Ok, here goes, this is the situation we are in. We are married 15 yrs., have two kids in school, my husband works full time and any overtime he can get. Straight time after tax income monthly for him is $3200.00. I am self employed, this year so far I have averaged 1605.00 monthly after tax. Combined monthly income $4805.00 Credit card debt - 7 cards $62,500.00 with minimum monthly payments of $981.00 Our montly bills including two car pymts, mtg., equity loan., school tuition, car ins., utility bills,cable/internet etc. come to $3,667.00 That leaves us with $156.00 a month to buy groceries, gas, my work supplies, and any entertainment/spending for our family. We are late on nothing we owe, our credit is perfect outside the obvious debt to income ratio. It's just a never ending cycle. Our cc debt never gets down because we can only pay the min. balance and with having nothing left at the end of the month our only way to get groceries, gas and etc. is the card. We so do not want to file for bankruptcy, but this financial burden is killing us mentally and we just don't know if we finally have to throw in the towel and try for a fresh start if it's even possible. I'm so embarrassed that we've gotten to this point. Any advice or opinions on what we can do or should do. would be appreciated.
Bankruptcy is never the only option, especially in your case; You have perfect credit--keep it that way. I was $75K in the hole at the beginning of '01. I'm almost done $3K left. My income after taxes was about $2500-$2700ish per month. Granted i didn't have any kids and i moved in w/my parents but you've got two incomes. Tip: Working on the weekends (even if at McDonalds) the money starts adding up quick.
My personal opinion.... Since you have somehow managed to maintain a good credit history with no derogs now is the best time to do something about it before you do something dumb like declare bankruptcy or go to a credit councelor. I would suggest taking out a home equity mortgage to pay down your highest interest cards and/or car loans, which should knock about $400-500 off your total monthly expenses. So instead of say $987 per month you might pay $487. Another thing I have read from here is if you have school tuition to pay, you can get student loans with very low payments and low interest. If you already have school loans then you can get them consolidated and delay payments and interest for up to 10 years in some cases. I currenty get paid $500 per month in student loan money for taking only two classes and I don't have to pay until 2010. Last thing I would do is setup a family budget, you will be really surprised if you keep track of all spending of just how much you could possibly save per month. From there you can pick one of your credit cards and decide right there to stop using that one card. Instead of making say $100 per month minimum payment, based on your budget try to send $200 per month without adding any more balance to that card. Once you have paid that one card off, take that $200 and add it to the next card you pick's minimum payment. As long as you do not spend on the cards you are paying off, you will have them with $0 balance in a very short time. The budget is the key. I used this method to pay off $18,000 in debt making only $400 per week before taxes. That is with a car payment, rent, etc. Always remember bankruptcy should be your absolute last resort when all other attempts have failed. This is all my own opinions based on personal experience, please do not think that my advice is the best or only advice for your situation.
I agree with the last several posters. I was $77K in debt after a divorce. I got into problems, so I didn't have the options you do. I refinanced my house at a subprime rate to get money out. Look at things you don't really need. I'd start with the cable. I canceled mine 15 years ago for financial reasons. It was hard the first month or so, now I don't miss it at all. I can rent (or even buy) DVDs or tapes, have someone tape a favorite show or two and watch it later. Listen to the radio while you do other things. Part of the time you save by not watching TV can be used for a part time job with ALL of that income going to the debt. Find other places you can cut, too. Don't eat out as much. Take your lunch instead of buying it. No Starbucks. Take a thermos of coffee from home. Lots of little things--but they add up amazingly fast. ALWAYS pay your extra on the highest interest rate, unless it's your mortgage. I made a spreadsheet with balance, interest rate, name of card, etc. Sort by interest rate and ALL extra goes on that card. Make sure you check it each month when you get your statements in case the rates change. You pay the minimum on all but the highest rate card. That one gets the minimum plus all the extra you can scrape together. When it's paid off, you add what you had been paying on it (minimum plus the extra) to the next highest card. As you pay them off and roll the amount down, it keeps increasing because you're adding all the previous minimums and extra to the next minimum. Any card that is paid off can ONLY be used for things that are paid each month, like gasoline. This is where the discipline also comes in. The less you spend here, the more you have to pay off debt. This is where not going out to dinner, etc. will help out. Each month, you update the balances in your spreadsheet. As you see the balance go down, it actually becomes addicting. You will try to get more and more to pay off so the decrease gets larger every month. And as you get to the lower rate cards, you're no longer paying as much interest, and more is paying the debt. I haven't paid all of mine. I've gotten it to the point that it's all transferred to 2.9% or less, and I can make more on my money than that. So I won't pay that off in any hurry, just the minimum each month.
Since you still have good credit, another option is to get a card with a low balance transfer rate that is good for the life of the transfer. But as much as you can on that card and pay minimums until everything else is paid off. Your goal is to get all interest rates as low as possible as quickly as possible.
you need to cut out all extras... cable... everything.. goto www.mycesi.org and put all your cards on this. They will negotiate a lower interest rate which will lower your payments and give you extra per month... (I used them for 2 years, it works. went from 30 % to 6%) since this will close these credit lines, you will need to make sure that you apply and recieve 1 credit card for emergency purposes only. refinance your existing car loans through www.patelco.com this will free up some money. I did this with both of my cars take out a home equity loan and pay down cards through mycesi. don't give directly to card companies or it will kill your agreement. have the kids get a part time job in the evenings and weekends to support their own extra curricular activities. I have worked since I was 12 and always had a part time job. Have them buy grocieries occasionally to make them see the real picture about how to deal with money. Cash out 401k plans if you have them and pay off debt... (worst case scenario) just my 2 cents... mycesi is my best advice...
Do NOT cash out 401K plans!!!!! VERY BAD ADVICE. You debt will come and go. Your bankruptcy will come and go (if you have to go that route). You will need that 401k money when you retire. By then your bad debt should be well behind you. It may sound like a good idea but you will regret that more than the bankruptcy when you get to retirement age.
Re: Is Bankruptcy our only option.. WRONG, WRONG, WRONG!!! YOU NEVER TAKE OUT A SECURED LOAN TO PAY OFF UNSECURED DEBT. NEVER!!!
Re: Is Bankruptcy our only option.. lol... just giving them creative ideas to get some money... seems like they are cash strapped... I didn't say it was good advice... well, the mycesi is... other than that, take it at face value...
Re: Is Bankruptcy our only option.. I wouldn't say never use secured debt to finance unsecured. It depends on the circumstances. Using a mortgage or home equity may give you some tax breaks. Nothing is black or white. The goal is to increase wealth. That said, you can't use secured debt to pay off unsecured, then go out and run the credit cards up again. It has to be a change in spending habits. I refinanced my house to help my situation, and wish I'd done it earlier.
Re: Re: Is Bankruptcy our only opti THINK OF IT THIS WAY. YOU SECURED A HELOC LOAN FOR 40K TO PAY OFF YOUR CREDIT CARDS. DOWN THE ROAD A FEW MONTHS OR EVEN A FEW YEARS SOMETHING HAPPENS TO YOU. IE. UNEMPLOYMENT, HEALTH ISSUES, DEATH IN THE FAMILY, WHATEVER....... YOU MISS A PAYMENT OR 2 ON YOUR HELOC LOAN AND THEY MAKE THE FULL AMOUNT DUE. ALMOST ALL MORTGAGE LOAN AGREEMENTS HAVE A CLAUSE SHOWING IF YOU MISS A PAYMENT THEY CAN MAKE THE LOAN DUE AND PAYABLE. LASTLY, THE INEVITABLE HAPPENS YOUR FORECLOSED ON. YOU LOSE THE HOUSE. WAS IT REALLY WORTH IT MOST PEOPLE THINK NOT. I TYPE IN CAPS BECAUSE I LIKE TO NOT BECAUSE I'M SHOUTING AT YOU.
Re: Re: Is Bankruptcy our only opti Hey but you can take a loan on your 401k. Like right my interest would be 4.5% and you can take up to 5years to pay it back and little out of each check.
Re: Re: Re: Is Bankruptcy our only opti The loan assumes that you are going to be working at the same company for the life of the loan. Is your job secure enough to guarantee that? If so, then it can be a good source of funding since you are basically paying yourself back with interest If not, you will find that the 401(k) plan will want the outstanding loan balance due when you leave the company, or they will decrease you vested amount and you will be subject to the IRS penalty's for early withdrawal and regular income taxes on the balance
Re: Re: Re: Is Bankruptcy our only opti I know this might not seem like an instant fix but I have been reading this book called "Automatic Millionare". It gives alot of really creative ways to save and be able to PAY YOURSELF. After all you are working for you right!!!! The other thing is that I have heard time and time again that credit "counseling" companies are no good. They hurt your scores but you have to look at it this way - What can you fix right now? Do you need scores that are out the roof OR do you need to be able to have enough money to make ends meet? If you learn anything from this forum- Learn that credit problems CAN be fixed! I say NEVER file BR. It doesnt help you! All it does is add more derogs to your credit. What is the worst they (CC Comp) can do? Answer-----take you to court and work out a payment plan. Which is what you are doing anyway. I am not an expert but I read alot.
Re: Re: Re: Is Bankruptcy our only opti Thank you so much for everyone responding. My husband and I have been reading along and excited to see each new response. I'll add more now. Here's our cards,rates and balances Capital one - 9.90 - $6157 Bank One - 20.24 - $5455 Bank One - 10.24 - $7039 BOA - 4.25 on a balance transfer we did awhile back ($9881)and 17.99 on purchases ($1861) Citi Premier - 9.90 - $15779 MBNA - 14.99 - $15293 We have no room on any of the cards to do any balance transfers so we can't do that. *First and foremost, Trendy and Hedwig, Congratulations! That is a great accomplishment, I'm sure you are so proud of yourselves, I would be and hopefully will be one day. *As far as taking out a HELOC, we already have one. When we did it, we didn't have enough equity to cover all our cc debt but figured some is better then none. Well, situations came about and rather then having our kids/ourselves do without we kept using the cards. And here we are. We did look into refinancing it all a couple months back, but even with attempting to get a 110% mtg. we were just shy of paying it all off. Was going through Wells Fargo and when they said our house would appraise out at $30,000 less then a house across the street just sold for (and they had one less bedroom and a smaller lot) we decided to stop everything. In hindsight I'm glad we did. We would have been in the position to lose absolutely everything if for some reason one of us couldn't work. *I should have been more clear, our kids are grade school age, 1st and 5th. The school tuition is for Catholic school. So the possibility of getting a student loan or them working to help out with expenses is not there. *Second jobs for us is pretty much impossible. My husbands job has him working weekends many times and with him taking overtime as much as possible he really has no other time to work somewhere else. As for me, I was a SAHM up until three years ago. As I said I'm self employed, an independent loan closer, (if any of you have refinanced, done a HELOC and when the time comes to sign the papers an agent/notary comes out to your house) that's me. Many weeks I'm doing 10 loans, which may not seems like alot, but travel times, document preparation time, and still trying to take care of my kids and getting them where they have to be, housework, leaves little time for anything else. Luckily I have a mother in-law and parents who are able to help out with the kids. I can't add an expense of child care too. *Borrowing against 401k- My husband has a savings plan with his work where he contributes and they match a certain amount, your able to take that money out as long as you pay yourself back with interest. He's done that already so until we finish paying that back there is no more borrowing room there. That money comes out of his paycheck before taxes so we don't need to budget that one into our monthly, nonetheless it's still there. So we've been discussing what has been posted here. Although we know we have to seriously change our spending habits, we are also of the thinking that you are supposed to enjoy life a bit. So with that I don't think we are ready to take everything out of our life that we enjoy. But we realize we are living way above our means. Here's the steps we have chosen to do so far. He'll take his lunch instead of stopping to eat somewhere, I'm guessing he probably spends $20-25 a week on lunch. The kids will take their lunch to school rather then me ordering hot lunches through the school (last month that bill came to $63) and I've canceled my Workout membership-$40 a month. Our cable/internet bill is about $135 a month. We're going down to basic cable which will be $44/mo. and we'll get dsl which he gets a rate of $29/mo bringing us to only $73/mo for those two services. The next thing I need to work on is dinner. So many times I'm not home enough throughout the day that I don't make dinner and we end up eating out or getting fast food. I'll have to put a bigger effort towards planning dinners and preparing in advance when I do have the time, or put my crockpot to more use. I'm sure many of you may think we're not cutting out as much as we should, and need to do whatever possible to get this debt gone. But I really do think we are taking steps toward that, even if it's baby steps. A few questions I have- in looking at our credit report we noticed some revolving credit that we haven't used in a few years with zero balances but still open. We don't even have the cards anymore. Should we close those accounts so it doesn't count as open revolving credit? Also some of the cards that we do have now with balances we don't plan on using anymore. Should they be closed or does it not look good to have a balance on a closed account. We both have good scores but the lady at Wells told us if we closed some of these unused and old cards that it would boost our score some. But I have also heard otherwise. Who is right? Again, thank you so much for the posts and please keep them coming, I'm really enjoying reading this board. It has given me renewed hope. I was so against BK but my husband really felt it may be what we need to do, we have the mtg with a good rate, the cars loans and he felt we wouldn't need to apply for anything and if we could just get rid of the cc debt and start anew with us both working now we could do it right this time. But still I was terrified because all I could think of is that even if you have cash to pay for everything, you need usable credit. There are so many things you can't do without a cc# to reserve stuff. I can't lie though, the thought of a fresh start without the money mess we've gotten ourselves into was intriguing. But I can honestly say I feel so much better thinking that we can whittle this away on our own and keep our good credit. I don't expect to be debt free anytime soon I'm not even thinking before the kids get out of grade school, but hopefully it will be manageable by then. BSutton21, I'm going to look into that book, thank you.
Re: Re: Re: Is Bankruptcy our only opti Don't close your cards!! Part of your score is based on the ratio of available credit to balances. If you close those cards, your ratio will go up. Is there any way your kids can go to public school for a year or two? It's not as bad as it sounds--I went to public school and turned out fine. That would save you a tremendous amount. You said you weren't ready to give up all the "good things" in life. Are you prepared for the consequences if you don't? Tightening the belt and saving/paying off now will mean you have more to spend later, when you want to retire. The reason I asked is that I was like you. I didn't really start saving until I was in my forties. And with all the "good living" that I'm still paying for, let me tell you what I went through. Several years of a mortgage at 12%. No money to buy a car, and the only way to fix what I has was to use credit cards at 20-25%. I almost lost my job because my car kept breaking down and I didn't get to work on time. Standing in line in the store with the knot in your stomach not knowing if your card will be declined. And then pulling out another, which is also declined. And knowing you can't write a check because there's no money in the bank. And what if you can't put gas in the car because there's no money? I've been there, done that--all of the above. So of course I couldn't save. And now, I'm hoping I'll be able to retire before I die. If my health holds out.
Re: Re: Re: Re: Is Bankruptcy our only opti This is some of the best advice I've seen in a long time, Hedwig. I was scratching my head over the previous post about not being ready to give up "the good things". It's amazing. We, as a society, have become so enamored with "the good things", at any cost, that we fail to see what the consequences might be. We're so into the "here and now" of instant gratification. So many of us have been there (myself included). And now looking back, we ask ourselves "was it worth it?". As far as public school goes, I agree. That's a lot of money that must be going toward tuition, that could be used for paying down debt. Public school is where it's at. Public school is cool. Just look at Bill Gates. He went to public school. He even quit college! How cool is that?
You only have two choices here. One, you have to increase your revenue. That means a second job for one or both of you. If you can't do that then you're left with... Option Two - Have a heart to heart with yourself that while you might enjoy the good things in life, you simply can't afford them. The facts are that if you continue the way that you're going, bankruptcy will be FORCED upon you. You will lose everything and the courts may end up dictating what you spend and what you spend it on. First you need to budget - housing, food, utilities get paid first. While its nice to drive new cars, YOU CAN'T AFFORD THEM. A POS that you pay cash for will get you the same places. You need to sell one or both cars. You may need to downgrade the house. I'm sure you live in a nice neighborhood, I used to. Consider selling the house. The second will probably hang it up, but its worth looking into. You can't afford Catholic school. At least not right now. Packing lunch, cutting cable, etc. are all nice efforts that will do nothing except make you feel like your changing things when you're really not. Bankruptcy will not help until you change the habits that got you there. The second probably paid off credit cards the first time. Right? I'm giving you a hard time because I was where you are several years ago. Making $100,000 a year, with a great house, two nice cars, credit cards, etc. But...I got laid off and served with divorce papers at about the same time. Even after liquidating everything, I was left with a boatload of debt. I got a new job, but I got the wake up call. I moved my new wife and son into an apartment, we drove a POS, ate beans and rice, basic cable and phone service and banged out everything in two years. Being debtfree, I was able to bank six months of expenses and a down payment on a house. I sleep well at night again. But I had to go back to the basics to do it. Good luck. I know it can be done. But only when you're willing to make REAL changes to your lifestyle and start living within your means. If you don't, you're going to lose everything eventually anyway.
Well, I guess I will say something here that is un-popular. GO SEE A LAWYER. It's free and it doesn't hurt anything to go talk to one. Fact is we tried the same exact thing you did and 6 years down the road we had accumulated another $30,000 or so in debt and nothing was going on except EXISTING...not living our lives. After an emergency room visit were my BP was at near stoke/fatal levels, I sat my husband down and said I can't pay 3 people this month and I have no way to pay them next month either! Up until that point we had never missed a payment! We filed on $92,000 worth of cc's and medical bills! In about 3 months time we had it all over with. We were discharged on Sept. 7th. I've already started to fix the credit report and have no doubt that in about 2 years we will be fine again. Okay so the credit sucks at present, but hubby works regular hours, not the 40 hrs of back breaking OT each pay check just to survive. My BP is fine now and we live on just what his base pay is. We are starting to build up a savings acct., and we are more than happy. Having to do some credit repair is well worth giving back $92,000 worth of debt and stupidity. GO TALK TO A LAWYER. See what they have to say. And good luck!
re: open revolving accounts how high are the limits? Could you balance transfer at least the high interest ones onto those?
