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Thanks for the advice everyone! I am going to look into filing chapter 13 bankruptcy this month....
@llecs wrote:
@Anonymous wrote:I would love to keep the car but what happens if you can't afford the payments anymore? What does a person do?
Rebudget.
I remember a point in time where DW and I had a bit of debt at approx. $25k and all was unsecured. Moreover, it was all charged-off with collectors and judgments chasing that as well. BK never entered our minds at any point and we figured that the only thing to do was to pay it off.
As I type this, I'm doing so as if I was in the situation, which I was to an extent. Focus on decreasing expenses and increasing income.
Here are some of the things we did and a few additional ideas to reduce expenses:
Cut cable, stop eating out, stop any subscriptions like newspapers, services, etc., cancel any vacation plans, restructure your food budget, stop going to or renting movies, temporarily stop any hobbies, change cell phone plans, cancel home phone if you have a cell phone, cut car insurance coverage if possible, change health insurance plan if not on a high-deductible plan. In short, look at your bank and CC statements and figure out where all of your money went and ask yourself: did I really need that? If not, take a second look and re-evaluate.
If earning income, look at your paycheck. If saving money now, suspend that temporarily. If investing now, then stop. If you have any money in savings or a non-retirement account, then consider liquidating it. If you got a refund, redo your W-4 to get more money on your paycheck. Do the same for state if applicable.
Next, look at your income. Ultimately your goal should be: your job should never be your primary source of income. Jobs can come and go so it's best to prepare on the assumption you may lose it tomorrow. Keep your job, but look for a second. Start by looking for a part-time gig when you aren't working. A min. wage job at just 20 hours a week can net over $600/month extra. You wouldn't have to do that forever, but just long enough to pay off the car or get the balance low enough that you can sell it for a profit. Another is to start you own business. By day, I work as an executive, but I run 2 profitable (well, one soon to be) businesses in my off hours. I got good at delegating and others do the work for me. And there's a myth that business ownership costs a lot of money. I started one for $10k, but my most profitable was started for $100. BTW, on top of this, I'm actively looking for another 9-5 job. If one fails, I've got the other.
Finally, look at the assets you do have now. I mentioned the savings, but look around your house for stuff you don't need. I bet there's a lot. If you have a family, then it's even more. Craigs list and Ebay are great for that. People buy useless junk all the time and you can easily capitalize on that. Sell off stuff you haven't used in the past 3 or so months. You can always buy it back bigger or better later.
Assuming you did the above, you could easily bring it back to $600/mo, plus a hundred or two extra to pay it down faster, it would feel good to have a paid off car and an extra $600+ each month. You can then bank that as an emergency fund and have over $7000/yr saved up for rainy-day emergencies. If you got rid of the car due to not running any more, then you can easily pay cash for a great used car or have enough saved for a solid down payment.
Wow, this is an awesome post.
If I'd done half those things when I was deep in it I'd have saved myself years of grief.
Note about Ebay. I've sold some stuff that way. I knew I would never find the time, so I found a guy who runs a company that sells stuff on Ebay. I drop it off, he sells it, takes his outrageous cut, and sends me the balance. Works like a charm.
@Anonymous wrote:Thanks for the advice everyone! I am going to look into filing chapter 13 bankruptcy this month....
4Runnergirl, I've never done BK. Maybe I should have years ago and I'd have gotten back on top faster.
I do hope you'll look long and hard before you push that particular button. Consider going to the library and looking through personal finance books for some advice. Or talking to someone in a credit union or a bank. Anything that might help you find some other way out. Just so you know your options.