At one time, we were $75,000 in debt. We cut back on all the things listed above, and didn't get enough momentum to knock-down the debt. We downgraded our car (new Ford Explorer -> 10-year old Subaru Legacy), which helped and got us on a debt snowball. Debt snowball is paying more on the credit card with the least owed, keep paying the others at the minimum. When the first credit card is paid off, apply the amount paid to the 1st to the 2nd card + the minimum on the second card. Eventually, all the cards are paid off.
Eventually, we downsized the house. This gave us some "breathing room". I know most people won't recommend downsizing the house, but it was a real wakeup call when we put all the categories in the budget, and realized housing (1st mortgage & HELOC) were 40% of our income. By downsizing our home, we also save on gas and electric. This was VERY painful, but, to us, better than trying to live a better lifestyle than our income allowed. My spouse switched jobs, and got another in a city 400 miles from here. We're now saving to complete our 8-month emergency fund. Then, the savings will go toward a house in the other city.
I don't believe in bankruptcy unless you really have to - excessive medical expenses are one reason, but just buying things you can't afford is entirely different. I made the decision to purchase these things, so I made the decision to pay it off.
First, I would really suggest a serious, heart-felt, discussion with your spouse. This could actually strengthen your marriage. God will and does test us. Next, I would go to the Library and get a copy of Dave Ramsey's book "Total Money Makeover." (Actually you should do this before the heart to heart with the hubby). Arrange for some free babysitting for the kids and give yourselves the weekend to really recommit to each other and to create a new plan for your lives. Only a true, honest commitment from both of you will work. In his book, Dave Ramsey doesn't just give you a tip or two, he encourages you to really examine how you got in to this mess and step up to take care of it. I have been where you are, and I truly know the dilemma that you are in. On one hand, you want to take care of the the debt you owe, but on the other hand you want to continue living the comfortable life you're accustomed to (OR at least you don't want it to be too painful!) You WANT to pay off this debt, because deep down you know that you owe it. I sense you don't want to go thru bankruptcy. You are at the breaking point because you are scared out of your mind that you're going to be "found out". You don't want to have to admit that you got in too deep to people like your parents or co-workers, etc. WHO WOULD???? That is human nature! So get the book. You'll read dozens of testimonies from other couples just like you who have tried Dave's suggestions and are now debt free, living life on their own terms...not the CC companies terms. I have been successful in turning my life around, while managing to maintain the "image" to the co-workers and family...for the most part. Dave recommends saving a minimum of $1000 for the things that can and DO pop up. He then recommends getting to the point that you can pay the minimum on all cards while paying extra on the smallest card until it is paid off...then paying off the next lowest balance, etc. Now. I have to tell you that I didn't save the $1000 because I had a CC with that much balance...and if ABSOLUTELY necessary that I pay for unexpected repairs, etc, I could charge it then pay it off, too. I wanted to jump in with both feet to repaying...so I did. First of all...like I said...you have to be to the point of paying all account minimum payments. If you are late on your payments, even a DAY, that is bad. You will NEED to get caught up. Now, I don't believe for a second that you couldn't generate some income with an ebay auction or yard sale. Do whatever you have to do to generate enough money to get caught up. Budget your money. Plan for a comfortable life. People are NOT going to be successful with any plan, and stick to it, if it is TOO STRICT. If that were not human nature, people wouldn't be fat. Everyone would just hard core diet and be thin. Those restrictive diets have people falling off the wagon within a week...so think about this. You don't want to set yourself up for failure, do you? Put some thought in to this. Pray about it. You can walk away stronger and happier than you ever were when you were filling up the voids with the junk that the credit cards paid for! BELIEVE ME!
All I can say is don't be eambarrassed! There are many of us out here with the same problems as you. Our credit card debt (which, like you, I left my husband in charge of -- silly me!) was about $50K as well. We first decided to turn them to a debt elimination company.....BIG mistake. For 4 months all they did was take our money for themselves and change our address to theirs on all our accounts so we were unaware that nothing was happening with them. We realized this when we were served a summons for court by one of the creditors who was suing us!
At that point, I fired the debt elimination company and took things into my own hands. After speaking with a credit counselor from my Employee Assistance Program, he suggested we borrow against our retirement funds since we are not elgible for retirement for several years and see if we could make settlement amounts on the debts. Many of them were already turned to collections agencies since they were more than 120 days delinquent.
We did that and starting calling all the credit card companies (about 40 of them, I might add) and we were able to pay off everyone except one that I cannot seem to find who has it, for about $23K. And since we hadn't paid in more than 120 days the total amount had now risen to about $56K. Most companies were willing to take 40 cents on the dollar, some less and some more.
Our payments back to our retirement fund are $250/month on one and $500 quarterly on the other for the $23K we loaned from them. These payments will last for 5 years.
This has freed us from the constant calls from creditors and has freed up some money each month as we were also paying about $2K/month for minimum payments.
Not sure if you want to go this route or not. Our credit is shot -- my credit rating is now between 4-500 but I'm hoping it will recover as we pay all our other debts on time.
In our case, it was a choice of this or bankruptcy and bankruptcy may not have eliminated our debts with the amount of money we make. Like you, we are an upper-middle-class family with no dependents.
I hope you can get free of those debts somehow. I know what a horrible feeling it is to have them hanging over you.
Sorry to see that you are in such a fix. You didn't mention if you had any children at home, that of course can be a serious consideration.
Frankly, owing as much as you do on credit cards is going to preclude you from ever (almost) getting out of this situation. As you know, each month you make the minimum payments and of that it's practically all interest and the occasional late fee. That doesn't provide you with much motivation I know. In that situation there aren't many people who would choose to continue doing that for very long. I"m a little surprised that your credit card grantor's won't negotiate with you at all. I would think that they can see the bankruptcies climbing and be willing to make some concessions.
You didn't' say that you had any automobile payments or not. If you do, I would urge you to sell the car or truck or both and get out from under them. That is money that you could certainly use to pay down debt. Today it isn't unusual for a couple to have two car payments amounting to $500 a month. Often times considerably more. So, if you are one of those people then divest yourself of the debt ASAP. You might also find that your insurance premiums will go down as well. Every little bit will help. Next, you need to take a close look at your debts. Make a list of them with the amount owed, the interest rate, and the payment required. I'm sure you know that the debts with the highest interest should take priority. For example, you mentioned a card with an interest rate of almost 30%. That would be one you would want to get a handle on quickly. Keep in mind that this is if you plan on paying off your debts.
Another consideration as I think I saw someone suggest is a possible bankruptcy. Not anyone's first choice but sometimes it is the best way out of a hopeless situation. How hopeless your particular situation is depends on several things. I wonder how much cash you could actually muster to pay down on the credit cards each month. This is after you have gotten out of any car payments or perhaps sold off some assets. Thin about it. An extra $500 or so each month on your largest balance credit card will make a significant difference in a relatively short time. Something like this will require both you and your spouse to focus on finances. Make some serious sacrifices and keep on top of your spending. You need to really go on an economic diet. Think of all the expenses you incur each month. Cable for example. Believe it or not, you can live without it. Using an antennae you can still get the local channels. If you keep the internet you can use that to get free TV as well. These are small things, but when combined with a host of other cost cutting measures can make a real difference. The key here is to think long term. You didn't get in this predicament overnight and you won't get out overnight either. But now is the time to make cuts. Think basic survival mode. No cable, reduce your phone bill or eliminate it if you have cell phones. Watch your utility expenses. What about your house? Are you buying or renting. If you have equity and I believe someone addressed this already see what you can do to tap into it. If you're renting, it's time to consider a move to reduce that expense if possible. Generally it is. None of these choices are going to be fun or the sort of thing that you want to do. But, if you want to pay off your debts then these are some of the things that you have to do. You just have to. Then try and get some enjoyment out of watching the credit card debt go down. There is a web site called Mint.com. I would suggest that you take a look at it. It's a pretty good site and it will help you to monitor your expenses closer than you have in the past.
So, if all of that seems unendurable for you then consider bankruptcy. I don't know your age but know that it will be on your credit report(s) for 10 years. On the other hand, these are days in which you will find a lot of company. So there is that. It's tough situation but basically you have only two choices, either knuckle down and pay the debts or go banko.
I was in your same situation a year ago. My credit card debt was about $58,000.00. My monthly payments on those cards totaled $2020.00. In June of 2008 I joined Genesis Financial Management Inc. They negotiated my interest rates with my creditors and today my credit card debt is $41,103.00. My monthly payments are $1,416.00, saving me $504.00 per month. In 29 months, I will be completely out of credit card debt. The good thing is that every three months my credit score is going up as my debt to ratio is going down. Today I can smile because I can see the light at the end of the tunnel.
We are keeing the satellite TV cuz we live in the sticks and cannot get ANY tv without it. Don't have any extra pay channels though. Same with internet--satellite or nothing.
I know it seems like you can't give up satelitte TV but you can. I live in an area that doesn't get any TV reception either. I gave up cable over a year and a half ago to pay off debt so I could buy a house. I find between sites like Hulu and TV.com that I am surviving ok.
Even now, with zero credit card debt I haven't re-activated my TV subscription.
Don't be embarrassed. As so many other posters have said, lots of us are in the same position. I just signed on today with American Credit Counseling and will be debt free in 5 years 4 months. It seems like a long time, now, but just knowing that I have help getting the cards paid off is a huge relief. They worked up a budget with me, I don't have much left over after the cards are paid and I cannot use them until they are paid off. But I think it's going to be worth it in the long run. If I were to continue to do what I had been doing, I would be paying them for more than twice as long. The counselor spent over an hour on the phone with me and we walked through everything. She was really nice and didn't make me feel embarrassed at all. Check with them and see if they can help you before you file BK. Best of luck to you and remember that you are not alone!!!
First of all don't be embarrassed. That's part of the problem. There are literally hundreds of thousands of folks in your shoes right now. You are definitely not alone.
Some things you left out. Credit Score, Income, # of credit cards, car payment, loan agreements, etc.
Look at your credit cards. CLOSE OUT ALL CREDIT CARDS BUT ONE! YOU DON'T NEED THEM! Keep the oldest and best performing (no lates) card with the highest limit possible. Don't worry about the interest rate. Get your credit report from all 3 agencies with score. http://www.mycreditkeeper.com will provide those at no charge.
DO NOT APPLY FOR ANY DEPARTMENT STORE CREDIT CARDS! Pay as much as you can on the credit card with the lowest balance. When that is paid off go to the next lowest and increase your payment on that card and so on. It took a while to get in debt, and it will take time to get out of debt. Some people can be happy being overweight but no-one is happy being overdebt.
By all means tighten your belt. No one needs 2 cases of beer a week, or go to the movies every week, or 2 cases of soda pop a week. Someone with good intentions said to punish yourself by eliminating all forms of entertainment. I disagree. When you pull back it is necessary to maintain optimism. How are you going to do that if the whole family is elbow to elbow 24/7? Find fun or interesting things to do that are free. That will help. Also you need to reward yourself every time you payoff a credit card. NO I don't mean a vacation in Hawaii. Go to Burger King or Outback or to a movie whichever you can realistically afford given your circumstance. Maybe its just taking your kids to the movie and picking them up after they are done. Maybe its a pie or a gallon of ice cream from the grocery.
Do some volunteer work. You might like it and it keep doing it.
It that isn't going to work look at Chapter 13 Bankruptcy. BK13 is a government provided repayment plan. Avoid CCCC's like the plague. Make the decision when you are current on everything, if possible. You will need an attorney so once you decide to look into BK consider not making credit card payments. It's all over. Time is of the essence here. Find a good attorney. If your credit scores are high you won't take as bad a hit as you might think. In any case the scores will recover.
Do NOT I repeat do NOT be late on your mortgage payment for ANY reason. Keep in mind that if everyone had high credit scores the Credit Reporting Agencies would be out of business. They are not your friends no matter what they would like you to believe.
Hope this give you some food for thought.