Interesting People: Kathleen Grogan

Woman holding head in her hands, next to computer

Nearly 20 credit cards -- all maxed out.

In just a few years Kathleen Grogan and Reggie Phillips had racked up $180,000 in unpaid charges.

Kathleen was optimistic they could get their debt under control as she deftly transferred balances from one credit card to another, depending on which one had the lowest rates.

But the partners of 26 years just couldn't put their credit cards away. "You max one out and go to the next one," Kathleen says.

When the minimum monthly payments reached $3,500 Kathleen could no longer keep up.

Creditors called at all hours and threatened to put a lien on their house. The threats were scary, but about three years ago Grogan was even more frightened when a stranger pulled up to their house at 8:30 on a winter night serving a summons to appear in court because her creditors were suing her.

The next morning, Kathleen got out the phone book and called three debt relief companies.

She tried checking them out with the Better Business Bureau but was confused by what she was told. She knew it was a risk, since many companies promising to help consumers with debt aren't considered reputable. But she took a chance and made an appointment with a debt resolution firm.

The firm put a team of debt counselors and debt negotiators on the case. They handled all communication with Grogan and Phillips' creditors from that point forward, negotiating with each one to reduce the amount they would settle for.

A debt resolution firm like this is not where we would have sent Kathleen and Reggie.

Consumer advocacy groups have repeatedly warned about unscrupulous companies that collect payments from customers but never forward any of it to their creditors. And then there are the fees.

The company Kathleen and Reggie chose gave them a choice: Pay a percentage of the debt it was able to wipe out or a percentage of their total debt. Kathleen chose the total debt option and the fees wound up being about 12%, or $21,600.

That's a lot. Too much by almost any measure.

But there's no denying that it provided Kathleen and Reggie a plan that got them out of debt.

Reggie, a pharmacist, began working a second full-time job--meaning 18-hour days. Kathleen, an artist and nanny to her grandkids, held down the fort at home, where her 87-year-old mother also lives.

Each month they deposited $1,500 to $5,000 into a special bank account. As the balance grew their counselor would finalize negotiations for a reduced payoff and the money transferred to that creditor.

The bottom line: $110,000 of Kathleen and Reggie's $180,000 debts have been wiped out. Even with the $21,600 fee, they only have to pay about $91,000, or half of what they owed.

To make sure she couldn't rack up more charges, Kathleen closed all of the credit card accounts. When an emergency required the use of a credit card, she used her mother's.

Not being able to spend was "a very painful process" at times, Kathleen says, especially when she wanted to buy something for her family.

"We just can't have our little luxuries," explains Kathleen. "We had to start paying with our own money, not somebody else's."

Kathleen found herself checking in with her lead negotiator for support. "She was my anchor. ... When I'd get discouraged I'd call her and she'd say, 'You can do it. I can help you.'"

The couple's new outlook on spending is reflected in their cars. They used to lease "souped up, sporty" Jeeps. Now they've got 2003 sedans that they own and will keep as long as they can.

But it's worth it, Kathleen says. When letters began arriving, saying that one of their accounts was paid in full, "we would just dance in the air."

Two and a half years after beginning their debt relief journey, the couple has just $7,000 left to pay off. And they've got a $22,000 emergency fund stashed away, to boot.

"Instead of taking it out of the emergency fund, I will wait until Reggie can earn enough extra to give it to them in full," Kathleen says. "Then we'll be completely finished."

As new credit card offer phone calls come in, "We say politely, 'No, thanks. We're never going there again.'"

Kathleen has this advice for others who may be in over their heads with debt: "You feel like you're drowning, but people are more than willing to help you find your life preservers and swim to the shore."