Drowning in Credit Card Debt

[jmw1]

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. 

[Anonymous]

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. 

[sccredit]

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. 

[Michizane]

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. 

[GrandBay]

@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

[CreditInspired]

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@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.

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

[CreditInspired]

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@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.

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^^^ this

[CreditInspired]

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@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. 

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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.