I will make you feel a lot better. My wife, ( now ex because of it ), put me over $71,000 in cc debt. I blame myself because I never checked on the household acct because I was too busy with my business. I found myself, as others did here, in the same similar situation as you are now. I was barely treading water and staying afloat. I tried to avoid bk at all costs. I did not want to feel like a "failure" but, I came to the realization that I had to do it. I am just now comming out of that bk. In fact, July 1, 2009 is the day it will be behind me. I can't tell you what to do, that has to be your decision. All I can say is, no matter how bad things seem to you, there is always someone out there, like me, who was in a little bit deeper. You may not think so now, but things will work out for you when you make your decision. Read as much as you can on this forum and listen to what a lot of the knowledgeable pros on this forum suggest to you. I wish you luck in your decision.
+1. You have gained the wisdom of painful experience. You will live a longer, healthier life because you have managed to park your problem and leave it in the rear view mirror.
Creditwhere's advice (and the others) is well taken. It is vital to spend time with a proven professional to get the facts--and you should do that with your husband.
It is also important to understand the core of the problem--fully. This means sitting down with your husband alone, in a place that you will not be disturbed for several hours, and writing a plan (after you've met with a sound professional). Some of the plan details should be correcting the behaviors that got you where you are. An example is the commitment to cutting non-essential spending. Two areas immediately available are the dinners out--you said that you have cut back, but you should consider completely cutting off for now. Another is the satellite TV. If you are getting the internet, cancel the TV. You can see most of the shows you want off their websites and going without the TV will validate a strong commitment to your goal of getting out of debt as soon as possible. Though this may sound borderline extreme, I've counseled many people in debt and too many of those are content to only change some things about their habits, but not enough to make clear progress.
Another strong move is to do the bills with your husband. Plan the time and do it together. You are a team and need the support 100% of the time. Paying bills when your heavily in debt is a very stressful situation--help each other by teaming up on this.
If the advice given and taken is to pay down the debt, check the excellent threads on this forum regarding the proper way to pay your cards down.
The support on this forum is strong, because many understand that credit and credit cards, and the positive and negative effects of both are perspective and behavior driven. Understand that you've taken a big step forward posting and will need to continue with great focus to improve your situation. As others have posted---it is possible.
I'm a complete newbie to this forum, and just looking to put it all on the table and hopefully hear back from someone that they were once in my shoes, and were able to work their way out (and maybe offer some suggestions)
I'll start by saying that I would consider my household to be "upper-middle class", and there is no good reason for us to be in debt the way we are. There are no excuses, just the "gotta have it now" attitude I guess. Our total credit card debt is, OMG are you ready for this, almost $55,000! Interest rates range from 11.15% on the low end to 29.99% on the high end--CRAZY, I know!
Thing is, with all this debt,and no extra money available each month, we can't make much more than the minimum payments. Second mortgage isn't an option because our DR is SO HIGH. We are paying about $2000 per month on credit card payments, and well over half of that is going to the interest alone. In many cases, almost 75% of the minimum payment goes to interest. Consolidation loan--same thing--too high of a DR and no one would give us a loan.
According to the CB report, I've managed to pay everything on time (although I know for a fact that I've had some over 30-days along the way--don't know why they are not showing up, but glad for it). The negative factors are too much debt, one collection agency (medical--and should be another one on there), ratio of available credit to balances on cc's. I've managed to hold it together for all of these years, but my I'm about to snap! If it weren't for the tax return this year, I don't know how I would have managed to get the bills paid. I'm constantly Robbing Peter to Pay Paul, using every day of grace periods, and going right up to the 30-day mark, and sometimes beyond. The late fees are costing extra money too! Credit card companies are not willing to negotiate a better rate for us--seems we are not far enough in default to qualify for this. But I'm trying to avoid that situation of being in default!
OK, enough of that. I know what the problem is. Now I need the solution. Yes, we've stopped using all the credit cards. My husband was the biggest abuser, so I've made him take over paying the bills each month, so he gets the big picture--not sure if that is a good idea or not. We are even trying to sell off things just to pay down this debt. Any other "realistic" suggestions? Any would be greatly appreciated. Thank you so much!
tophat - first know that you are far from the first, or last, to be in this circumstance. Easy and loose credit seduces many. It's just so darn easy to fall into and is the reason, as you now understand, why you have to guard and even overcompensate to avoid this type of circumstance.
With that said, the following suggestions (are just that, suggestions) may provide some food for thought.
1. Have a written budget which charts all income and all expenses.
2. Immediately kill all non-essentials (going out to eat, fast food, movie rentals or theaters, impulse buys).
3. Evaluate your spending habits of essentials, such as food, personal care, house hold goods (cleaning), etc. Simplify the food categories and buy less convenience food. Change to generic and store labels on food and personal care and household. This will save on average 20% on these type of expenses.
4. Turn your AC thermostat up to 79 or 80 degrees. Turn your heating thermostat setting down to 68 degrees. Change your light bulbs (as necessary) with compact florescent. Unplug your those items that are not in use (DVD players, TV's, Stereos, etc. all have continual power use even when the power button is off). This will save you at least 10-15% on average in electric/utility expenses.
5. Tune your car, properly inflate your tires, keep oil/maintenance up to date. This can save 5% on fuel.
6. DRIVE 3 miles per hour UNDER the speed limit. Use cruise control whenever possible. Take freeway or routes with as few stop lights/signs. This will save 10% on fuel.
7. Stop driving non-essentially. Walk, bike or wait till you can combine the trip with other errands or when all ready going that direction. Carpool if possible. Take public transportation if possible. This can save 10% or more on fuel.
8. Have a garage sale, ebay/craigslist sale. Sell stuff you have accumulated that is in the closet, attic, garage, under bed, laying around or in paid storage. Sell stuff you don't use, don't need, don't remember or is stuff you can live without (luxuries).
9. Consider cutting back or cancelling premium cable/satellite channels, internet or phone upgrades, cell phone plans can be reduced or eliminated, magazine and newspaper subscriptions, online site subscriptions, other recurring non-essentials (don't say you don't have any until you have a written budget which has gone over your monthly statements of all credit cards, checking and check cards for the past 6 months). It is amazing how much these type of things can add up to.
10. Get a second or third part time job. Husband and wife, if possible, work some extra hours overtime or on another part time job. Even if it is minimum wage, a couple hundred each month (or more) is over $2400 per year in extra principle.
11. Analyze your insurance premiums. Is there any fat that can be trimmed. Don't eliminate responsible coverage, but maybe look at limits, extras, riders, etc. and see if there is anything that can be trimmed.
12. Take an approved Driving Classes which will provide additional discouts toward your auto insurance.
13. Look at your credit cards and see if you have any BT options from a higher rate card to lower rate card (check the fees and make sure it makes sense).
14. Look at family opportunites. Do you have the ability to borrow from parents or other family for an initial period till you get your finances under control? Yes, it is hard and you have to swallow pride, but if you are paying 24,99% for your pride, plus late fees....well, swallow hard and bite the bullet if you have this option.
15. Can you take a loan or draw against any retirement plans (that won't cost too much penalty)?
16. Cut your own lawn and do your own yard care (if you don't all ready).
17. Have children who are old enough get part time jobs and begin to cover some of their own extra curricular expenses. This is a great education on life and pays dividends in many ways. Sit down with them and make family goals so that it is not a sacrifice, but family adventure. Discuss the benefits and freedom you will have in 1 or 2 years.
18. Call your CCC's and ask for rate reductions, even if for just a temporary period of time. They may not, but some might.
19. Begin the snowball approach on paying the cards down. Start by paying the minimums on all cards except either the lowest balance or highest APR card. Then put all extra resources from above on this single account. Pay it down hard and fast. Once this account is paid, apply all that was being paid on it to the next lowest balance or next highest rate card. Repeat till it is paid, then go on to the next, then next. Each time you pay an account off, make sure you are not using it or running it up again.
20. Listen to Dave Ramsey (yes, take the radical approach and advice till you are in a better position).
Well, as you can see, there are many ways to come up with a little extra, but the combination of all makes quite a bit. You can probably come up with even more.
Good luck and work hard, it's worth it!
many of txjohns solutions work.
But the big question is: do you have a commitment from you spouse to get things under control and handled?
Credit Cards are a lot like diabetes. because you do not see the immediate effects and danger you continue on thinking it will be OK and do nothing but accrue cummulative damage that eventually comes due.
You will not be able to get out iof this situation in 1 year or even 2 maybe 3 or four.
Most people do not have the stomache for that. Granted BK takes months to year too as well.
If you do not have the commitment of your spouse though to budget and control spending and pay off bills, you may as well find an attorney to do the BK.
Now here is something else that is important: the money you save you need to view as income and you need to pay debt off.
What to do?
1-Get a notebook for you and for the spouse. Give out a set amount of money each week and ask that e very cent be accounted for. every week tranfer it to a master list.
After a month you have an idea where your money goes and how much you spend (people trying to lose weight use this, if you can stick to it it isa great motivation)
This will give you an idea where your money goes. Is a McDonalds coffee 3 times a week really necessary? No cut that out and you save $6.00 or $24 a month. I cut huge saving when I realized I drank 10 $1.00 sodas from the vending machine at work a week and could buy 12 for 7.18 at the grocery store and use a little cooler with a refreezable ice pak (10*4=$40 vs 3.5*$7.18=$25.13....the cooler and the ice pack was paid off in the first month. Same amount of beverage cheaper no degrading my quality of life)
2-List all your monthly bills and obligations, include a set amount for vehicle repairs and expected gas you really cannot do anything about that.
See where your money is going out at.
3- Save all you grocery receipts. Go through them. Are there generics you can trade out? Frozen or fresh for cheaper depending on season. Most people can save 50% of their food household goods budget by:
a) Buying Generics
b) Aggressive couponing (with products they actually use)
c) meal planning using guides like the book CHEAP, FAST, GOOD, by Mills.
d) grocery planning using circulars and online looking. This does important things- it allows you to buy cheap and it limits trips out shopping. Most people buy at least ONE thing not on their list. If you limit your shopping to x times a month you limit how many extra items you may buy.
e) Shop at multiple stores for your needs. One stop shopping means you are paying more for something that the discount store sells cheaper> I shop at 3 different stores- The Big grocery store, Aldis and a discounter named Marcs. I can buy coffee creamer for $1.00 a quart, at Marcs, same brand product for 3.59 at grocery store or house brand at Aldis for $2.79. Be aggressive- don't buy what you dont eat as it tastes bad> But shopping can for 3 hours of work save you a considerable amount
f) get another notebook for shopping. It's your grocery log. Write down and log prices of the staples you typically buy at the stores you go to- that way you can remember that milk is chaeper at XXXX but carrots are cheaper at XXXX record price changes as you shop. You can also then compare and see where a sale price is cheaper.
g) start downgrading meals- you dont need steak or chicken so much, and you may find frozen chicken breasts at a better price then fresh.
h) Less prepackged- mini carrots are great but regular ones are pound for pound cheaper. bagged salad mix is incredibly expensive.
4-All the money you save you need to do two things- Cut it in half- put half down on paying bills off and the other half to make your emergencey cash fund. Every dollar you save you need to view as INCOME that you worked for. You need to save it and pay off your debt.
5- If you buy more then 3 copies of a magazine a year a subscription is probably cheaper
6- Use your library for books, magazines and DVDs. In many places you can order them online and pick them up. Who needs netflix? (or magazine subscriptions honest I only have a few, the rest I take out from the library)< multiple memberships at different ones can give you different products.
7- Costco or Sams club CAN save you money if you are budgeting hard core and if they have products you use. And if you shop well. My Costco card pays for itself just by one maintenence medication I buy there.
8-Look closely at your cell phone/cable bill. Down grade your high speed internet. Downgrade your cell service. Put the kids on a use budget.
9- Wal mart- they may be destroying America but some stuff they have is cheaper--but just because Wal mart sells it does not mean it will be cheaper then a sale price or regular price somewhere else.
With my and txjohn suggestions you could probably save $700-$900 a month extra.
You guys have to work together and get a written game plan, ON PAPER, ON PURPOSE. Check out DaveRamsey dot com
Dave uses the debt snowball plan which pays minimum payments on all CCs expect the one with the smallest balance and it pays extra on that until PIF and then attacks the next card and so on.
If you are getting hit with OTL fees and very high interest rates, a DMP uses they same method as Dave and can also reduce the interest rates. You must be able to afford the paymenst though since the longest a DMP program can be is 5 years.
BK is a poor option unless you have no other choice, Finally a DMP program will not hurt your FICO or credit in the long run.
Is all the CC debt on joint cards or is it in one persons name? If the latter, I'd concentrate on removing any AU status and do anything else you can to get one of your credit reports as clean and healthy looking as possible. The person with clean reports can then apply for new cards with 0% BT offers. To reiterate, get all the debt on one persons credit report so the other person can get some fresh financial instruments to move the debt to with BT's. Pay down as much as you can for 12 months then you should be able to BT it back to the other spouse for another 12 months at 0%.
Do not be embarrassed.
My advice and it is just my humble opinion.
1. Do the BK. BK is legal, it is moral, it is even in the Bible. The BK laws are designed to help you. It is called relief and that is what you need. Relief. Your life will be so much better post BK. You will not believe the relief and the extra funds you will have. Continuing to struggle will take an unneccessary toll on your life. You will come out on the other side wiser and healthier. GOOD LUCK.
2.Go do something fun after you choose #1.
What I would do if in your shoes -
Set up a consultation appt with a bankruptcy attorney. Years back you could file bankruptcy individually, not sure if this is still the case.
If so, an option would be -
Who is the major earner in the home? Once decided, move as much debt as possible to the other spouse (as mentioned - remove AU's, transfer balances, etc. Not much you can do if a joint account). Only that spouse (usually the wife) then holding the majority of debt claim bankruptcy. The husband would still have clean reports.
The object - both of you would be debt free, and only 1 would have negative credit rating for 10 years (the bite actually lessens after about 2 years, so that individual could begin rebuilding).
Again, not sure if rules have changed, must discuss with a bankruptcy attorney.
I agree with most of what other posters have said: that you face some very difficult choices, that you need expert professional advice as soon as possible, and that you can and will get through this difficult time.
In my opinion you need to consult at least two types of professional as soon as possible: a lawyer and a financial planner.
Your basic options boil down to one or more of:
None of which will be easy. Nor will a BK (if you file one) make the other two any less essential, at best a BK may allow you to discharge part of your accumulated debts but that alone will not address the root cause of your fiscal imbalance.
In order to make intelligent decisions, you need both data and expert advice. The lawyer and the financial planner will provide the advice, but only you and your spouse can provided the needed data. You basically need to come as close as possible to writing down where every penny for the previous 24 months came from and where it went. Assembling these data will not be easy, and where exact details are not available you need the most accurate estimates you can make. Once you have listed all your expenses then rank them in order from largest to smallest and start thinking creatively about how to cut the biggest ones first. You need to focus on the big items of spending because unless you can find ways to cut those it is highly unlikely you will be able to balance your budget even if you slice the smaller ones to the bone.
You need to pay extra-special attention to what I call the "unsurprising surprises" and make sure your budget has room for those. By "unsurprising surprises" I mean things that are locally unpredictable but globally predictable -- like the furnace my wife and I had to have installed last Fall, the water pump my car needed a few months ago, the kitchen stove that died last summer, the A/C compressor a few years back, and so forth. If one owns a home or a car then it is likely to need sudden infusions of money from time to time. I cannot predict when the next sudden home or car repair will be needed, but I would be very surprised if either my home or my car stops needing them! For budgeting, one can list all major car or home repairs over the past N years and then divide the total by N to arrive at an approximate annual amount. If each major home or car repair results in more debt then you simply do not have a reality-based budget.
Your long-term goal should be to get your fixed costs (housing, utilities, transportation, insurance, etc.) below 50 percent of your after tax income. Then you can divide the remaining 50 percent of your after tax income among charity, savings, and discretionary spending without much difficulty. Getting yourselves to the 50% level will not be easy, but with determination and imagination it should be possible. However, it will not be possible unless you and your spouse have some very serious conversations and come to a genuine agreement on what needs to happen and how to make it happen. Unless both parties feel complete ownership of the solution, it ain't gonna happen.