The U.S. government can learn a lot about shedding debt from Jerry and Sue Bailey.
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The Jackson, Mich., couple paid off $92,000 in credit card debt in 5-1/2 years. "I still can't believe it when I hear the amount. I don't wish this on anybody," Sue Bailey says.
The couple's massive debt reduction earned them the Clients of the Year award from the National Foundation for Credit Counseling, a nonprofit association of credit counseling agencies that help consumers manage their finances and get out of debt. The winners were announced this week at the group's annual meeting in San Francisco.
17 credit cardsHow did the Baileys end up in such a predicament? From 1992 to 2005, they ran up bills on 17 different credit cards. During that time, they paid for two weddings for their daughters (at a cost of $5,000 each), replaced the transmission in their car when it blew out, made numerous repairs on their home and replaced the roof when it started to leak.
Everything went on a credit card. "We got caught up with 'More is better' and 'How much is enough'," says Jerry Bailey, a pastor. He handled the family finances but didn't let his wife, a nurse, know how much debt they were amassing.
"My first clue was when the people started calling our house," Sue Bailey says, describing calls from debt collectors about unpaid bills. "My husband is very loving and very protective, to a fault sometimes."
The magnitude of their financial woes hit home when he told her they had to put the cost of their daughter's wedding reception on a credit card. When they added up all the bills, the $92,000 total debt was staggering. (See the Baileys' video testimonial about their debt loss.)
"I never thought it would happen to me. It happens to other people," Sue Bailey says of their massive debt. "You feel kind of ashamed that you got there because you believe in paying your debt and paying what you owe."
Afraid of the mailbox, phoneThey recall being afraid to go to the mailbox for fear of the bills they would find there. Sue Bailey says when she was home alone, she checked the caller ID before answering a call. If it was a bill collector, "I wouldn't answer the phone," she says.
"That is no way to live your life," Jerry Bailey says.
The couple sought help in May 2005 from their local credit union. A representative suggested they file for bankruptcy, but the couple dismissed that option. "We just don't believe in that," Sue Bailey says. "We believe in paying what we owe."
The credit union then suggested they contact GreenPath Debt Solutions, a nonprofit credit counseling agency and NFCC member based in Farmington Hills, Mich.
GreenPath and other nonprofit credit counseling agencies enroll financially troubled consumers in debt management plans to pay off outstanding debt. Clients agree to make monthly payments to the credit counseling agency, which distributes the money to creditors each month until the debts are paid off. The agencies have a long track record of negotiating with creditors to reduce interest rates and make affordable monthly payments.
The Baileys' road to debt freedom wasn't easy. Sue Bailey had to briefly stop working as a visiting home nurse when she needed foot surgery. Their GreenPath credit counselor, Mary Haas, stepped in to help, contacting creditors seeking further reductions in payment amounts. All but two agreed to reductions.
"When I hear a success story like the Baileys', it makes me really feel good about what I do for a living," Haas says. "I'm glad that I was involved in helping them achieve their goal of getting out of debt."
Through budgeting, sacrificing and taking on extra work to earn more income, the Baileys paid off their debt in October 2010. Jerry Bailey says he didn't believe it when he got the call from Haas that they had completed the program. He couldn't believe he was finally finished. "I had her repeat it because I wasn't sure," he recalls.
Says Jerry Bailey: "The scripture tells us that the borrower is a slave to the lender, and we really felt that way for a long time. That was true for us until GreenPath came along and helped us to climb out painful step after painful step."
GreenPath CEO and President Jane McNamara says everyone, including the federal government, can learn from the Baileys' debt reduction ethic.
"Not everyone is as dedicated as they were," says McNamara. "They made a lot of sacrifices. They weren't able to spend as much time as they would liked with their children and grandchildren."
She adds: "I have said several times, what they need in Washington is a debt management program. When we talk to people who are overextended, we look for ways to increase income, decrease expenses and balance the budget. This is not rocket science."
Advice to others: save and talkJerry Bailey advises those who may be where he was six years ago to "put just a little bit out of every paycheck into a savings account. Let it build up for when that rainy day comes because it does come."
What would they do differently if they had it to do all over again? "We'd tear up the credit cards," Sue Bailey says.
"Don't get more than one," her husband adds. "You need to have one, but pay it off every month."
Sue Bailey's advice to other couples sharing finances: "Talk to each other; don't play the blame game. We both did it. I didn't blame him. We did it together."
She adds: "If you don't have money to buy something, then you have to ask, do I need it or do I want it and can it wait until later."