Building up (and Bailing out) Massive Credit Card Debt: My Story

I’m going to share the story of my twentysomething financial meltdown.

But understand there’s some risk for me. Wait until you see just how reckless Lou Carlozo, the intrepid personal finance journalist, once behaved.

What’s more, you might think this story is so over-the-top that I made it up. If only.

My woes started, as many a wild ride does, with Hollywood schemes, rock and roll dreams and a few bad money moves that brewed a fiscal perfect storm. I was a full-time rock musician at the time, and I’d just read an article that director Robert Townsend had financed his 1987 movie “Hollywood Shuffle” entirely on credit cards.

So I applied for a few cards. I got one, then two. Then eight or ten. It amazed me how easy they were to get.

I started cash advancing left and right, pumping money into an album my band was recording at a big-time recording studio. When the bills mounted — first to $5,000, then $10,000, then over $20,000 — you’d think I’d have batted an eye. Nah. ’Twas free money, or so it seemed. How rock and roll!

During this time, a close family member noted my newfound cash pool, and assured me he could multiply it through an IPO investment. He asked me for a few thousand dollars: Why not? This guy was smart, charming and I had every reason to trust him. Besides, it wasn’t my money.

Then came the twister.

Expenses for the album spiraled, most of them billed to me. Then the family member, a problem gambler in his past, took my money to the racetrack. In a few days he squandered it all: More than $12,000. That’s when it hit me — it wasn’t really my money. And I had to pay it back.

Like that, I found myself more than $30,000 in the hole. Trying to kill off that debt on a waiter’s salary proved impossible, especially when my band released the album and it tanked, selling fewer than 200 copies.

Despondent and depressed, I called my older brother Joe, who’s a CPA. He told me about a non-profit called the Consumer Credit Counseling Service. Today, that organization exits as Money Management International — and if not for their help, I would’ve landed in bankruptcy, debtor’s prison, or worse.

As a non-profit credit-debt counseling and education agency, MMI can do a lot for you, as they did for me. First, they helped renegotiate better interest rates and payment terms with my creditors, who didn’t want to see me default. Once I had the debt tamed a bit, I found better-paying work and landed a debt consolidation loan. I made my payments like clockwork, even as I took care not to rack up any more bills.

But I still had to learn financial discipline. I didn’t like living at home as a 26 year old, but it helped me save on room and board. I sold much of the fancy music gear bought on the credit cards, recouping some lost funds.

And I repented my free-spending ways. The CCCS folks taught me to “write it all down” — that is, to use monthly budget charts to track daily spending. As any successful dieter knows, you do much better when you record every bit of your consumption.

If you have out-of-control spending or bad debt problems, I can sympathize. I felt ashamed and powerless. But making a phone call marked a crucial first step for me. At MMI, there’s no charge for the first counseling session, and once you get a debt management plan, the fees to set it up and maintain it are manageable.

As a non-profit community service organization, MMI has a long history behind it that dates to 1958. In that year, consumer credit card debt didn’t even exist — hard to believe, eh? American Express issued its first charge card that year, and BankAmericard (now Visa) came along eight years later as the first card that allowed consumers to carry credit balances.

Fast forward to March 2012, when we average $14,517 in credit card debt, according to NerdWallet’s analysis of Federal Reserve statistics. And while that’s down from $16,383 in March 2010, it’s not nearly as low as it should be. I’m guessing that if you’ve read this far, your debt could be much higher.

If so, here’s what to do: Call MMI at 888-441-1744. They’ll answer 24 hours a day, seven days a week. (Don’t confuse the work they do with private “credit repair” agencies, which often charge exorbitant fees and have dubious track records.)

Also, take heart. If you’re anything like I was, you didn’t get into the mess overnight and it will also take time to dig out. My excavation took two-plus years, and plenty of sacrifices. I ate out less. I limited spending to $40 a week. Amidst all the belt tightening, the band broke up. The rock and roll lifestyle had become too expensive.

Do I have any regrets? I’d rewrite huge parts of my story if I could. But as for telling it to you, I have no reservations whatsoever. If you’re in debt despair for whatever reason in this Great Recession, I want you to know that you’re not alone. Help is available. Redemption is possible.

I believe that with our finances, as in all areas of life, we shouldn’t strive for perfection, but course correction. When I made my mistakes, I was fortunate to learn from them. I’ll never repeat my nightmare again.

Perhaps you feel it’s too late to turn things around. If so, I understand. But there’s another way to look at it: If you start addressing your debt difficulties today, you’ll beat the New Year’s resolution rush by a good two months.


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About Lou Carlozo

Based in Chicago, Lou Carlozo is a personal finance contributor for Reuters Money, a columnist with, and a former managing editor at AOL's Contact him with story ideas for Money Under 30 at, or follow him via LinkedIn and Twitter (@LouCarlozo63).


  1. I have a similar story…I wasn’t into rock and roll but I was into looking cool. I would pay for my friends meals, buy clothes etc. I ended up where I couldn’t even make the minimum payments on my credit cards. I ended up using one of those private consolidation companies who charge an arm and a leg, but it worked for me. I was able to pay it off and I learned a valuable lesson.

  2. Thanks for sharing your story. I think many people are like you were – not thinking that the debt they are racking up has any consequences to their lives. Then they have an “aha” moment when they realize what they got themselves into and have to start digging themselves back out.

    My friend has his “aha” moment when he wanted to buy a house. When he applied for the mortgage, he realized how much credit card debt affected not only his credit score, but also on how much house he could buy. He followed the same path as you did: selling some of the things he bought, he got a second job and worked overtime to rid himself of the debt. He is almost eliminated it and is happy and excited to live debt free.

  3. It was really bold of you to share your personal financial situation. Many people end up in the debt hold because they don’t think twice about the money they are borrowing…it’s not really your money. Although hindsight is 20/20, long-term thinking doesn’t come naturally, especially when you are caught up in the moment.

    Great article! :-)

  4. I know how you feel. I financed my first business entirely on credit cards. $50,000 later, I realized that I had make a huge mistake. While I could have kept going with my business and paid off the balance, it would have destroyed my health and my marriage. Some things are not worth it. I had to close the business and then deal with my problem head on. It took me 4 years of dedication, but I finally paid off the credit cards and am now working on saving up.

    It is so easy to use a credit card because you don’t see the money leave your bank account.

  5. I have a question regarding credit card debt that I was hoping to hear some suggestions. I am one year removed from college and have a good paying job and so does my wife. We both live within our means and don’t spend too freely. However, I have roughly 12k in cc debt and haven’t been able to knock that down too much because we were self-financing our wedding and I just haven’t had the free money to put towards CC debt. This has been weighing on me for quite some time and I just hate having that feeling. I want it gone!!!

    When I was in college, I interned 3 years for a company that offered a great 401(k) progam that I took advantage of. So between that and my current job, I have 20k saved in my 401(k). Would it be wise to take out 12k from that to pay off my cc debts? The benefits I see in doing that are as followed:

    1. Freedom from CC debt! This would be a huge relief
    2. Would raise my Credit Score (will be looking to buy a house in the not too distant future).
    3. Would lower my monthly expenses, so I could then pay more into my 401(k) to build that back up.

    Obviously, I know there are penalties and taxes associated with early withdrawal, but I think the benefits may outweigh that. Any thoughts?


    • A few more details:

      1. My 401(k) is a Roth
      2. The average APR on my CC debt is 20% (Yikes!)

      • I agree with Mark on this. Don’t ever touch your retirement money to pay down debt. That would not fix the problem. Start with a budget every thing extra put toward paying that CC off than any other consumer debt you might have like a car. By taking money out of the retirement account you will hurt your future investments and you will not learn the lesson of not getting into debt in the first place. I suggests reading Dave Ramsey. Some find him extreme. But he suggests that if you can pay in cash than you can’t afford it. Now that the wedding is paid for it’s time to dig out of debt. You have to be serious about it though.

    • I wouldn’t do it, if both you and your wife have good paying jobs there is no reason you can’t kill 12K in debt in a few months, especially if you don’t have any children yet. Also, your 12K in credit card debt doesn’t hurt your credit score, it just increases your debt to income ratio, which just decreases the amount the bank will offer you. If you have good salaries the 12K won’t matter for getting a mortgage, but the lack of a down payment will.

      My advice would be to knock that debt out as fast as you can, then start saving for your down payment if you are serious about getting a house. Make sure you get your 401K match and once the debt is gone I would also start putting money in your ROTH IRA if elligible.

  6. Lou Carlozo says:

    Hi Nick: That is an excellent question. Do you mind if I use it as the source for a potential future column? I can also pass along some personal tips if you email me at

    All the best, Lou Carlozo

  7. Lou you do not have to go through a third party to lower your credit card interest rate, this is a common misconception the public has due to all of the marketing these “debt solution” companies do. You can as a cardholder work with the credit card issuer directly to lower your APR, the only thing is you need to know who to talk to. John Write wrote a book called DIY Lower Interest Rates, and he explains all of this in detail. You can read about the book here