Formal debt repayment plans aren't right for everyone

By HELEN HUNTLEY

© St. Petersburg Times, published January 7, 2001

Q. I am thinking of signing up with a debt repayment company that I saw advertised on TV. What things should I consider?

A. Congratulations on recognizing that you have a problem. That's the first step toward solving it. A formal debt repayment plan helps many people conquer what previously appeared to be insurmountable debt. Some creditors give participants in these programs a break on interest and penalties, and the counseling provided may be very valuable.

"Each case is different," said Peggy Schott, who directs educational programs for the Consumer Credit Counseling Service of Central Florida and the Florida Suncoast. "We find out what the problem has been and if it's been solved. We do a budget with them to see what their expenses are. Then we go through their debts to see what it would take to put together a debt management program."

She said the debt repayment plan is not appropriate for everyone. Participants are required to cut up their credit cards and must have income they can designate for debt repayment each month.

Before signing a contract with any company or agency, find out what kind of help you would get and what you would pay for it. Here are some key questions to ask:

Is counseling provided in person? Online? Over the telephone? If you have a serious problem, talking with a counselor face-to-face probably is a good idea.

Which of your debts can be included in the program? Some programs have restrictions.

What fees will you be charged? One heavily advertised non-profit company charges a one-time fee that is about equivalent to the entire first month's debt repayment, often several hundred dollars, plus a monthly charge of $6 for each debt included in the program. Schott's agency, also non-profit, charges much less: a one-time fee of $20 to $50 plus a monthly fee of $20 for the debt repayment program that can be waived in some situations.

To get a referral to an agency near you, check the National Foundation for Credit Counseling's Web site (www.nfcc.org) or call (800) 388-2227.

Q. I own shares of stock in one company that has stopped paying dividends and another that I think may do the same thing because business isn't growing as expected. Should I stay with these stocks or sell them and possibly take a loss now? I am a senior citizen?

A. Sell a stock when you have a better use for the money. I cannot tell you what these stocks are going to do, but it sounds to me as though the outlook for these companies has changed. If you bought these stocks for income and future growth and it looks as if you are not going to get either, that is an excellent reason to sell and put the money in an investment more likely to deliver.

Q. I would like to sell some stock I acquired in a company where I worked in the 1950s, but I do not know my cost to determine my capital gain. To make matters worse, the stock has several splits and spinoffs. I've tried in vain to obtain some understandable information from the companies, my broker, Standard & Poor's and Moody's and I cannot get what I need. Some have verbally said put down whatever you want for cost. Do you have any other ideas?

A. You are obligated to make a good faith effort to determine your cost basis. Should you ever be audited, you want to be able to show the IRS how you arrived at the numbers. Here is one additional suggestion: Try contacting CPA firms or other tax preparers in the city in which the company has its headquarters. A firm that has been in business for many years probably has had other employees of this company as clients and may have some or all of the information you need in its files.

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Are you a savvy investor with advice you'd like to sell? Or are you willing to pay to find out what other people think? If you fit in either category, check out Soapbox.com from the Motley Fool and competitor iexchange.com, two free markets for buying and selling investment advice and information. Be sure to check out what you read before putting any hard-earned money at risk.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731, or to huntley@sptimes.com by e-mail.

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