Credit Counseling

Credit counseling success story

In over your head? Help is out there.

Sitting on top of the world. That's where Gary and Lynda Krajacic thought they were in early 1991. Gary had recently received a substantial promotion in his job, had a comfortable salary, and a company car.

"We were saving money. We were in the company 401(k) and we were paying off our bills. We were putting ourselves into a position for future security. Everything was going great," says Gary. "Then came the hatchet."

Gary and 17 other managers were laid off during a company downsizing. "It was devastating. Of all the things that could have happened, I never expected to lose my job," says Gary.

To make ends meet until he found another job, Gary worked at his brother's bar, as a construction laborer and at any other odd jobs he could find. "Even working 60 or 70 hours a week, our income was $25,000 to $30,000 less than what it had been," he says.

The Krajacics' two children were still in the formula-and-diaper stage. Lynda Krajacic, overwhelmed by the stress of the situation, developed a serious anxiety disorder that eventually cost $6,000 for medical treatment.

The Krajacics spent all of their savings, moved in with Lynda's father to save on rent and utilities, then turned to credit to cover their living expenses. At the time, they had about 10 credit cards of various types that they had always paid on time and that carried small balances.

Now, they were in a whole different world. They ran up their credit card debt to more than $30,000. For the first time in their lives, the Krajacics were unable to pay their bills.

All this time, Gary continued working two to three jobs while looking for a more permanent professional job. "It got to be very depressing," he says. "I kept trying to negotiate with creditors. When they would call, I would tell them that they would get their money, even if it took 20 years."

Finally, the Krajacics decided to try a debt consolidation loan. At the bank where they applied, they were turned down because of poor credit. Looking back, Gary says maybe that was the best thing that could have happened.

"After the woman at the bank said we couldn't get approved for a loan, she suggested two other options - bankruptcy and the Consumer Credit Counseling Service," says Gary. "Bankruptcy was never an option for us. I come from a long tradition of people who accept responsibility and pay bills on time. Early on, Lynda and I had vowed that we would somehow, some day, pay back every dollar we owed, even if we had to do it 50 cents at a time."

The bank officer explained to Gary that Consumer Credit Counseling Services (CCCS) is a member of the National Foundation for Consumer Credit, a nonprofit organization with offices across the country. CCCS specializes in helping families get out of debt and back on track financially. "When we found out that their services were either free or very low cost, Lynda and I decided to give it a try. When you're in a situation like this, you put aside your pride and do what you have to do."

Gary and Lynda met with Lynn Gerrity Ames, vice president of the local CCCS. "When the Krajacics came to me, they had been doing everything right," says Lynn. "They were trying to explain their situation to creditors and make payment arrangements, but the situation had become far too stressful for them to deal with on their own."

The first thing Lynn did with the Krajacics was to review their current budget. That's the typical starting point for clients who come to CCCS. "We look at their income and their living expenses - rent, food, the electric bill. Then we determine how much is left over to pay down debt," Lynn explains.

At the time, even with Gary's intensive work schedule, the Krajacics had only about $500 a month to put toward their debt. Not much in the face of $30,000 worth of bills.

Working with this amount, CCCS devised a payment plan for each creditor. "We try to be fair to all creditors in dividing up what money is available," Lynn says. "Usually, each creditor will not receive the specified minimum payment each month, but they will receive a regular payment. That's what counts."

Once a realistic plan was developed, CCCS counselors contacted the Krajacics' creditors. "Third-party involvement adds credibility to the situation," says Lynn. "We tell creditors our plan; then, if necessary, we negotiate to arrive at an amount that is acceptable to them and to our client."

The Krajacics had stopped using their credit cards - a requirement of getting into the CCCS program - so they weren't incurring any new debt. Each month, they sent a check for the agreed-upon total to CCCS, who then paid the creditors on their behalf, according to the established payment plan. "It was such a relief to get out of the middle," says Gary.

Meanwhile, he faced the probability that he was not going to find a new job without retraining. In April 1992, Gary started business college on a special program and surprised himself by doing extremely well, despite continuing to work 60 hours a week.

He graduated with highest honors in September 1993, with an associate's degree in computer technology. The following March, he landed a position as a network support coordinator with TWI, a large computer software, network, and training company.

All this time, the Krajacics continued making payments on their debt in line with the plan CCCS had laid out for them. "The Krajacics stuck with the program, making whatever sacrifices they had to. They never missed a payment," recalls Lynn.

For the client who sticks with a program, getting out of debt usually takes between four and five years, depending on the amount of debt, she says.

In early 1997, right on schedule, Gary and Lynda made the final payment. "I felt like Sly Stallone in Rocky when he wins the big fight," says Gary.

More than a year later Gary reported, "We aren't out of the woods yet, but we're getting close to being financially secure again."

"We use credit cards differently now," says Gary, adding that they are not only wiser, but also richer for their experience. "We're wiser because we learned about managing our financial situation better. We understand that we don't need everything right when we want it," he says. "Now, we look at where we are and imagine 'what if?' If I lost my job, could we maintain our current level of debt? We want to make sure we never go through this again."

As for being richer, "My wife and I know that we always have each other and the kids," says Gary. "As long as we have that, we can do anything."

The best advice he can offer to others facing debt problems: "Get help. You cannot go through it on your own. There are professionals out there who know how to get you straightened out with your creditors, and they are ready to help you."