money on toys at Christmas because what if my kids hate me? It’s just all of that wrapped up into it. And I can hear right now, listeners going, okay, at what point do I do this? At what point do I settle my debt? At what point is this the right choice for me? Do you have a checklist or guidelines around that?
Leslie Tayne:
So it is emotional. So I just want to reiterate that, that it is emotional, it’s stressful. I mean, a lot of people do cry on the phone with me. They cry when we start, we cry when we end. And there’s a lot of, there is shame and embarrassment and lots of feelings that go along with it. And recognize those feelings and say, I understand this is how I’m feeling and it’s normal and it’s okay to feel that way. I really want to stress that because it is an emotional situation and it’s hard to seek help. So when you’re seeking help, I really believe you need to be able to find somebody who really understands and can be empathetic to what you’re going through. So when you start to figure out, when do I need help? When you’re starting to feel that level of stress and anxiety, that’s awareness. Become aware. Why am I feeling this way? I’m feeling stressed because I can’t pay the bills. I’m feeling stressed because… So that’s an indication, that’s a red flag. So that’s step one, once you become aware of it.
And then you’re looking at it and saying, what do I do next? How do I find help? You can find help by looking for experts who can make recommendations, other professionals. You can go online, but do your independent research and make sure you’re comfortable. Make sure you have a set of questions and you can advocate for yourself. What are the services that I’m getting? What is this going to cost me? What is it going to look like short and long term? Who are you? Those are really important questions to ask. And what kind of help am I really seeking? Do I want somebody who is going to advocate for me, or do I want somebody who’s going to give me a self-help guide?
When you understand a little bit more about what you’re looking for, and I hear it a lot on the phone, like sometimes, most people don’t know what they’re looking for. So when they call me up and they say, “This is my debt problem,” and I say, “This is how we could resolve it.” And some people say, “It seems so easy.” I said, “It’s like trying on the perfect dress. You put it on and it fits perfectly, and you’re like, should I buy this? But it fits perfectly. It’s exactly what you were looking for. So it’s a good fit and it feels good.” And I think really being your own advocate and understanding, being really in touch with your feelings about it, because it’s not just a business decision, and part of it is a business decision because your self debt and your self finances really is a small business. And if you look at it like a small business and you’re running your own personal financial company through yourself, that’s a good way to kind of take a bird’s eye view of what’s happening. But there are a lot of emotions involved and with it, you really need people who are going to be able to be there for you and advocate for you along the way.
Debt settlement is not an easy, overnight process. It doesn’t happen in a day or a week. You can’t promise anything ahead of time. So anybody who’s making you definitive promises, that’s a red flag, that is not going to happen. Money upfront, monthly service fees, all of those are red flags. Guarantees on timeframe, guarantees on settlement numbers, it’s impossible. All these companies change their parameters with the win. Every quarter they’re looking at their different policies and procedures and their numbers, and they make policy changes on a regular basis. And so there’s no way to determine what one bank is going to do today versus what they’re going to do tomorrow, or a year from now when we’re really at the point where we’re able to settle the debt.
And settling debt does require a couple of things that not everybody feels comfortable with. You can’t be current on your payments. You cannot settle debt in any way, shape or form, any kind of debt whatsoever if you’re current. If you’re current and making current on-time payments, it’s designed that way. It’s designed for you to make minimum payments for 30 years. That’s what it is. Student loans, mortgages, cars, even, and your credit cards are designed for long-term payout. That’s how they make money. That’s the business model that you sign up for. So they’re not short-term debts. If you pay everything off, that’s a different story, but if you can’t pay it, they’re long term and they’re not going to make any adjustments when you’re current because they want you to be current. Make the payment, we’re making tons of money on interest, we want you to make the payment.
So, understanding that you have to default is part of the process, and that is a very uncomfortable position. Or maybe you have defaulted and now it’s like you don’t want to open the mail or the email or the phone calls and you just want to shut it off. But when you’re in that situation, once you’re behind, you need help. You are unlikely somebody who understands the process with credit card companies and how to manage them, what to say to them, at what point it’s settle-able. What are the consequences of settling? How to get the best terms, how it’s going to impact your credit or how it’s going to appear on your credit. The 1099C, forgiveness of debt for settling debts over $600. How does that impact you? There’s so many nuances to doing it.
And even though there’s many how to’s, it’s like I try to tell people it’s like changing the oil in the car. Well, we’re all capable of figuring this out and going on YouTube and watching a video and changing the oil in the car, but are we going to make a mess and mess it up? Yeah. So we give it to somebody who knows what they’re doing and can fix it kind of easily for you and guide you and say, “Here’s what we did and what we’re doing.” So I think in the debt settlement world, it’s my strong opinion that you find an advocate who really can help you from point A to point B. From the beginning, understanding what it’s doing to you. How to save money during the debt settlement process. How to have more cash flow. What the budget should be. So that’s the biggest issue. What should your budget be during the debt settlement process? And I tell people who call us up, don’t guess. Guessing doesn’t work, or they say to me, “You tell me what I should be paying.” Well, I’m not in your finances and so-
Tori Dunlap:
Right, I don’t know.
Leslie Tayne:
I can give you a guideline, but I’m not there looking at your finances saying what makes sense and whatnot, and what you can keep up with and what you can’t keep up with. And so it’s important to know that to help yourself. It’s a partnership, a relationship that you’re going to have with a… long-term, because that settlement takes six months to five years to complete. And yes, you can be sued. Yes, it can go to collection agencies. Yes, there’s all kinds of things that can happen during that process, but if it’s managed appropriately, you’ll get through that, no problem. If it’s not managed, you can end up with judgments, wage garnishment, frozen bank accounts. Frozen bank accounts that belong to your mother, your child, your church, your… I mean, I’ve seen it all. How did this happen? I don’t understand, or I thought this debt went away. It’s not on my credit. So how did this happen? And so it doesn’t go away.
And so it’s important to understand that the debt settlement process is a good process, but the how-to is starting with awareness, starting with knowing what’s happening, reaching out to appropriate places and seeing what you feel comfortable with. And then being able to go through the process and stick with the process and follow the parameters so you can come out the other side and get through it.
Tori Dunlap:
We got to talk about student loans. Student loans, as we all know, they’re kind of a different beast. Can we go over some of the options consumers have for both private and for federal loans?
Leslie Tayne:
Sure. Student loans, it’s such a buzzword these days. It’s challenging because most people don’t understand them. When I say, what kind of student loan do you have? No idea. Is it private? Is it federal? I don’t know, I don’t know. So I roll it back and say, well, did you pay during the pandemic? That’s the basic question as I could get out. So, and who’s the servicer? I don’t know. Have you spoken with the servicer? No.
So, there is a huge difference between private and federal student loans. Federals are much easier to talk about first. The federal student loan offers a zillion different options, super easy to work with, lots of repayment options. They are really, truly not trying to screw you over, actually. And from a perspective, from my perspective as a practitioner in this area of debt resolution, when I look at the federal student loan programs and I’ve spoken on them and examined them for many, many, many years, I had my own student loan debt, etc, my children have student loans. So I really understand when I’m looking at the programs, they go out of their way to offer programs and assistance to those who are challenged.
And yes, so again, when you’re taking out a student loan, it’s not like, oh, gee, in five years this should be gone. It’s a 20 to 30 year repayment. You took a mortgage, we should really call it what it is, a student loan mortgage. You mortgaged your education, you mortgaged your career, okay? Because really what it is. So, why do you have it for 20 years? Because that’s what it’s designed for. That’s it. People get so surprised, I’m like, but that’s it.
Tori Dunlap:
Right.
Leslie Tayne:
So with that, how do you manage it? Because when you’re 18 and 20 and taking this stuff, even when I took it, I didn’t know what I… I was in going into law school, I had no idea what I read, I just signed.
Tori Dunlap:
No, you’re 18 years old. It’s the John Mulaney. I’m 18 in sweatpants, I signed on the dotted line to be an English major.
Leslie Tayne:
Exactly. Well, you know what? Oh my God, I love the lake in the middle of the campus, and that’s why I chose to go to the school because it was so pretty.
Tori Dunlap:
Oh, they have really good food. Okay, cool. I’m very happy with my university. I love my university. I managed to get out debt-free because my parents had some money and I worked three jobs. I had saved my own money, worked in summers, and I look now at the cost of my university. I graduated 2016, so not that long ago. I look at the cost of a year at my university. I think we’re at 70K now. One year, one year.
Leslie Tayne:
Yeah, I know, because my kids just all graduated from colleges, and I’m like-
Tori Dunlap:
Mine was 52,000 when I went and I remember thinking, this is ludicrous. Also, I didn’t know what $52,000 was, if that makes sense.
Leslie Tayne:
Yeah.
Tori Dunlap:
When you’re 18, 19, you don’t know how much money that is, and you don’t know that you’re probably, especially for me, a marketing major, you’re lucky to make 52K in the first job out of college for the whole year. You have no concept of money. So yeah, you’re signing on the dotted line and you’re going to the college that, yeah, has a cute lake.
Leslie Tayne:
Yeah. My favorite is like, I want to go to NYU and be a social worker. I’m like, okay, so it’ll cost you $85,000 to go to NYU, and you might make 42 grand a year if you’re lucky in your first job.
Tori Dunlap:
So with student loans, income-driven repayment plans, that’s a question we get all of the time. What are the pros and cons of taking advantage of that kind of program?
Leslie Tayne:
So that only is involved in the federal student loan. So going back to the original question of federal versus private loans. The federal loans offer all kinds of repayment options, including income based and income sensitive repayment plans. Private loans do not offer any of that. They’re private banks and they’ve loaned you money and they expect you to pay. And they may offer you a little bit of a hardship, but none of the programs, none of the forgiveness programs, nothing that happened during COVID. None of that applies to private student loans, and they very often will sue you. We have lots of clients that get sued by private student loans versus the federal student loans where there isn’t a lawsuit process, certainly not at this time. But they do offer programs like you’re talking about, which is the income-based repayment plan.
And so without getting into too much detail on it to really make your head spin, basically, it’s based on your income and what you do is you call them up and you say, “Here’s what I’m making,” or, “I’m not earning any money, and here, what can I pay?” And they’ll tell you what you will qualify to pay based on your income. And so it’s, that’s it in its form. You need to call them to get that number. It doesn’t just automatically happen. So you have to call them up and have a conversation. And again, knowing what kind of loans that you have. And what ends up happening is that because there’s multiple semesters and federal student loans only cover a portion of your student loans. They will not cover, just so you know if you’re going into college, you have kids going into college, federal student loans do not cover all of the expenses related to college. So, especially if you go to an expensive school that exceeds what the federal either grant is or what you qualify for in year one, two, three, and four, you would have to take private student loans on top of the federal student loans. So be aware that the federal student loans aren’t going to cover everything.
So when you’re looking to repay federal student loans, they’ll give you a certain amount of time post graduation to pay. Your servicer will reach out to you. It’s important to give them all of the information. It is the federal government, they know where you are. You can try to run, but you can’t hide, and they know where you are. So it’s not something you could say, “Oh, well, if I don’t tell them, they’ll never find me.” It doesn’t really work like that. So you should tell them, you should be proactive. Make sure you’re getting the notices, and if you’re going to school or graduate school, you can continue to what’s called defer them or push them off. But remember, when you defer loans like these that the interest is still accumulating.
So I always recommend that you try to pay something while in college, and I encourage my own children to do that, who did do that? That they were paying some money towards the federal student loans while in school, whether it was 100 bucks a month, which comes out to $25 a week, and just to pay something so the interest doesn’t compound again. And you don’t end up with huge amounts of debt and that you can, when you come out of school, you can come out with basically what you borrowed. So you’re contributing to your education while you’re in school. It’s the same thing that when there’s a pause on payments and there’s deferment periods, you can make voluntary payments, you just have to go in and manually do them. So even if you qualify on an income base for zero, you could make some payments, but remember, every time you defer them or you qualify for zero repayment, the interest is still accumulating on those loans. And that’s why when you get done with the deferment period or timeframe where your income base then starts to go up, that the balances go up. So if you borrowed 25,000, when you’re done deferring, you might be at 35,000. And so that’s where the challenges come in.
So, it is important to be proactive about it and contact them. Have your income, what’s happening now, here’s my income. What programs can I qualify for? And that’s why I love having a conversation with them because say, what programs are out now? And the programs do change periodically. So when you’re changing economic statuses, you’ve got a job with more money, or you’re getting married and you’re filing now joint tax returns, you want to ask the questions, how does that impact me if I get married and I’m filing now jointly. My spouse makes considerably more money, is that going to be a consideration? And you need to ask those questions before making certain financial decisions. Always trying to find a way to make those payments on the federal student loans.
It is my opinion and has been my opinion, that they will never fully go away. They have given dollar amounts to very specific groups in the population, which makes sense, in terms of forgiveness, but I have seen certainly post pandemic, the prevailing thought process was, well, I’m not going to pay because at some point they’re going to wipe out student loans. I would still have my student loan debt and it’d probably be like $1 million by now if I thought that by now… You can’t go on the concept that you borrowed money and that at some point someone’s going to just wipe it away and I’m not going to pay. And I do see that as a prevailing thought process, that eventually somebody will come along and it’ll get wiped away. So why should I bother paying? That is just not a good strategy when you’re dealing with your student loan debt. It is advisable to make payments and find a way to make some sort of payments on it.
And again, the federal student loans, I’m going to say, will allow you lots of flexibility. So take advantage of the flexibility that’s offered, and be and advocate for yourself on those. And in fact, in some cases when you’re looking at federal versus private, which ones do I pay? I get that question a lot. Should I pay my federal student loans or my private student loans? Your federal loans are going to offer you many more options and if something is going to come out from the government, it’s only going to affect the federal student loans. So if you have private student loans and the interest rates are higher on the private student loans, federal student loans are set by Congress, but the private student loans, there may be a sliding scale on that. So you would want to take a look at maybe paying down as a strategy, paying down your private student loans.
And when you’re talking about consolidation, how do you consolidate? It is always my advice, never to consolidate a federal loan into a private loan, ever. You will lose all, all federal advantages that come out. Any of the programs that ever come out from now into eternity, you will lose those, and you can’t go back from private to federal. So if you consolidate through a federal program with federal loans, that’s one thing, but don’t turn it into a private loan. And private loans, consolidation works, but you have to have very good credit. And very good credit is like 760, 780 and above. And honestly, right out of school, it would be unlikely that you’re going to see those kind of, what they call very good credit like that.
Tori Dunlap:
Yep. I was going to highlight that. Never, ever, ever consolidate federal loans-
Leslie Tayne:
To private loans.
Tori Dunlap:
Excuse me. Yes, and I see a lot of people dependent on student loan forgiveness or thinking like, oh, it’s coming. We support it, right? We vote for it, but also, not just the politicians that you might be voting for, the ones making key decisions, right? You also have Mitch McConnell. So it’s also when you’re thinking about whether this legislation is going to get passed or not, I don’t want to rely or depend, put my financial dependence on politicians on whether I have debt or not. Yeah.
Leslie Tayne:
100%. Never rely on that as they’ll pass something, there’ll be a forgiveness program. It’s a campaign promise. It’s a-
Tori Dunlap:
Absolutely not. Yeah.
Leslie Tayne:
It’s not. Yes, I understand and again, there really are a lot of programs. I’m not negative about student loans at all. In fact, I took student loans. I have a wonderful career that really helped me. It was helpful to my children and it taught them a lot. I believe they can work for you. Again, it’s a tool. Student loans are a tool. If you use it right and you use it appropriately, and again, I had so much debt related to my student loans, you’d think I was scarred and I had PTSD from it.
So for a while I would shudder when I would hear my servicer’s name for many years. But the truth is I got a great career out of it. And yeah, I was in debt and I paid back more than double of what it cost me to go to law school, but I understood that that was the choice that I made. But the other side of it was so positive. So I am an advocate of it as a financial tool. I think it does work, but also I’m an advocate of working to pay it back and finding solutions for those who are struggling with it. It is a problem. It’s hard to understand as an 18, 20 or 22-year-old what that means and how it impacts you in the future. So I get that the population is limited, in terms of really understanding the long-term financial aspect of taking student loans. So by the time you’re 35 and you have a family and lots of other obligations, it’s hard to pay it back at that point. But it is, if you rely on others, it will get you into trouble.
Tori Dunlap:
I can’t end our conversation without asking about bankruptcy, because it’s a question I get and I feel very out of my depths about how to answer it. When is bankruptcy smart for somebody? When should they consider it versus when should they not? And I always think of the Michael Scott, “I declare bankruptcy” clip from The Office. I don’t know if you’re a fan of that show, but that’s always what I think of. Not enough to just, he’s like, well, I didn’t say it, I declared it. Not enough to just obviously say it out loud. So, what does bankruptcy entail? When is it smart for somebody and when would you not advise it?
Leslie Tayne:
So bankruptcy is kind of an extreme solution to a very serious financial situation. You have to qualify for bankruptcy. There’s something called what’s called a means test, and you have to qualify to file either what’s called a chapter seven or a chapter 13. Both are really considered the consumer-based bankruptcy options. A chapter seven will wipe out your debt completely, a chapter 13 as a plan to repay your debts within three to five years that has to be approved by the court. You are in a federal court with a federal judge who oversees that.
Student loans are generally non-dischargeable in bankruptcy, that’s not an option. And so if you have debt, the question is, why would you seek out bankruptcy? Generally, the litmus test for me in bankruptcy is, you’re going to lose your house and you’re at a point where you can’t pay anything. You can’t sell the house, you can’t get out of the house, because you can’t sit there with equity in the house and say, “I can’t pay. I want bankruptcy help to keep me in my house.” It doesn’t work like that. You can retain certain assets through a bankruptcy, but you can’t retain certain assets. There are limitations on retention of assets during a bankruptcy, and you are at the mercy of the judge of making a decision on your finances.
And so if you’re really in dire straits where you have no more money, you have no income coming in or very limited income, you can’t put food on the table, those are really the litmus tests on the bankruptcy circumstance. I have seen bankruptcy work to disadvantage when clients have gone through chapter 13 and repaid 100% of the debt. The judge could force you to pay a hundred percent of it back, plus the court fees and the attorney’s fees. So it’s not necessarily something that will wipe out all of your debt. I also look at it like if you have small amounts of debt, that that’s not always the best thing to do because there are alternatives to help you get out of debt that are less restrictive. That’ll give you more leeway and room to allow yourself the breathing room that you need to get through a difficult financial time. And those are things that should be considered.
There’s nothing wrong with seeking out the advice of a bankruptcy attorney and having a conversation with a bankruptcy attorney to understand whether you qualify, what you qualify for, and what the process looks like. Once you file bankruptcy, it does stay on your credit for quite some time and you will have difficulty with things like certain jobs, security clearance, and certainly also jobs that require licensing series sevens and other things like that. It’s not uncommon for employers to check backgrounds, with bankruptcy being an impediment to certain jobs. It certainly will impact your interest rates. So if you think that you can wipe out your debt and then all of a sudden you’re this great qualifier, you’re just not going to be. There is a box that you have to check on insurance, you’re going to go into high risk categories on insurance, from homeowners insurance will definitely be an issue because you file bankruptcy. There’s all kinds of other far-reaching impact of bankruptcy. So I don’t recommend it unless it’s something that really makes sense.
And I do recommend it for those that it does make sense. And I have sent people to bankruptcy attorneys many, many times under certain circumstances. But that’s where you talk to a bankruptcy attorney and talk to non-bankruptcy attorneys. People like myself who look at alternatives to bankruptcy, where they can look at your overall financial situation and say, “Here are the various options, these are the consequences of that.” But bankruptcy in and of itself is not necessarily the answer because if you haven’t resolved the underlying issue and you file for bankruptcy, you can’t file again for 10 years. So you should hope that if you wiped out your debts, that you can now afford your lifestyle, whatever that is, so you don’t end up back in debt because then it won’t be an option at that time.
And so there’s no scarlet letter for doing it, it’s if you have to do it, you have to do it, it’s understandable, and it does being reprieved to a lot of people really struggling. But if you can avoid it, there are a lot of ways to avoid it and try to get through it, a little through a different path. But those are the two basic bankruptcies and there’s something also called the chapter 11, which is a reorganization, but generally not for consumer base-
Tori Dunlap:
Individuals, yeah.
Leslie Tayne:
I know that that’s a common question about bankruptcy. Should I just file bankruptcy? It’s not a given. So it’s something that, and if you talk to a bankruptcy attorney, they could push you in that direction, but that’s why I recommend strongly that you seek out different options and different opinions and then decide what’s really best for you and your finances. Just because you’re married, you both don’t have to file for bankruptcy, that’s not a requirement. One spouse could file over the other filing, which brings me to a really good point about finances in couples. I’m a big advocate of keeping separate finances with couples.
Tori Dunlap:
Me too, me too.
Leslie Tayne:
Because of things like that, you each keeping your own independent credit scores. It’s very exciting to combine everything, combine bank accounts, credit cards and things like that. But when I’m resolving couples’ debt, I sometimes will say, oh, one person in the couple has two credit cards, the other has six. So my two, we try to get resolved quickly so that we can start rebuilding their credit and keeping that independent. So that if something should happen, you both have two paths to go down, two paths is better than one.
Tori Dunlap:
I want to sum up basically everything we’ve talked about, which is, if you’re going to make any sort of decision, I need you to have a plan, right? Like any sort of, okay, we’re filing for bankruptcy, we’re doing a balance transfer, we’re consolidating our debt, we are potentially looking at debt collection. Everything needs to have a plan because if you don’t get to the root of the problem, nothing changes. If you don’t understand why this happened and how to fix it in the future, this will happen over and over and over again. And to your point, it actually might in many cases make you worse off, in trying to get the solution to things.
So, I want to ask you my last question, which is, somebody out there in debt, what is your best encouragement for them? If they feel like they’re just so overwhelmed and their debt seems insurmountable, what do you have to say to them?
Leslie Tayne:
It’s not, it’s not. It’s not insurmountable, it’s not the end of the world. It’s just debt, and not to minimize a difficult financial situation. It’s resolvable. There are ways to get out of it, but you can’t necessarily do it alone and you can feel very alone when you feel overwhelmed by debt and stressed by it. Seek assistance, a lifeline, somebody that you can talk to about it. It could be a stepping stone to some very wonderful experiences. So I’m about taking that negative and turning it into a positive. What can you learn from it? Where were your mistakes and what can you learn and what can you do differently to help yourself into a better financial circumstance? And learning from it. That one step back and two steps forwards could be so empowering.
And going through difficult times, and we all go through difficult times for different reasons and certainly financially for a lot of different reasons. And so when you’re in that situation, there is a light at the end of the tunnel, and that light could bring so much change to your life. And the challenges that you’re going through are there for a reason. I look at it like that, that, what can I learn from this? What can I extract from it? How can I empower myself? How can I get stronger and better from what I’ve experienced? And can I change the path that I’m on? And seeking help, there’s no shame in it and some sort of lifeline to help you see the light at the end of the tunnel, and just do it.
Tori Dunlap:
This was incredibly helpful. Thank you for all of your education and your guidance. Where can people find out more about you and your work?
Leslie Tayne:
So I’m easily accessible, of course, on the web at taynelaw.com and everything from Facebook, every social media. I’m sure it’ll be all in the notes, but, taynelaw.com, and my book, Life and Debt. And certainly, we are always there as a lifeline. We offer free consultations and phone calls. So if you’re struggling and you need that guidance to where to go, we’re certainly like to be there to support people and guide them and hopefully make a difference in their life financially.
Tori Dunlap:
Yeah, we’ll put all of that in the show notes. Thank you so much for your work.
Leslie Tayne:
Thank you for having me.
Tori Dunlap:
Thank you so much to Leslie for joining us. You can follow her on Instagram at Leslie H. Tayne, T-A-Y-N-E, and you can learn more about her services, as well as her firm, and figure out if that’s something that you might be interested in or might be able to use in your own debt journey.
If you want some free resources around paying off your debts, you can go to herfirst100k.com/quiz, for a free financial plan that we will deliver straight to your email inbox. And for a little more money, we’re talking like 12 to $20, we have an entire chapter about debt payoff in my book, Financial Feminist, and that’s available wherever books are sold. And if you’re listening on Spotify, you might be able to get the audiobook and also maybe for free, if you have a premium Spotify subscription. Thanks for being here, as always, we appreciate you and we’ll talk to you later.
Duh-duh, duh-duh, duh-duh, duh-duh, duh-duh, duh-duh. Okay, thank you for listening to Financial Feminist, a Her First 100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, and Tamisha Grant, research by Sarah Sciortino, audio and video engineering by Alyssa Midcalf, marketing and operations by Karina Patel and Amanda Leffew. Special thanks to our team at Her First $100K, Kailyn Sprinkle, Masha Bachmetyeva, Taylor Chou, Sasha Bonar, Rae Wong, Elizabeth McCumber, Claire Kurronen, Daryl Ann Ingram, and Meghan Walker, promotional graphics by Mary Stratton, photography by Sarah Wolfe, and theme music by Jonah Cohen Sound. A huge thanks to the entire Her First $100K community for supporting the show. For more information about Financial Feminist, Her First $100K, our guests, and episode show notes, visit financialfeministpodcast.com. If you’re confused about your personal finances and you’re wondering where to start, go to herfirst100k.com/quiz for a free personalized money plan.
Tori Dunlap
Tori Dunlap is an internationally-recognized money and career expert. After saving $100,000 at age 25, Tori quit her corporate job in marketing and founded Her First $100K to fight financial inequality by giving women actionable resources to better their money. She has helped over five million women negotiate salaries, pay off debt, build savings, and invest.
Tori’s work has been featured on Good Morning America, the New York Times, BBC, TIME, PEOPLE, CNN, New York Magazine, Forbes, CNBC, BuzzFeed, and more.
With a dedicated following of over 2.1 million on Instagram and 2.4 million on TikTok —and multiple instances of her story going viral—Tori’s unique take on financial advice has made her the go-to voice for ambitious millennial women. CNBC called Tori “the voice of financial confidence for women.”
An honors graduate of the University of Portland, Tori currently lives in Seattle, where she enjoys eating fried chicken, going to barre classes, and attempting to naturally work John Mulaney bits into conversation.
