topic Re: Drowning in Credit Card Debt in General Credit Topics

Drowning in Credit Card Debt

Anonymous — Sat, 14 Aug 2021 15:07:31 GMT

Hello

I have about $70k in credit card debt. These were all for business expenses I incurred over the years but the credit cards are all in my name i.e. I am liable. To be clear, I am still current with all my credit card debt. The creditors are Chase, BOA, Citi, Synchrony, Discover and Amex

My business is dying and I've been offered a few jobs, but obviously my income is much much less than what my business was making at its peak. I dont want to give up on at least some income until things get better, but the question of credit card debt is really haunting me. Basically if I accept the job, theres no way I can pay even the minimum amount.

My choices seem to be below:

a) Find a side hussel or second job and try to keep paying. I already started this, but I dont know how successful it would be

b) Stop paying the debt once I cant, then wait for charge-offs to settle the accounts, hopefully for less.

c) File for Chapter 13 bankruptcy (I cant qualify for Chapter 7 with my job) and just let all disposable income go to a trustee for them to pay and have it discharged.

I dont know what else to do, I want to pay my debts, but I'm really just drowning.

Re: Drowning in Credit Card Debt

Anonymous — Sat, 14 Aug 2021 16:12:26 GMT

@Anonymous wrote:
Hello
I have about $70k in credit card debt. These were all for business expenses I incurred over the years but the credit cards are all in my name i.e. I am liable. To be clear, I am still current with all my credit card debt. The creditors are Chase, BOA, Citi, Synchrony, Discover and Amex

My business is dying and I've been offered a few jobs, but obviously my income is much much less than what my business was making at its peak. I dont want to give up on at least some income until things get better, but the question of credit card debt is really haunting me. Basically if I accept the job, theres no way I can pay even the minimum amount.

My choices seem to be below:
a) Find a side hussel or second job and try to keep paying. I already started this, but I dont know how successful it would be
b) Stop paying the debt once I cant, then wait for charge-offs to settle the accounts, hopefully for less.
c) File for Chapter 13 bankruptcy (I cant qualify for Chapter 7 with my job) and just let all disposable income go to a trustee for them to pay and have it discharged.

I dont know what else to do, I want to pay my debts, but I'm really just drowning.

I am sorry to hear about your predicament.

You will likely get a few more replies on this. I want to make a few comments/suggestions that I hope will help with your recovery here.

I think you mentioned that you don't want to give up on some income, and then stated "if I accept the job, there is no way I can pay even the minimum amount." This appears confusing. And I say this not to be disagreeable, but in an attempt to better understand. In your situation, the options are rarely favorable. And, more over, it is usually not possible to pick what is more convenient for us..

You will likely need to put a lot of this on paper - if you haven't done so - detailing all of your accounts, balances, min due.

You should consider developing a strategy to pay these debts down - even if less than minimums - if permitted by the lenders

I would recommend that you write out your budget so you can get a microscopic view of your cash flow. (are there non-essential expenses you can eliminate that could free up cash? e.g., cable, mobile phone bill features, dining out, ordering out if applicable). When I ran into financial trouble, I was able to uncover cash from extra spending on things I didn't need. I had a $5/day weekly Starbucks habit which ended.

That was an extra $100/mo going towards credit card balances.

Consider local foodbanks and second hand clothing shops if you need clothes

I would also speak with a tax/financial advisor to see what other remedies might be available to deal with the debt. In addition, have you considered a gofund me page? You must have loyal clients who helped you succeed; why not go back to them and solicit there help since your business has failed?

If you stop paying your credit debt and they go to charge off status, you rarely have an option to settle - from my experience. The chargeoff will destroy your scores, and if you do not pay, then they go to collection resulting into two derogs for each account not paid. (someone please correct me if I am wrong on this one) I don't recommend bankruptcy.

Lastly, you stated you wanted to pay your debts but two of the choices you listed are consistent with avoiding paying them - chargeoffs, bankruptcy). So, the one thing you can do right now - this moment - is to commit to resolving the issue and understand you will need to buckle down for a little and make sacrifices.

Hey, $70k is a lot of debt to many people but once you create your budget, formulate a realistic plan that includes extra employment, this will become manageable. Letting these things go into chargeoffs/bankruptcy etc should be a last resort.

Best of luck!

Re: Drowning in Credit Card Debt

SoCalGardener — Sat, 14 Aug 2021 16:51:37 GMT

I'm really sorry you're facing such a dire situation. Try to keep your head up and focus on what you can do, rather than focus on how bad it is.

When my husband and I were drowning in debt with no apparent way out, we used Consumer Credit Counseling Services. I don't know if they're even still around, but there must be others like them. They were a debt negotiation service; they contacted each creditor and mapped out a plan that was workable for our budget, and we made the monthly payments directly to CCCS, who then doled them out to the creditors. It was so long ago, I honestly can't remember how this affected our credit, i.e., whether using CCCS helped keep our records in better shape....but it doesn't matter, because we had tanked our credit by then. Anyway, we eventually paid off all the debt, which made us feel good, but did it on a budget we could actually live with.

Whatever you do, don't fall for one of those silly 'credit repair' or 'wipe out all your debt!' places. They're full of...well, you know.

The previous poster has given you some excellent advice.

If you're determined to pay your debts, you should be able to figure out a way, but if bankruptcy turns out to be your only viable path...been there, done that. It's awful. It's a terrible feeling of failure and being a loser, but it's available for a reason, so if you need to make use of it, do. Don't hang your head in shame (like I did), just accept it and move on.

Re: Drowning in Credit Card Debt

Anonymous — Sat, 14 Aug 2021 17:02:00 GMT

Thank you so much for the advice so far. I will check out credit counseling.

I also just realized the job part was not clear.

What I meant was my business is not generating enough income, so I've been looking for employment and got some offers. The choice is to get a guaranteed source of income, versus keep looking at other options to revive the business, look for other jobs, etc. Credit card debt plays a big role in these thoughts/decisions.

Re: Drowning in Credit Card Debt

barca — Sat, 14 Aug 2021 17:21:09 GMT

@Anonymous - have you considered getting a personal loan.

A personal loan might be ideal in your case, pay off all the debt , then manage just one account.
most personal loans start with soft pull pre qualification, so you know your rate before you apply.

try Penfed, discover, Wells Fargo (if you are customer) and maybe sofi.

Re: Drowning in Credit Card Debt

Horseshoez — Sat, 14 Aug 2021 20:45:28 GMT

@Anonymous, I was in your shoes about 10 years ago with debt, mostly business related, but in my name (and run up by my former business partner), which amounted to two to three times what I could expect in gross annual income from a regular job. When I found out about the absurd amount of debt I was in, I left the company I had co-founded over 30 years before and took a job with one of my clients, and yeah, that gross income was well under half of my debt; "Hello, Chapter 13!"

While a bankruptcy of any sort is hard medicine for us mere mortals, in my case at least, the "Wage Earner" plan worked out well for me. Once the "stay" goes into effect, all interest and penalties are immediately stopped, and then based upon your income and monthly expenses, your creditors get paid back some or all of what you owe over the next three to five years. For me at least, even though I'm already up to retirement age, I made a career change while in my bankruptcy, and that change has since exploded into a huge new job. Trust me, it is very comforting to look at a future with lots of opportunity and zero debt.

Re: Drowning in Credit Card Debt

Slowlyrebuilding — Sat, 14 Aug 2021 21:54:47 GMT

I've been in your situation twice. I filed ch 13 once and this time I let the debts all go to collections.

I have lots of thoughts and opinions on this but I'll try to be brief...

1) if you decide to just stop paying, take about 50-75% of what you were paying and set it aside for negotiations. You can get amazing deals on settlement if you have a lump sum.
2) if your accounts go to collections find out (through this website) which are likely to sue and get on a payment plan. The payment plans with collection agencies can be as low as a third of what your min payment was. I had a card that was $200 min payment and I now pay $68 a month.
3) if you become eligible for ch 7 pursue it. I would do a chapter 7 in my situation but a chunk of my debt is student loans. Have you met with a lawyer or 2?

Re: Drowning in Credit Card Debt

Slowlyrebuilding — Sat, 14 Aug 2021 22:15:09 GMT

I also wanted to add if you do stop paying, pick a card or 2 that you want to keep and continue paying on them so you have a credit card if you need one. I kept my credit union cards and my Amex current through it all.

Re: Drowning in Credit Card Debt

Gunnerboy — Sat, 14 Aug 2021 22:52:25 GMT

@Anonymous

If you're going the counseling or consolidation route, another is Trinity Debt Management, a non-profit agency. Good luck to you.

Re: Drowning in Credit Card Debt

ocheosa — Sun, 15 Aug 2021 02:22:14 GMT

So sorry to hear about the troubles you/business are experiencing due to the pandemic. Do you expect your business will recover once we are out of this mess? If so, you might consider a SBA EIDL loan. The terms are better than any bank/credit union and they are using the business income from the 2019 tax return. The loan term was increased in Apr: 24mos income up to 500k max, at 3.75% for 30 yrs. You could also look into business grants in your state. Your local SBA office should be able to guide you in the right direction.

Good luck in whatever you decide to do.

SBA EIDL Website

https://disasterloanassistance.sba.gov/ela/s/

Contact Info

https://www.sba.gov/about-sba/organization/contact-sba#section-header-0

FAQ Pages

https://wisconsinsbdc.org/services/covid-19/disasterloans/disaster-loan-inquiry/sba-disaster-loan-faq/

https://www.nav.com/blog/frequently-asked-questions-about-applying-for-sba-disaster-loans-due-to-coronavirus-582699/

Re: Drowning in Credit Card Debt

jmw1 — Sun, 15 Aug 2021 04:29:02 GMT

At minimums with credit card interest rates, you will not be able to pay it off for decades unless your income goes up. You would need to work two jobs for a while to make a dent in a reasonable amount of time. Not one job and a side hustle. Two full jobs until the debt becomes manageable on one job. Don't work two jobs, fail, and then file 13. The 13 trustee will want you to work two jobs for five years.

I'm going to ignore the option of negotiating settlements with creditors because there is no need to. There is an option that forces creditors to take a deal with no 1099C debt forgiveness income called chapter 13. The creditors can't say no. The interest rate will be zero. You only need to work one job. You only pay what you can afford. You might end up paying 100%. That's because the interest and fees are frozen. No more paying $300 in minimums and having none of it go to principal because of interest and late fees. The longer you wait, the more this debt will multiply and make it harder to get through a 13.

Finally, if more than 50% of your debt is considered business debt, you don't have to pass the means test and you can skip this 13 business altogether and do a 7. Talk to a BK lawyer about this option.

Re: Drowning in Credit Card Debt

Anonymous — Sun, 15 Aug 2021 19:06:59 GMT

First let me reply to everyone and thank them profoundly for their valuable responses. I thought I had researched a lot but I gained way more info by just asking here.

Second, I didnt know about the 50% business debt exemption to means test. I will speak to a lawyer soon. I am still keeping bankruptcy as my last option, but if its a matter of feeding/keeping a roof over my kids head vs paying the credit card companies, I have no choice. But this might just make it less painful than Chapter 13.

Re: Drowning in Credit Card Debt

sccredit — Mon, 16 Aug 2021 17:12:42 GMT

Similar to @Horseshoez I ended up very deep in debt due to a shady business partner. I will say this - do what is best for you and your family, along with what is best for your mental health. I agonized hard before filing bankruptcy but in the end it was best and the day I filed I sobbed like a baby, then slept better than I had for 2 1/2 years.

Re: Drowning in Credit Card Debt

Michizane — Wed, 18 Aug 2021 00:19:25 GMT

Sorry to hear, it can be very demoralizing to be drowning in debt. I would recommend that you list out all your debts and call them up individually and try to work out a deal. You can work with a credit counseling agency but they will not do anything you can't do on your own. Some might offer that you pay them and they will use that money to negotiate and pay your debts. The problem is that they can decide not to pay if they can't strike a deal leaving you in a similar situation as letting it all charge off.

You can try bankruptcy or letting everything charge off, but you need to realize that it can kill your chances of getting credit from those lenders for the foreseeable future.

Or you can get a side hustle to make more money and pay off the debts if you can. Your credit at this point may not be good enough to try getting a debt consolidation loan to pay everything off at a better rate than your credit cards...but if you can that's an option. Or pick lenders that you have to pay and who you can let go (depending on if you will need future credit from them).

There are a lot of options but it depends on whether you want to use credit for the foreseeable future or not.

Re: Drowning in Credit Card Debt

GrandBay — Wed, 13 Oct 2021 00:48:09 GMT

@Anonymous

speaking with an attorney should be step 1

before decinding on anything else

you may not file for bankruptcy

but knowing your options

and being fully informed will be best

Re: Drowning in Credit Card Debt

CreditInspired — Thu, 14 Oct 2021 22:13:54 GMT

@Horseshoez wrote:
@Anonymous, I was in your shoes about 10 years ago with debt, mostly business related, but in my name (and run up by my former business partner), which amounted to two to three times what I could expect in gross annual income from a regular job. When I found out about the absurd amount of debt I was in, I left the company I had co-founded over 30 years before and took a job with one of my clients, and yeah, that gross income was well under half of my debt; "Hello, Chapter 13!"

While a bankruptcy of any sort is hard medicine for us mere mortals, in my case at least, the "Wage Earner" plan worked out well for me. Once the "stay" goes into effect, all interest and penalties are immediately stopped, and then based upon your income and monthly expenses, your creditors get paid back some or all of what you owe over the next three to five years. For me at least, even though I'm already up to retirement age, I made a career change while in my bankruptcy, and that change has since exploded into a huge new job. Trust me, it is very comforting to look at a future with lots of opportunity and zero debt.

Thanks for sharing. It helps others see that sometimes BK gives one a new lease on life.

Re: Drowning in Credit Card Debt

CreditInspired — Thu, 14 Oct 2021 22:18:28 GMT

@SoCalGardener wrote:
I'm really sorry you're facing such a dire situation. Try to keep your head up and focus on what you can do, ...,

but if bankruptcy turns out to be your only viable path...been there, done that. It's awful... so if you need to make use of it, do. Don't hang your head in shame (like I did), just accept it and move on.

^^^ this

Re: Drowning in Credit Card Debt

CreditInspired — Thu, 14 Oct 2021 22:25:19 GMT

@jmw1 wrote:
At minimums with credit card interest rates, you will not be able to pay it off for decades unless your income goes up. You would need to work two jobs for a while to make a dent in a reasonable amount of time. Not one job and a side hustle. Two full jobs until the debt becomes manageable on one job. Don't work two jobs, fail, and then file 13. The 13 trustee will want you to work two jobs for five years.

I'm going to ignore the option of negotiating settlements with creditors because there is no need to. There is an option that forces creditors to take a deal with no 1099C debt forgiveness income called chapter 13. The creditors can't say no. The interest rate will be zero. You only need to work one job. You only pay what you can afford. You might end up paying 100%. That's because the interest and fees are frozen. No more paying $300 in minimums and having none of it go to principal because of interest and late fees. The longer you wait, the more this debt will multiply and make it harder to get through a 13.

Finally, if more than 50% of your debt is considered business debt, you don't have to pass the means test and you can skip this 13 business altogether and do a 7. Talk to a BK lawyer about this option.

Thanks for sharing the option that forces creditors to take a deal with no 1099C debt forgiveness income called chapter 13. The creditors can't say no. The interest rate will be zero. You only need to work one job. You only pay what you can afford. You might end up paying 100%. That's because the interest and fees are frozen.

Wow. I learn something new everyday. I sure hope OP look into this and take advantage of this plan.