Behavior of debtors.

[DrTodd13]

I'm the treasurer of my community's home-owner's association (HOA) so I get to see the list of people who are delinquent in paying their contractually obligated HOA assessments. I don't know most of the people on the list but a couple of the people on the list live close enough to me that I can observe some of their spending behaviors. For example, one guy that owes over $800 bought a huge inflatable pool, a top of the line grill, and spent a bunch of money on ripping out the garden the previous owner had planted and replacing it with something he liked. I'm pretty sure those three things combined totals more than $800 and that none of them were a necessary expense. To me, this is shameful. You know you owe someone money but won't change your lifestyle one bit in order to pay it back. I can almost guarantee that 90% of the people that owe money have $100+ monthly bills for TV+internet. The former especially in my book is a luxury. Stop those and stop eating out all the time and within 2 or 3 months your debt would be paid off. Instead, they let the debt languish, hang up on a representative calling to setup a payment plan, and let liens be placed on their homes instead. WTF is wrong with all these people!

[luke warm]

people don't care as much as they did (yes, that's a generalization)... i heard bankrupt laws are more stringent, maybe that will help

[kenberg]

It's tough for me to talk about these things w/o going off the deep end. Although I don't usually advertise the fact, I was briefly in a fraternity when I was in college. One of my dumber decisions. Anyway, they made me treasurer (after all, I was a math major) and there was this guy behind on his dues. He explained that he had lost his job. I suggested he get another one. He explained he was drawing unemployment and getting a job was not worthwhile. I suggested he pay is dues out of his unemployment check. He explained that there wasn't enough money from unemployment to pay his dues. And so on. I was brought up differently, this was all new to me, and I didn't know what to say. I still don't, really.

 

 

We regularly read about people who get in over their heads with credit cards. Usually the explanation is that they did not understand. In some cases maybe so, but in most cases it seems to me that they understood perfectly well, they just didn't give a damn.

[hrothgar]

The only times that I've ever been deliquent on a debt has been through some combination of laziness / stupidity (forgetting to mail in a car payment or some such)

 

Regretfully, shame / opprobrium really don't do much to motivate people.

Getting bent out of shape about it won't do any good.

 

From my perspective, the best course of action is to build appropriate penalty clauses into the HOA contracts. Require that members of the HOA post a bond or security. If anyone is deliquent on payments for three monthes or more, the bond goes bye-bye...

[DrTodd13]

I think that shame is a good motivator. The problem is that they don't feel any shame.

 

Our HOA works a bit differently, we have $50 late fees pegged on every month that you are late. This stuff builds up quickly and when it gets to $500 then a lien is placed on the house. When that happens then all sorts of other fees get attached to get the lien off your house. It should be sufficient motivation to keep up with your payments. I assume everyone want to maximize their amount of money. Racking up these fines is not the way to go about it. I don't want to assume that so many people are stupid but they don't even appear to be acting in their best interest. Perhaps they are addicted to instantaneous pleasure and can't think more than a few days in advance.

[hrothgar]

Our HOA works a bit differently, we have $50 late fees pegged on every month that you are late. This stuff builds up quickly and when it gets to $500 then a lien is placed on the house. When that happens then all sorts of other fees get attached to get the lien off your house. It should be sufficient motivation to keep up with your payments. I assume everyone want to maximize their amount of money. Racking up these fines is not the way to go about it. I don't want to assume that so many people are stupid but they don't even appear to be acting in their best interest. Perhaps they are addicted to instantaneous pleasure and can't think more than a few days in advance.

I think that you need to stop worrying about other people's motivation.

 

As treasurer of the HOA, your primary responsibility is to assure that the HOA enjoys a revenue stream that is both sufficient and reliable.

 

Does the payment style of the individuals in question have a delitorius effect on saiid revenue stream? If so, change the penalty mechanism or build up a larger rainy day fund.

 

If not, who cares what they do / how they pay...

[kenberg]

People do not always act in their own best interests. An example:

 

 

I was driving to a tournament in Roanoke, carefully following the speed limit. One lane each direction. A guy in front was very poky and when I got the chance, I sped up to pass him and then returned to following the speed limit. A cop got me and gave me a ticket for something like 6mph over the limit for the brief period that I was passing. I was so pissed I never paid it. Several years later I was actually speeding in Virginia and got stopped. They checked the records, cuffed me, searched me, and hauled me off to jail.

 

 

You need to find a good motivational strategy. Some years ago it became a fad to call in bomb scares to the University where I taught. It got bizarre. I was in the office one time and heard the secretary saying to a caller "I'm sorry, we already have our ten o'clock bomb threat. Could you call back at eleven?" Anyway, they caught one of the kids and threw the *****ing book at him. The calls stopped.

 

 

Another solution is to give the treasurer's job to some other sucker.

[DrTodd13]

Well, we have a management company that deals with day-to-day stuff so it isn't a burden on me directly. I was largely bitching at what seems like a culture that is sliding daily toward hedonism. We have about all the mechanisms in place that we can have but that doesn't guarantee you get the money. We have a fund to draw from such that we're not strapped for cash but that needs to be replenished for required large expenditures in future years. So, temporary cash flow isn't so much the issue. The HOA is not first in line for money when the house with a lien is sold. Other creditors have higher priorities so some of this money will become uncollectable which means that everyone else has to pay more. It just makes me angry that a person's word used to be enough and now people have no respect for obligations even that they've signed their names to.

[bid_em_up]

The HOA is not first in line for money when the house with a lien is sold. Other creditors have higher priorities so some of this money will become uncollectable which means that everyone else has to pay more.

Is this a true statement?

 

It has always been my understanding that before a house can be sold, any and all liens on the property must be paid in full. Otherwise, you cannot get a clean title to the property.

 

If you meant in the case of foreclosure, that other lienholders might have priority, that may be true.

[Phil]

Shame is the best motivator. When I beloged to a country club, the members with 60 day accounts' names were posted in a display box next to the board of directors minutes.

 

These debts are tricky. If its secured, you can grab collateral without a problem. I believe HOAs (in California anyway) can lien property, but they can't foreclose. If a senior lienholder forecloses, its bye bye birdie.

[DrTodd13]

Yes, in foreclosure, other lien holders have priority (first mortgage has first priority, HOA second, 2nd mortgage has third priority). If the person was "upside-down" then we probably get nothing.

[kenrexford]

Not all debts are equal. The type you mention is one that seems to merit consternation, especially as the debt is actually for an ongoing service, it seems.

 

That said, not all debt non-repayment is the same. Suppose, for instance, that a debt is so high that you could not make even interest-only payments without starving and being homeless. Suppose further that the debt is not dischargeable, or that you are morally or ethically opposed to bankruptcy and therefore won't seek discharge of the debt even if you could. Suppose that you have multiple debtors.

 

Well, if the person cannot physically make a payment agreement on all his accounts, then he practically speaking cannot make many at all, if any. Why?

 

Suppose you can only afford to pay a certain percentage of your income toward debts. The laws as to garnishment of wages only reaches to, say, 25% of after-tax dollars. Imagine $500 per month is 25% of after-tax dollars. If one creditor is owed $500 a month, another $250 a month, and a third $100 a month, you cannot afford this.

 

So, you get a call from the first. You can afford $100 per month. But, if you pay that voluntarily, then the $500 per month person can garnish $500 from you, making your debt payments $600 per month, which may not be possible. So, you instead have to force, in a sense, all these creditors to fight over the $500 per month that is available. You might be "rooting" for the $100 guy to win first, then the $250 guy to get his full $250, and the bastard $500 guy to be left with $150, but what is is what is.

 

Now, buying a new grill when owing so relatively little seems like a completely different story, but generalizing to society generally may be missing some of the realities of economic realities. Millionaires incorporate and avoid millions of dollars of debt by simply losing the asset, and few blink an eye. But, the struggling single mom loses her second job and then dodges the credit-card company regarding a debt incurred before the bastard left her for a new bimbo, and she's stuck with the debt without recourse? Please. Her "bailout" is not answering the phone 20 times per day.

[DrTodd13]

A small number of people are delinquent in debt through essentially no fault of their own. I have no problem with them. What I have a problem with are people who live in an upper-middle class neighbor and don't plan for hard times and at the first missed paycheck they become delinquent on all their bills. Financial experts recommend a 6 month supply of emergency cash in case you lose your job or have some medical problem. Most people can't even go 2 weeks. I have the most disdain for those who already owe money and then go out and spend what they do have (or don't have....credit!) on something purely for their own enjoyment.

[Winstonm]

For example, one guy that owes over $800 bought a huge inflatable pool, a top of the line grill, and spent a bunch of money on ripping out the garden the previous owner had planted and replacing it with something he liked. I'm pretty sure those three things combined totals more than $800 and that none of them were a necessary expense. To me, this is shameful.

 

Yes, absolutely shameful...wait...shameful or patriotic? I get confused.

 

Debt has been the driving force behind the U.S. economy for the last 25 years - we are exceptional, don't you know. We are that shining city on the hill with an unlimited line of credit. We get everything we want and never, but never have to pay the bill.

 

After all, Reagan proved that deficits don't matter. Relying on Communist China and Muslim OPEC to buy our debt makes us all safer - just like bombing the ***** out of Pakistani wedding parties prevents nukes from being given as wedding gifts, and putting the general who used to be in charge of a clandestine killing group in charge of the Afghan war makes the Army and the government more transparent, just like the president promised it would be.

 

What are you, some kind of Commie Marxist believer in socialized medicine or something??? I bet you even voted Democrat....

 

Who are you to criticize my debt? I am America and I got the right to live beyond my means.....What are you...some Muslim-loving no-interest-on-my-loans whacko?

 

What a jerk....

[mike777]

BTW has anyone sent these guys a letter about their past due bill? You might want to remind them about the lien that may be placed on their home.

[Gerben42]

I would try to pay back friends first, then small companies and the banks and large companies last. I've never been in this position, though.. The first thing I ever bought on credit was my car. The 2nd thing will probably be a house. And the 3rd thing... dunno.

[mike777]

I would try to pay back friends first, then small companies and the banks and large companies last. I've never been in this position, though.. The first thing I ever bought on credit was my car. The 2nd thing will probably be a house. And the 3rd thing... dunno.

This must be a huge cultural difference. In the USA even young kids buy stuff on credit.

 

Even 35-40 years ago is was very common for very many of us to go to College on credit at the age of 16. College, housing, food, etc is a lot of money for a 16 year old to pay upfront.

[mr1303]

At the moment I have a fairly large amount of debt. And here's why:

 

About 18 months ago I bought a house with my then partner. We could afford the house and the mortgage fairly comfortably.

 

Unfortunately around Christmas time last year we split up. We tried living together but separated, which lasted for a couple of months, during which time I lost about 3 stone in weight due to the stress of the situation. She moved out, and it was agreed that since I had the higher salary, I would keep the house. Unfortunately the stress caused me to lose my job in the middle of a recession. I was able to get another one, but on a much lower salary. As a result the vast majority of my salary goes on my mortgage.

 

I'm not the type who likes to sit at home and do nothing with my spare time. I like being sociable, and fun, and adventurous. But the only way I can afford to do things is by putting them on a credit card etc.

 

The alternative is to sell the house in the middle of the biggest recession and housing market crash since the 1930s. To be honest, my chances of selling it at a price where I could repay the mortgage are very slim.

 

So at the moment I'm stuck here picking up debt until the market picks up.

 

As some people have said here, not everyone gets into debt through things that are their fault.

[PassedOut]

As some people have said here, not everyone gets into debt through things that are their fault.

But many do. A lack of judgment and self-discipline often goes hand in hand with poor financial decisions.

[kenberg]

About mortgages, I have seen several instances and variations on the following: A friend bought a house with payments a bit beyond what would be comfortable. He took in some carefully chosen renters, they had a cooperative and friendly relationship. Later, as finances improved, the renters moved out, my friend got married, he had a fine house for his family. My son-in-law had one of the variations. He and his brother bought a house. When he married my daughter she moved in. This was a bit crowded, psychologically speaking, and eventually they bought his brother out. The brother is now married with a house of his own.

 

I see in the morning paper that the foreclosure prevention plans are not going well despite government subsidies and that there will be some meetings to see what to do next. I believe in helping people but honestly I am thinking I am getting a little tapped out in the rescue business. I am particularly uneasy about spending money that we, as a country, don't have. It makes rescue plans appear to be cost free, which I think is an illusion.

 

A friend of mine who is both religious and generous (far more than I am) was telling me recently of his minister appealing for financial help for a family. They have received quite a bit of help already and my friend was commenting that they did not seem to be much into helping themselves. He gave the money but I got the idea it was about the last donation this family will be getting, at least from him. All good things come to an end.

[Winstonm]

I like being sociable, and fun, and adventurous. But the only way I can afford to do things is by putting them on a credit card etc.

 

I hate to be the bearer of bad news, but being forced to delay payment and live on credit card debt means that you cannot afford your lifestyle.

[Trinidad]

I like being sociable, and fun, and adventurous. But the only way I can afford to do things is by putting them on a credit card etc.

 

I hate to be the bearer of bad news, but being forced to delay payment and live on credit card debt means that you cannot afford your lifestyle.

I also like being sociable, and fun and adventurous. I fail to see why this has to cost any money.

 

And keep in mind that creating a credit card debt is where it goes wrong. It is not a problem to own a home that is worth less than what you paid for it. Right now, a lot of people own a home that is worth less than what they paid for it. The problem is there when you have to sell a house that is worth less than what you paid for it. And that is a BIG problem. So you should do everything you can to make sure that you don't have to sell. Creating a credit card debt is a sure way to force yourself to sell the house. And on that day you will lose an enormous amount of money.

 

Thus, stay away from your credit card and you can wait until the crisis is over. If that means that you won't be sociable, fun and adventurous for a while, so be it. If it means that you will eat "pasta without" for a while, so be it.

 

The point is that there will be an end to the crisis. The question is where you want to be then. Do you want to own a home that is worth more than what you paid for it, enjoy the economic prosperity and charge your fun and adventures on your credit card? Or do you want to see someone else owning that house while you have a debt hanging around your neck that is so big that even economic prosperity won't pay for it? Right now, you are making the choice for that time.

 

Rik

[Gerben42]

This must be a huge cultural difference. In the USA even young kids buy stuff on credit.

 

I guess so. Sounds very irresponsible to me to allow kids without a regular income to buy things on credit.

I have a college credit, but it's only 80 Euros a month and if I lose my job I don't have to pay until I find a new job. Otherwise, the only reason I own a two credit cards is because I can withdraw money for free everywhere with my personal one (and for online shopping sometimes when they require a credit card), and one is a company credit card for, well, business stuff like rental cars, hotels, etc. on business trips.

 

If I see an offer for something on credit I always ask myself if I cannot get it cheaper when paying for it directly. After all, when there's credit, there usually is a catch. And 0% financing means something as well... Someone is paying for it, and it's usually... the customer (i.e. me).

[mike777]

This must be a huge cultural difference. In the USA even young kids buy stuff on credit.

 

I guess so. Sounds very irresponsible to me to allow kids without a regular income to buy things on credit.

I have a college credit, but it's only 80 Euros a month and if I lose my job I don't have to pay until I find a new job. Otherwise, the only reason I own a two credit cards is because I can withdraw money for free everywhere with my personal one (and for online shopping sometimes when they require a credit card), and one is a company credit card for, well, business stuff like rental cars, hotels, etc. on business trips.

 

If I see an offer for something on credit I always ask myself if I cannot get it cheaper when paying for it directly. After all, when there's credit, there usually is a catch. And 0% financing means something as well... Someone is paying for it, and it's usually... the customer (i.e. me).

Ahhh so you use alot of credit not close to zero, thought so. Revolving credit is credit....:D

 

 

"The first thing I ever bought on credit was my car. The 2nd thing will probably be a house. And the 3rd thing... dunno."

 

Funny enough just think if our schools, local city or our company job never used credit. In fact they use it literally every year and very very often! It is the blood that courses through their veins, CREDIT!

[Trinidad]

The point that Gerben is making is that he uses his credit card as a convenient payment method, not as a credit. He pays 0 interest on his credit card since the bill is paid during the grace period.

 

And yes, there is a big cultural difference between the USA and Europe. The general picture is that Americans buy on credit, Europeans save first and buy then. This is not only true for consumers, but also for organizations (schools, bridge clubs, etc.) and small businesses.

 

Rik