Need help deciding. Do we file BK? Interest is about to kill us!

[wHiTeSoL]

It's been a long time since I've been on this board, 2 years ago I was so proud, fixed my credit (removed a lot of incorrect information and GW a lot of collections off), got new cards (I never thought I would have 25k cards!) and was on the fast track to 800.

Today my wife and I are both around 700-710 (according to DCU and Barclays) but are buried in about 70k in credit card debt. All of it at 0% but the first 30k is about to end and we're about to be flooded with interest payments. We don't have too much to our name besides a new online reselling business we just started last month and is flurishing. Basiclly I'm looking for advice, I'll put a TL;DR below with important information.

Family with 2 small children

Credit Card debt between wife and I: 70K

Credit limits between wife and I: 150k

Car loan @ 1.99%: 16,500. (car is worth about 13k as is)

Income from my FT job: 3500 / month after taxs, 401k, and car payment (taken out automaticlly by sending to separate account) or about 55k/year before deductions

Income from our family business: 2500 profit.

401k value: 12k

2nd car value (not being used) 1k

Required Monthly expenses: 1500 / month (Includes $500 rent from family)

30K will be off 0% in November 2015

20k will be off 0% in June 2016

20k will be off 0% in September 2016

Other things:

We really want to move out, and soon. Either rent or buy. (looking for rentals around 1500-1700/ month or buy for 250-300k)

My job requires me to have a car, second car ok for job but too small for family. 

Wife unable to work traditional job due to kids. 

No late payments to date yet, we have had a few credit limits slashed by Chase (they took about 5k from my wife) and American Express has denied us SP CLIs stating we have had limits cut.

We have 3 Business credit cards we have had for about a year (Chase Ink Bold, Ink Plus, American Express Simply cash) we have been using to buy inventory that is PG but never carries a balance. (Can we keep if we BK?)

[Anonymous]

It sounds to me like you're in quite a pickle, but no I don't believe  bankruptcy is your best option. you still seem to have a good amount of funds available at the end of the month. I would start snowballing your debts to minimize your interest charges as the cards come out of the 0% period. Bankruptcy should be a last resort and it sticks with you for far longer than taking the time to pay what you owe. It may take a couple years to dig out of this, but you'll stop losing credit and get back on track. If you file bankruptcy you will lose every card you have and you have really good cards that will not let you back in after you file. Moving out would actually be the worst thing you could do in your situation because you are taking away funds that could pay your debts faster. 

[StartingOver10]

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@Anonymous wrote:

It sounds to me like you're in quite a pickle, but no I don't believe  bankruptcy is your best option. you still seem to have a good amount of funds available at the end of the month. I would start snowballing your debts to minimize your interest charges as the cards come out of the 0% period. Bankruptcy should be a last resort and it sticks with you for far longer than taking the time to pay what you owe. It may take a couple years to dig out of this, but you'll stop losing credit and get back on track. If you file bankruptcy you will lose every card you have and you have really good cards that will not let you back in after you file. Moving out would actually be the worst thing you could do in your situation because you are taking away funds that could pay your debts faster. 

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Agree with the above^^^. Bk is not your solution and it will only solve your problem for the short term.

You need to stay where you are now because you will need every dime to pay back debt and build savings.

First thing to do is to find out where $70,000 went and yet you have no tangible items to show for it. That is a huge red flag that there are underlying spending issues that will not be resolved with a Bk.

Having your wife stay home with the children is also a luxury these  days. Not everyone can afford it and apparently you are in that camp. You may need to figure out a different income strategy while you are mired in this debt.

Is your wife the one that is handling the new business at home and bringing in an extra $2500 per month? Or are you charging up inventory on your cards and then planning to discharge the debt so you didn't include it in your profit & loss statement?  If it is the second one, then rework your figures to see if you actually have a viable business. if you are actually making a profit of $2500/month, then you have a chance to get out of this debt reasonably.  If it is the former, then you have more issues that can't be solved with a Bk.

In any event, you have an income issue and a spending issue. The income issue is easier to solve than the spending issue.

Put together a realistic budget that includes repayment of the debt. Then sock drawer all of your cards. Put yourself on a cash basis and start the debt snowball. Find out where the spending impulses is coming from to fix this problem. Is it an emotional response to something? Is it to plug in an income shortage? Is it dinners out and other frivolous spending? Not to be harsh, but $70,000 is a lot of money to slip through your fingers without noticing. The answer to the spending problem will help you more than a Bk will help at this stage.

[wHiTeSoL]

The debt is 90% my fault and 10% my wife's. She first moved to the US when we got married 3 years ago and didn't really know the value of the dollar in relation to what we brought in. I as the head of the finances means I should of said "NO" but I couldn't. We continued to spend more than we made every single month until it balooned to where we are today. We're created our budget two weeks ago and that's what listed above leaving us a decent amount of money to pay off debts every month, but the interest payment still scare me.

In terms of the business. I believe it is currently viable. We have purchased 13k worth of inventory and after all associated fees have sold half of it in a month. This resulted in 10k being returned to us and half of our inventory still being sold. By my calculations this is a little over 3k profit (assuming the rest of the inventory continues to sell) but still left us a gap for this month. We used our personal funds to pay off this debt in lieu of our personal debt. My wife is running most of the business from home while watching our two kids (8 years and 11 months) which includes inventorying the products I bring home, creating the listings, packing and shipping, and bookeeping profits.

This is what our bottom line looks like after month 1

Total spent    Selling price   # of units for sale  # of units sold   Profit

Totals

$13,744.22

$10,387.64

1,681

757

$3,421.65

Thank you for all the encouragement guys, I really believe we can dig ourselfs out of this but I know it's not going to be easy. It does sound like we are not in as bad a shape as I originally thought though.

On a side note, do you guys see a way for use to continue to grow the business during this process? I feel like we should be reinvesting our profits into the business to allow it to snowball with the upcoming holiday season but right now the plans are to take the profits out to pay our personal debt. 

[Anonymous]

I would split up the funds and pay towards the personal debts, then keep investing in the business. As you pay your debts down you may begin to qualify for new cards with no interest as your debt levels begin to fall which should help get things in order. Once you're finally finished you will be all set to start a savings account and purchase your home.

[bstone]

Can you balance transfer some or all of the $30K coming off 0% in November to another 0% card? If nothing else, figure out which of your cards has the lowest rate and be prepared to transfer as much as possible to that card when the interest starts. This will at least minimize the interest paid.

[wHiTeSoL]

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@bstone wrote:
Can you balance transfer some or all of the $30K coming off 0% in November to another 0% card? If nothing else, figure out which of your cards has the lowest rate and be prepared to transfer as much as possible to that card when the interest starts. This will at least minimize the interest paid.

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We are going to try but with a debt load like we have right now I dont know who would give us another card. Our credit scores are still ok and I have no doubt we would be close to 800 if we get this cleared. Anyone have any ideas on BT cards? (I have most of the major ones already)

[Shooting-For-800]

You are not a good candidate for BK.

You would be put into a Chapter 13 and your life would be like being in prison.

If I were you I would start calling CC companies and asking for 0% extensions and settlement options.

You make 6k per month after taxes and have good credit scores.  Why throw that away.

In addition, the fact that you are already thinking about a 300k house at the same time as filing BK is a red flag for me.

I just do not think you are in the right position for BK.

You could easily lose $2000 per month for the next 48 months in Chapter 13.

You will not save a dime if you Chapter 13.

Take $1000 per month and pay off your debts (with or without settling.)