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johnson30
New Member

Need assistance

So many questions and not sure where to start....

 

My wife has stayed home for about 10 years with our children and will hopefully be heading back to work soon. I make almost 6 figures. We have a variety of debt (~40k in credit cards, 2 car loans, a 401k loan, a personal loan). Stupid, stupid stuff that is just a result of our inability to manage money. We kept our heads in the sand for too long and lived beyond our means. 

 

The question is, we are considering a couple of options - going with a debt management company (take charge america) that would run ~1000/month or filing chapter 7. Our house is also underwater about 10k so no home equity available. 

 

The thought of filing scares me, but I am also not confident that we can commit to 1000/month in debt management. We have cut most expenses that we can and need to get beond this mess.

 

Does anyhone have any feedback? I am sure I am not alone, but it certainly feels like it right about now so I would love to hear from people with experience. 

 

Thanks

Message 1 of 7
6 REPLIES 6
pizzadude
Credit Mentor

Re: Need assistance

 

A few questions - are you current on all of your accounts now?   What does your credit look like today?  

 

Would the DMP consolidate all of your revolving debt, and how much extra per month would you have to pay over what the minimum payments are now ?

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 2 of 7
johnson30
New Member

Re: Need assistance

Yes, we are current on all of our accounts now. My credit was in the upper 600s. I cant recall specifically what it was from the different bureaus, but they were all close. All of our revolving debt  runs about ~1155 a month. The DMP was around ~1160, but at least has a finite end.

Message 3 of 7
shols44
Frequent Contributor

Re: Need assistance


@johnson30 wrote:

Yes, we are current on all of our accounts now. My credit was in the upper 600s. I cant recall specifically what it was from the different bureaus, but they were all close. All of our revolving debt  runs about ~1155 a month. The DMP was around ~1160, but at least has a finite end.


I don't think BK is for you. At least from your post, it certainly seems you have other options. Your income is twice your credit card debt. I think with a solid plan, you can tackle your debt to manageable levels within a few years. 

 

A few thoughts. Do you need two cars? Perhaps you could realize a few savings there. Also, if your children are now school age and your wife is ready to return to work, will an extra 20K per year in income from her put a dent in your debt? Good thing is you have realized this early, have a good job and are current on everything. I think if you create a firm budget and stick to it, you would come out ahead. Tackle your high interest loans first with any extra money, and work your way to the next IMO.  

 

 


Starting Score: 501
Current Score: 754 EQ,TU 745,EX 750
Goal Score: 800

Message 4 of 7
johnson30
New Member

Re: Need assistance

After a lot of number crunching and soul searching, we met with an attorney today. It looks like we are forging ahead with the Chapter 7 option. With paying our expenses plus servicing our debt, we run negative 600/month. In the short term, I am afraid of the decision, but I think it the right decision long term. It will allow us to get back on our feet and learn from our mistakes. I feel like a loser, but need to start over somewhere and now seems as good a time as any. 

Message 5 of 7
SoulMaster
Established Contributor

Re: Need assistance


@johnson30 wrote:

After a lot of number crunching and soul searching, we met with an attorney today. It looks like we are forging ahead with the Chapter 7 option. With paying our expenses plus servicing our debt, we run negative 600/month. In the short term, I am afraid of the decision, but I think it the right decision long term. It will allow us to get back on our feet and learn from our mistakes. I feel like a loser, but need to start over somewhere and now seems as good a time as any. 


I want to chime in here real quick, BEFORE you sign a retainer.  In your first post, you said you're making almost 6 figures?  Unless you have a lot more kids than I've seen in a while, or are in a really rich state, how do you Q for a 7?  I'd get a second opinion, at least.  Remeber, a BK attorney is going to sell you a BK... that's their job.

 

I think you should do 2 things:  First, go get Dave Ramsey's Total Money Makeover and spend the weekend reading it.  You are not bankrupt...  Here's the worst case scenario:  You file, one of your kids is hospitalized running up $500K in bills, they sue, they garnish and you're screwed.  Sadly, I've seen this happen more than once.  If you don't have a monthly budget (written down, that you NEVER stray from) that's the first step.

 

Second, have your wife go here: http://www.huffingtonpost.com/2013/06/27/jobs-you-can-do-from-home_n_3505353.html .  I just sent that to someone else and still had it in the buffer.  Ha!  Anyhow, plenty of ways to earn money working from home... and $200/week seems to get you really close to solving your problems.

 

More importantly, BK7 is pretty simple.  You might need to go through a bit of pain for a bit... to fix the "Stupid, stupid stuff that is just a result of our inability to manage money. We kept our heads in the sand for too long and lived beyond our means." that you mentioned.  Dave's plan is great for that.  I also like the snowball (for the psych factor) better than the "pay the highest interest rates first" plan.  Yeah, you pay more, but small psychological wins are way cool motivation.

 

Trust me, I'm a real fan of BK in the right scenarios, but I think there are quite a few ways for you to avoid it... and no one's even mentioned Debt Settlement yet.  

 

Finally, I'm about 99% sure that 401k loans don't go away in BK (not in the office, can't check, but I'm certain they aren't debts).  If you stop paying on it, you're going to be hit with a monster tax bill, which is going to compound your troubles.

 

Assuming nothing changes re: your job, I'd stake my reputation on the fact that you can get out of this mess w/o BK and be MUCH happier in 2-3 years than if you filed.

 

Please re-think this.  You're not a loser, none of us are.  We're not stupid either... we just did some stupid things!

 

 

-SM

I am not an attorney and none of what I write should be construed as legal advice. For legal advice please consult an attorney.

Starting Score: ~470 preBK(8/2010)
Current Scores as of Late January 2016 All 700+. Last CR pull from a lender(housing) was mid-score 749.
Goal Score: 700+ - reached.
Message 6 of 7
redwing2013
Member

Re: Need assistance

SoulMaster,

 

Great information.

 

Johnson30, 

 

Soulmaster is right on.  Seek out the Dave Ramsey Total Money Makeover and his syndicated radio show.  His sould purpose is to help people live debt free.  He filed BK a long time ago and regretted it so now he helps others avoid it.  

 

http://www.daveramsey.com/home/

 

As SoulMaster said....Don't beat yourself up; we all make mistakes.  Its how we recover that matters.  

 

Best of luck.

 

Kevin

Message 7 of 7
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