The late children’s book author Paula Danziger once wrote, “Most people want to forget. Don’t forget things that were painful or embarrassing or silly. Turn them into a story that tells the truth.”
We don’t know if longtime financial writer Miranda Marquit is a Danziger fan, but she has certainly taken Danziger’s advice. Marquit bravely shared with her readers one of the most humiliating experiences of her adult life, hoping she’d help someone else avoid the same mistake.
Marquit writes on her blog, “We all make money mistakes. Even ‘nationally recognized financial experts.’ Gather round, children, and let me tell you a story of my botched debt consolidation.”
In a way, the story began in 2015 when Marquit and her husband divorced. Although it was her ex who asked for the divorce, Marquit wanted him to be financially stable. She was making plenty of money, had an excellent credit score, and knew she was on solid financial footing.
At the time the marriage broke up, the couple was saddled with debt. For whatever reason, Marquit felt she’d be able to handle the debt on her own. So, in addition to using money from a big contract she’d just landed to pay off her soon-to-be ex-husband’s credit cards, she also paid off another of his loans, leaving him debt-free. Marquit then took out a personal loan to move across the country, bringing along more than $15,000 in joint debt from her marriage.
Though she paid off any new spending on her credit cards each month, she spent at least two years allowing the old debt — a reminder of her marriage — to ride, making small payments but never paying it off completely.
Looking back, Marquit admits that she allowed her emotions to rule her, leading to financial mistakes she knew better than to make. She had money in a travel fund and an emergency fund, but, she writes, “In my mind, I didn’t want my resources going to this joint debt. Stupid, perhaps, but that was my emotional blindness. So, even though I was paying interest on it each month, I told myself the interest rate was low, and it wouldn’t matter as much.”
Marquit’s knowledge, gained from years of studying personal finance and writing for major publications, appears to have been at war with her emotions. According to psychologists at Collaborative Divorce Solutions, divorce is a high-stress, life-altering event, and the strain can leave a person psychologically and physically vulnerable.
Perhaps in response to the fact that her ex was never interested in traveling with her, Marquit took a trip across Canada and went on a river cruise. Still, the old debt lingered. She says she continued to pay the debt bit by bit, but refused to put off doing the things she’d “put off for years already.”
She now calls her decision “short-sightedness” and a “huge mistake.”
Writing about money had taught Marquit that debt consolidations can work. For example, transferring debt to a credit card with a 0% APR can save money on interest. A few years after her divorce, Marquit received a pre-screened debt consolidation offer, and decided it was finally time to get rid of all the old debt she’d carried around like a souvenir from her marriage.
With an excellent credit score and next to no reason to worry about loan approval, Marquit called the number on the offer, signed up to consolidate the debt at a low interest rate, and grew excited at the thought of having it off her plate in 24 months.
She writes that she was busy at the time and did not read the paperwork carefully before she signed on the dotted line.
Except it wasn’t debt consolidation
At first, everything seemed normal. Marquit signed up for auto-pay, so the payments came out of her bank account without any effort on her part.
If Marquet had closely read the contract she signed, she would have realized that she never consolidated her debt. Instead, she entered into a debt settlement program. All those payments drawn from her bank account were not paying off “consolidated debt,” but were going to a debt settlement company.
Here’s how debt settlement works: You stop making payments to your creditors, and start sending money to a debt settlement company. The company collects your money, waiting until enough has accumulated for them to call your creditors and negotiate on your behalf, settling your debt for less than you owe.
As months pass and your creditors receive no payments, your credit score takes a nosedive. While Marquit believed she was making payments on a low-interest consolidation loan, she was missing payments left and right, and only sending money to a debt settlement company. She did not regularly check her credit report (as everyone should, at least once a year). Instead, she went on with life, believing she was about to pay off her debt consolidation. It wasn’t until one of her creditors sued for non-payment that Marquit took notice. By then, her excellent credit score was decimated, and Marquit was left wondering how she allowed such a thing to happen.
And that’s the point she makes. No matter how much you know about finance, it is possible to make horrible, embarrassing mistakes.
Today, Marquit is on a payment plan to repay the bank that sued her, while starting from scratch to rebuild her credit score. She says she’s sharing her story to help other people, whether it makes them feel better about their own mistakes or keeps them from making new ones.
Whether Marquit was still reeling from a divorce she did not ask for, or was so swamped building a new life that she was vulnerable to making a huge mistake, it happened. Still, Marquit did what Paula Danziger advises by remembering a painful, embarrassing, or silly experience and turning it into a story that tells the truth.