Drowning in Debt

[Revelate]

It's generally easier to get a HELOC than a Home Equity Loan.  It's variable in a rising interest market, but if you can refinance call it 45K of 15%+  of debt down to 4-4.5%, total win.

You also didn't share what your income was in addition to the rest of your bill breakdown, but if you haven't done it already do yourself a favor with a budgeting exercise: if there's a bunch of silly spending that you can end (been there done that) and get to where you can start paying down the high interest CC debt, that may save a CH 13 or even 7 if you income qualify.

Generally speaking just make minimum payments on things for now and any extra drop on your highest interest credit card, see what you can get rid of spending wise and socialize your stats with a few CUs don't just look at the local ones.   Depending when you looked the market may have gotten spooked by Ukraine, but I had a stupid and sloppy CO tacked on to my account which dropped my scores 100 points across the board (been lazy cleaning up because I know they'll remove I just need to call them and fork over $180), and as of two weeks ago I was getting all sorts of mailers for personal loans in the 7-8% range  so I strongly suspect there's money on the sidelines looking for a home once this Ukraine issue goes in either direction.

[SoCalGardener]

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@sweetland wrote:

Good evening forum. It has been sometime since I have been here. I currently have bit off more than I can chew regarding my debt. I'm starting to get to the point where I'm delaying payments with creditors so that I can afford others.  I have ZERO late pays or delinquient paymets to any creditors but I feel the inevitable is approaching. I have been almost over 800 credit score prior to purchasing my home and maxing out my creditors.

My Scores

Experian App = 699

Credit Karma= 598 Trans 603 Equifax

Chase Credit Journey- 596

My Revolving- (most are maxed w/in a couple hundred dollars)

Discover:            $13,794 19.99%  $200

Chase Sapphire:$22,375 15.99%. $450+/-

Chase #2:           $9,711 23.74%     $604 (currently past due as of 2/14-need to pay asap)

Best Buy Visa:   $4,231 24.24%.    $120/mo

Amex:                 $2,766 25.24%.     $86/mo

My Installment Debt

Lightstream:      $20,669 12.74%.   $450/mo

Vehicle                $52,800                  $934/mo (no equity, cannot re-fi)

*not broken down above is my home and all bills (insurance, electric, gas etc. etc. )

I have made horrible decisions and I need to get back on track. As a last ditch effort I have applied for a discover home equity loan to pay off $50-$70k, if that happens I will have a path to get unburied. In the event that it does not work out, I wanted to be pro-active with my inquiry on this forum. I tried my local credit union for home equity but was denied due to DTI ratio, so my spirits regarding discover is nill.  Does anyone have any recommendations with Consumer Credit Counseling type compaines or any other option that may be recommended?

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You've gotten a lot of great advice in this thread. I hope it helps!

I've been down two separate paths when in financial trouble: bankruptcy and consumer credit counseling. Keeping in mind that they both end up with the same results, i.e., ruined credit, closed accounts, and bad histories that will last for years, if I had to pick one to do over again it would be the latter. As I recall, the actual name of the company was Consumer Credit Counseling Services, but I have no idea if they're still around.

I'd avoid bankruptcy like the plague, if at all possible. It's awful, and its ramifications stick around for a very long time--ten years. At least with a service like CCCS, all of your debts get paid, you feel good about that, and although your credit takes a nosedive, it doesn't last as long as post-bankruptcy.

If you're considering any type of loan, whether secured (like a HELOC) or unsecured, it's critical that you stick with the plan. I mean, pay off the bills the loan is intended for, then start working on paying down the loan, but DO NOT GIVE IN TO TEMPTATION and start running up the cards again! This is a *huge* pitfall for someone in your situation. If you know you don't have the willpower to stop using the cards, you're going to end up in double trouble--a loan AND credit card bills. That's not the objective, so you have to resolve not to fall into that trap. I'd tell you to give your cards to a trusted person, or put them in your safe deposit box, etc., to avoid temptation, but in today's digital world...we don't need physical cards in order to use them, so that won't help much. It boils down to willpower, and only you know if you possess the willpower needed in this scenario.

Good luck! I hope you'll keep us posted.

[Citylights18]

It all comes down to cash flow. If you have to pay creditors anyways you could stick a few bills on the cards and just pay minimums, freeing up cash flow to pay down other debts. You might even be able to do that with other spending categories such as groceries. Eventually it will snowball as your cash flow increases.

As to the car, if you can hang in there you'll eventually pay it down enough to sell it. You could even consider trading it into a dealership and picking up something else less expensive, even if at a loss. Let's say you could find a dealer to give you 44k for it and put you into a used vehicle that was valued at 12k. Maybe you would have to pay $400 a month for it as opposed to $200 a month but it would be more managable.

HELOC money is good for some situations. I decided to go for the cash out refinance first THEN applied for the HELOC on top of it. I lowered my 1st mortgage by $500 a month so I could afford a HELOC at $400 a month. There is only so much money you can take out from a HELOC though (200k-300k max) and the amount you apply for is the equity you have at the time so the longer you hold off the bigger HELOC amount so you might want to use it last resort.

[LawStudentCivilis]

OP, hopefully some of the advice here has been helpful to you.  I would have to agree without having any idea of what type of cashflow you have there is no advice that can be specific enough for your situation.

[CreditInspired]

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@chiefone4u wrote:

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@sweetland wrote:

Good evening forum. It has been sometime since I have been here. I currently have bit off more than I can chew regarding my debt. I'm starting to get to the point where I'm delaying payments with creditors so that I can afford others.  I have ZERO late pays or delinquient paymets to any creditors but I feel the inevitable is approaching. I have been almost over 800 credit score prior to purchasing my home and maxing out my creditors.

My Scores

Experian App = 699

Credit Karma= 598 Trans 603 Equifax

Chase Credit Journey- 596

My Revolving- (most are maxed w/in a couple hundred dollars)

Discover:            $13,794 19.99%  $200

Chase Sapphire:$22,375 15.99%. $450+/-

Chase #2:           $9,711 23.74%     $604 (currently past due as of 2/14-need to pay asap)

Best Buy Visa:   $4,231 24.24%.    $120/mo

Amex:                 $2,766 25.24%.     $86/mo

My Installment Debt

Lightstream:      $20,669 12.74%.   $450/mo

Vehicle                $52,800                  $934/mo (no equity, cannot re-fi)

*not broken down above is my home and all bills (insurance, electric, gas etc. etc. )

I have made horrible decisions and I need to get back on track. As a last ditch effort I have applied for a discover home equity loan to pay off $50-$70k, if that happens I will have a path to get unburied. In the event that it does not work out, I wanted to be pro-active with my inquiry on this forum. I tried my local credit union for home equity but was denied due to DTI ratio, so my spirits regarding discover is nill.  Does anyone have any recommendations with Consumer Credit Counseling type compaines or any other option that may be recommended?

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If you're afraid missed payments are coming, consider contacting your creditor's BEFORE you miss the payment and see if they can/will offer a hardship program to you.

Discover can lower your interest (they cut mine in half for 12 months), taking their hardship program will cause charging privileges to be canceled for the term of the hardship (unable to charge anything to the card), but can reduce minimum payments. 

American Express used to offer a hardship program, I'd imagine they still do... might have to miss a payment before they will offer it (typically you only have to be 24 hour's past the due date to have a creditor that requires you to miss a payment allow you into hardship).

Chase used to be willing to offer those who missed a payment a 0%apr for 5 years... trade off, they close the account-- if you pay in full you won't get black listed.

I'm not sure if putting your credit cards into hardship will offer enough help, but is another option. 

I would also look at NADAguides and kbb.com to see what private party prices are on your vehicle, as it's possible selling it yourself will get you the funds needed to pay off the loan.

Hope you find the right combination of changes to get your debt payments back to a manageable level and reduce the stress of playing shell games with payments to stay afloat.

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This ^^^ times 1000 should be your very next move. 

Also, check into whether there's a hardship program for your mortgage or if you qualify for a mortgage modification. If your mortgage is FHA with a high APR, look into a FHA streamline. 

Other ways to bring money into the fold: renting out a room in your home, having a garage sale, getting a PT job, or driving for Uber or DashDoor. 

GL2U

[vinblastine]

Do not get a home equity loan to pay off credit cards. (You will just charge the cards up again). Stop paying all your unsecured debt and your car payments. Just pay your mortgage. You probably don't qualify for Chapter 7 and Chapter 13 may be an option but if you don't complete it you're back to square one. After a few months they will repossess your car but you can buy another used car with all the money you save. You can save a ton of money and later use it to pay off your loans or not. Depending on your state, wait for the SOL to run out. Yes your credit will take a hit but who cares, you don't need it to buy a house or get credit. The only thing you have to worry about is a garnishment or a lien on your house. But by then you should have enough saved to pay off anyone that bothers to do that. 

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[SouthJamaica]

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@vinblastine wrote:

Do not get a home equity loan to pay off credit cards. (You will just charge the cards up again). Stop paying all your unsecured debt and your car payments. Just pay your mortgage. You probably don't qualify for Chapter 7 and Chapter 13 may be an option but if you don't complete it you're back to square one. After a few months they will repossess your car but you can buy another used car with all the money you save. You can save a ton of money and later use it to pay off your loans or not. Depending on your state, wait for the SOL to run out. Yes your credit will take a hit but who cares, you don't need it to buy a house or get credit. The only thing you have to worry about is a garnishment or a lien on your house. But by then you should have enough saved to pay off anyone that bothers to do that. 

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No offense, but that is the worst advice I've ever heard.

[vinblastine]

No offense taken. 

It worked for me.

[jmw1]

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@vinblastine wrote:

Do not get a home equity loan to pay off credit cards. (You will just charge the cards up again). Stop paying all your unsecured debt and your car payments. Just pay your mortgage. You probably don't qualify for Chapter 7 and Chapter 13 may be an option but if you don't complete it you're back to square one. After a few months they will repossess your car but you can buy another used car with all the money you save. You can save a ton of money and later use it to pay off your loans or not. Depending on your state, wait for the SOL to run out. Yes your credit will take a hit but who cares, you don't need it to buy a house or get credit. The only thing you have to worry about is a garnishment or a lien on your house. But by then you should have enough saved to pay off anyone that bothers to do that. 

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There is a lot of truth to this even though mathmatically dumb. Everybody says they won't run the cards up again and they do anyway. Mathmatically nobody in their right mind would pay 20% on a credit card but many here do anyway. It's an emotional issue, not a math issue. 

Reaching SOL if you are a homeowner is unrealistic. Creditors are not dumb and they will sue you before the SOL runs out to lien your house. Judgment liens can be removed in bankruptcy, but it will cost a couple of thousand in legal fees for each lien. Better not to get to that point.

In the context of bankruptcy, which is the vastly preferred solution over debt consolidation, home equity is exempt when entering bankruptcy from creditors in many states. If you live in one of those states where your home equity is entirely exempt, getting a HELOC to pay unsecured creditors (the lowest priority claims in bankruptcy) is the worst and dumbest thing you can do. Similar to that is withdrawing from a 401k (401ks are totally exempt from creditors) to pay credit cards. Bankruptcy allows you to get rid of unsecured debt 100% minus what you can repay which is often zero or close to it. Taking a HELOC or 401k just robs you of equity you can legitimately keep.

The quicker you reach the Coming to Jesus moment on debt, the quicker and better it is because you won't make dumb mistakes like taking a HELOC/401k out when bankruptcy was actually inevitable. 

[clipperskipper]

My Dad had many sayings about money, never charge more than you can pay off in a month was number 5, iirc. I just cannot imagine carrying that kind of paper on a vehicle, leaving you one logical solution, filing.