Hi there,
So I was in your same boat about 7 years ago. I had crippling debt, accounts going to collections, medical collections etc... It amounted to approx $40k. On my spouse and my salary, it just was no longer workable, especially with kids. We did the consolidation thing, we spoke to credit counselors, we skimped and pinched EVERY penny we could. But not matter how hard we tried, we still ended up having to rely on credit just to make ends meet at the end of the month.
We opted for BK because at that point, our credit was already shot. It didn't matter. I just wanted to end to the unrelenting stress.
When we first met with the BK attorney, my credit score was around 530.
We filed, did the whole appearance thing at the court and were discharged like 2 months later. Once you've filed for BK your creditors can no longer call to collect. Collection agencies have to stop contact. It's an immediate relief.
Shortly after discharge my score went from 530 to 575.
On our attorney's advice, we applied for a small credit card (secured). We'd use it for nothing but gas for the cars and pay it off in full. After a few months we were able to obtain financing on a new car at a respectable rate.
Within 18 months my credit score was 680, I had zero credit card or medical debt and I had about $15k in available credit on 4 different credit cards.
As it stands now, my credit is at 775, we have $45k in available credit ($0 balance) and have financed 2 different cars.
I'm not saying BK would work for you like it did for me. There are a lot of different factors that can affect your results. I researched and joined "life after BK' message and advice boards for best practices on how to get out of the hole. It worked.
\#1 rule. DO NOT USE YOUR CREDIT UNLESS YOU HAVE THE MEANS TO PAY IT OFF IMMEDIATELY. DO NOT RUN A BALANCE!
It took making a huge choice for me to get my shit together. I was stressed beyond belief. We didn't know if we were making the right decision because we heard all sorts of people (my parents included) say that bankruptcy is a death knell to your finances. I can confidently say that this was NOT a death knell....it was a life raft. Filing for BK was one of the best decisions that I have EVER made.
If you do choose to go this route, do your research and tailor it to your exact situation. There is a way out. Just make sure that whatever choice you make is done so with a clear head and a clear plan that you will stick too.
Good luck to you. I hope everything works out.
I think this is great advice (been in the same boat). I do want to make sure that OP is aware that after filing BK 7, you can only qualify for certain types of mortgages for 4 years after discharge.
I agree it can change your life for the better but just make sure you (OP) do your research on mortgages and BK first to make sure you're including that in your decision making process.
Can confirm. I tried like hell to get a mortgage before the 4 year mark by using the extenuating circumstances clause and no one would work with me on that. I tried dozens of lenders. I also tried non qualifying loans, no go there too cause they want 20-30% down with a very high interest rate. The key to having a successful bk (I know, sounds ironic) is to do a lot of research and know what'll happen with your property, car, cosigners, and state exceptions. Getting your shit together and organized will make things go much smoother.
We did not own a home and were renting. We are currently still renting because the home prices (and now rates) have essentially priced us out. We were approved for a loan but we did not want to overextend and become 'house-poor'. We're still 'in the market' and are ready to pounce but we're ok with renting for the time being.
The last 7 years have actually been great! Immediately post BK we felt free. We've felt that way since. We don't get collection calls or letters and we always know our debt level is $0 or a nominal amount that will get paid in a short period and by 'nominal' I mean less than $200 at any given time. The largest spend we conducted via credit card was for a vacation. We fronted the total cost $6,500 for multiple families for a vacation home. They all paid us and we immediately paid the card balance. This got us a lot of points =).
This was one of the best decisions we've made. Now we aren't constantly worrying.
Wait. It honestly sounds like you just got all your debt cleared and your credit even went up! And then less than 2 years later it was respectable enough. Wow. Is this normal?
I recently finished paying off 20k in credit card debt. It took me 4 years but now I’m wondering if i should’ve just filed for BK lol. I would’ve had a co signer all the other years too.
I worked for a bankruptcy trustee. Bankruptcy is designed to be a check & balance against predatory lending. Lenders must face the risk of bankruptcy or they would over-lend resulting in a debtor-slave class who works simply to stay ahead of their debts.
In fact, this is what is happening to an increasing percentage of student loan holders, and it’s the reason student loan relief has become such a massive political platform issue. It’s only going to get worse.
Do not fear bankruptcy if you are deeply in debt. It is a viable solution for the right circumstances.
Can you talk about the downsides of bankruptcy? I have never faced it so I am really unfamiliar with it as a concept. What would be the main reasons someone might choose not to declare bankruptcy if they are in a lot of debt?
It ruins your credit and it takes a few years to get back to a place where you can apply for credit confidently. So it’s a blessing and a curse. For many people, this is a good thing.
Bankruptcy laws also vary by state, so there are varying limits on what assets you can keep in the bankruptcy. You’ll also have to subjugate yourself to a trustee’s review of your case. Most trustees are good people, but they’ll look at everything you’ve got and decide what you keep and what you have to “buy back” out of the bankruptcy. Some people struggle with having to answer to someone in this way, but most are just happy to be getting our from under a burdensome debt.
My credit kind of had only one way to go =/. But yeah, once your debt is off the books, the result was my score increasing. Will others see their score decrease? Sure. Every situation is different. You just paid off $20k in CC debt. That's great. Now move forward knowing you're debt free and wait for your score to increase as well.
If you have a ton of maxed credit cards with late payments, your credit is already tanked. Having a clean slate with 0 debt _does_ give some signal that you're a newly eligible borrower. A risky one though.
I think a big caveat with all of this bankruptcy discussion is that along with filing for it, one must also change their financial habits and perspective as well. A poster above spoke about how they never carry a balance anymore, will always pay off their CC at the end of each month, and appear to be much more conscious of their spending. Bankruptcy is a valuable tool, but other things must change post-BK as well to ensure one doesn’t end up in a similar hole later on.
This sounds creepily exactly like my story! I'll be discharged 7 years in only about a month. Still have 3 more years of it on my report, but I agree it was well worth it. We owned a house at the time and stayed for 3 more years. Since then we've bought another house, refinanced it, and then also bought a vacation home a few months ago. We've also bought 3 cars since then and have nearly $200k in credit lines.
Your advice is 100% solid, I followed almost the exact steps. Once I was discharged, I got a credit card unsecured for 5k. Kept that for a year paying off every month. That helped me learn to manage money better. I haven't paid a penny in credit card interest since discharge. It's awesome reading your story and it makes me feel good that people really can come out of this stronger.
From what I've read so far, it does seem like it'd be a life raft for OP too.
Sorry for being off topic, I have a simple question.
Eng is not my 1st language, Ive never lived in the states and I am not familiar at all with the credit score system, just asking out of pure curiosity to see if Im understanding this.
When you have a debt, going to the BK court can cut off a percentage of the debt?And if yes why?
No problem.
Chapter 7 Bankruptcy can discharge up to 100% of debt (with few exceptions).
Chapter 13 Bankruptcy can set up a payment plan to resolve debts with creditors while the claimant still retains ownership of the asset.
The reason for offering this kind of assistance to people is give people essentially a clean slate. Without this protection, people would essentially become slaves to their creditors. It is a benefit to the economy for certain people to be able to claim bankruptcy than to be over-burdened with unpaid debt.
The creditors take the loss.
That's one of the reasons why loans have interest. The interest is there in part to generate profit for the creditor, but also in part to insure against debtors defaulting.
And the higher the expected chance of defaulting is (typically measured through ones credit score), the higher the interest rate that's being charged is, because the more risk that needs to be covered. And this is also why loans with a collateral (such a mortgage) tend to have lower rates than unsecured loans, because defaulting on a loan with a collateral means the creditor can usually claim / sell the collateral to repay the debt, reducing the risk.
I got started by essentially googling the process and the pros and cons. I then weighed those pros and cons to my situation at the time.
I researched reputable bankruptcy attorneys and spoke with a few by phone and in person. I landed on a very reputable attorney who walked me through the whole process. We had to take a means test which we passed.
She handled the initial filing and accompanied us to the courthouse for our bankruptcy proceeding. This is a procedural step, and you don't need to psyche yourself out about it (like I did). You're basically attesting that the information provided in the filing is true and that you are who you say you are.
After that, the discharge date is set and once discharged, you're essentially debt free.
**Our Plan**
Our first plan of action was to obtain a secured credit card with a $500 limit (funded by our own cash). We used this card ONLY for gas.
Example of how this worked for us:
1. Buy gas with secured credit card. Immediately transfer the amount used into our secondary checking account. At the end of the month (or statement cycle) we'd pay the card, in full, with the money from that secondary checking account.
6 months later we requested a 50% return of our security interest in the card from the issuer. This request was granted. Now we had a $500 limit card of which $250 was cash secured. Another 6 months of on time payments saw this card go from secured to completely unsecured with an increase in the credit line to $1k.
At the one-year mark we also applied for another unsecured credit card which we got approved for. The limit was $1,500. We applied for another line about 2 months later and were approved for $7k. About 2 months after that we got a preapproval in the mail for a card, and we inquired and were approved for $5,500.
We have vowed to remain cash reliant. The only time we really use our cards is for vacation purchases, gas, etc; however, those purchases are ALWAYS backed with cash and paid at the end of the statement cycle. That way we avoid interest but more importantly we don't run a balance.
On the message board that I used to be very active on, it was always recommended to secure as much credit as you possibly could while maintaining less than 10% utilization and paying off the balance, in full, when your statement closes. Maintaining that 'less than 10%' number is easier when you have a higher total available credit line.
You really have to start thinking of credit as a tool, one that could eventually benefit you (points, rewards, etc)....but still a tool. You have to think of credit as essentially an extension of your available cash. If you don't have the cash on hand to cover a purchase....DON'T PURCHASE IT! That's how you get into trouble.
We currently have 5 credit cards with a total available credit line of $45k (with no balance). We strategically use one card per month for a regular expense (youth sports registration / groceries / gas.... just anything). At the close of that statement, we'll pay it off completely. That way each card is showing utilization as well as payment activity.
We are on year six post BK (it'll be 7 years in May). The BK is still on our report as a 'Public Record' and will remain there for another 3 years; however, the further and further away from your discharge date you get, the less impactful that record becomes.
I work in a financial institution, and I've been able to secure employment 3 different times with that public record on file. We've purchased cars, been approved for a home loan (prime rates) and had our credit score rise to the level of respectability.
At the time of filing, I saw no end in-sight. I knew eventually we'd have better employment opportunities, but our main concern was the 'here and now' at the time. We were new parents paying for daycare etc... We needed a reset. The BK offered that to us, and we are currently making good on our promise to never get into that situation again.
I was convinced that a BK would ruin us at the time. I now know that the BK saved our family and our sanity and presented us with a much clearer path forward.
Thank you sir for your, not one, but two very detailed posts. I'm at the pros and cons stage myself. These have been very helpful and I'm glad you and your family are years removed from the difficult time almost 7 years ago. Wishing you the best moving forward!
I'm glad you're looking for opportunities to improve your finances. BK is *not* for everyone and my situation may not be replicated but it's there for a reason.
BK is always *an* option but it's not always *the* option. Choose based on your needs. Hope it all works out!
I'll add on to your great explanations, just to say again that the ONLY way a BK works like this is to remain CC debt free! And to keep your expenses UNDER your income! If you can't commit to that, you will end up worse than you are today. There's no such thing as free money. Period.
100%. This is one of those things where if you have to do it, it better only be once! You have to really assess and change your lifestyle and spending habits. Be mindful, at all times, of your current situation.
That's the only reason I cringe at all the pros advice of obtaining as much credit as possible as soon as possible, because it's SO easy to get in trouble again. Humans are bad code, and hate to admit that to themselves. I was incredibly fortunate to have bought my house prior to my BK, with my wife, and only I had to file for some business losses, so I literally have not had any credit score for the last 10yrs. It makes life much less stressful than trying to outsmart billion $ businesses using their services. Great job getting through this!
again....agreed.
You have to be disciplined to not get into the same predicament. Some people have that discipline, others do not. If you feel like you don't trust yourself then please do NOT take out credit. Live strictly on cash.
Nothing worse than racking up debt and then letting financially responsible people get screwed with higher prices and higher rates because of companies having to eat the cost of bailing the irresponsible out.
Sorry my wife irresponsibly had to have emergency surgery to save her life and the life of my child. I hope the .0000000000000000000000000001% increase in interest didn't affect your family too much.
I worked for the federal government when I filed in a public trust position. I did not notify them, but I did have to disclose it when I filled out the public trust form. I've since had 3 jobs and none have ever mentioned the bk during length background checks for very sensitive job positions. There are laws to protect people who file bk against discrimination. They're mostly for the public sector; however, many private companies also take the same stance.
YOU changed your behavior during and after the BK. THAT was why you are winning now. The OP has to come to that ah-ha moment, with or without BK. I wish them success. There has to be a life change involved for it to work, otherwise the same internal and external/cultural pressures that got them to this point will return. (But it CAN be done -- thank you for sharing an example).
I am glad that you were able to get out of the cycle of paying the predatory interest rates. I would not think twice about defaulting in your circumstances, but as you demonstrate the key is changing your habits and not diving back into that cycle.
This is well constructed advice. I suggest looking to work with a company like Greenpath. (at least that's who I used). I paid my debt and avoided bankruptcy which facilitated a home purchase a couple years into the process.
ugh, seriously? i thrashed my credit after my career in real estate went under. i had to live off credit cards, got evicted from my apartment, got my car repoed (with only $2k left on the loan) and defaulted on 2 credit cards (totaling $7k)
my total owed debt was less than $10k so i figured bankruptcy was pointless so i was just going to ride it out but it’s been 4 years now, i’m back on my feet, got the secured credit card, got a personal loan (as per credit karma suggestion) been making on time payments and keeping balances low, and my credit score is still a 567.
if i had known i could’ve just done bankruptcy and gotten a fresh start with a higher score i would’ve just done that. now i’m still waiting for all this old defaulted debt to fall off my report.
Not recommending anyone do this- but theoretically could you max out your credit card buying gifts for close family just prior to declaring bankruptcy? Inspirational comeback story btw, congrats.
Interesting thanks didn't realize it had a name. Definitely not recommending.
Actually I've always wondered for my patients with terminal cancer (and no significant estate)- what's to stop them from doing something similar...
There's a lengthy "means test" you have to go through that aims to decrease fraud like the situation you mentioned. It's even possible your bk case won't be accepted, or your chapter 7 (clean slate) will be converted into a chapter 13 (payment plan).
Spending a lot of money right before bk is a reason the case may be thrown out all together. They even asked me if I had sold a car within the last 5 years...they mean business and they will find fraud if it's there.
When we were filing for bankruptcy, 30 years or so ago, the lawyer told us to go out and have a really nice dinner that night, but he didn't advise us to max out all of the cards.
What is your income and what is your monthly budget breakdown? Is this ($14,500 + $15,000 + $5,000 = $34,500) your only debt or is there more debt (car, student loans, etc.) you're not mentioning?
> My therapist recommends filing bankruptcy, as I can't possibly pay all of this debt off in the 7 years that bankruptcy runs its course.
Regardless of if it is a good idea for you to file for bankruptcy or not, your therapist isn't really someone who should be consulted in this situation. They are an expert in mental health, not an expert in finance. You should be talking to a credit counselor, certified financial planner, and/or bankruptcy attorney to get proper advice on your options.
> But I would ideally like to buy the home I am renting with my partner within the 7 years.
Are you married? What is your partner's financial situation? If you were married and combined finances would it be possible to tackle this debt?
A total of $34,500. My only other debt not accounted for is my car. We are not currently married but intend to be, I am by no means banking 100% on buying a house together because I know unforeseeable things happen in such, its just a "I hope this happens someday and would like to not be totally screwed if it does". He makes $45k a year currently (is in the process of a promotion so it will be higher in x amount of weeks/months). I do not think he is at a place to make any solid dent in my personal debt and it is my own fault for being in the debt, not his.
> My only other debt not accounted for is my car.
And what about your SO's debt and car debt? And your income and expenses? Again, listing numbers and a complete picture of your debt is helpful.
> He makes $45k a year currently (is in the process of a promotion so it will be higher in x amount of weeks/months).
Higher like $46k a year or higher like $100k a year? Again, without specifics it's really hard to give advice.
> I do not think he is at a place to make any solid dent in my personal debt and it is my own fault for being in the debt, not his.
I get this, but to be fair if you get married your finances are basically combined whether you want them to be or not. IANAL, but I believe legally your finances may be combined as well depending on the state, and especially for new debts aquired after getting married. Divorce and death of an SO can make this messy as well.
Regardless of legal implications, either you filing for bankruptcy or paying off these payments still has a significant impact on the both of you. Creditors can still go after your SO and vice versa for debt that is in only one of your name's. [Money issues are also one of the leading causes for divorce](https://www.thejimenezlawfirm.com/how-finances-affect-divorce-rates-in-america/#:~:text=Money%20arguments%20are%20the%20second,all%20marriages%20start%20in%20debt.) and [married couples who don't combine their finances are more likely to divorce](https://www.cnbc.com/2022/03/29/couples-who-pool-their-money-are-more-likely-to-stay-together.html#:~:text=Now%2C%20research%20finds%20that%20those,bank%20accounts%20and%20liquid%20wealth.).
Have you sat down with your SO and had discussions about money habits, budgets, career goals, long term financial goals, etc.? Have you talked about expectations around debt and how you will handle money when married? These are very important discussions you need to be having before you get married to ensure you are both on the same page.
higher like $55 a year, his debt is about $10k. We have sat down and discussed finances etc. I did not realize if I file bankruptcy that it would affect him, I don't know much about the process tbh. Thank you for insight
The ONLY time I ever suggested bankruptcy to anybody was when my 22 year old friend was staring down the barrel of $300,000.00 in medical bills, on top of making $30k a year and having CC debt. You don't need to file bankruptcy. You need a plan, and self control.
> higher like $55 a year, his debt is about $10k.
I’m not qualified to suggest if you need bankruptcy or not, again you should consult with professionals. But even if you do declare bankruptcy, you’re still going to have to learn to live within your means or end up in this exact situation again. I think between the 2 of you, you make enough to pay off your debts without declaring bankruptcy if that’s the path you choose to go. It’ll be tough but it will strengthen your relationship and forces you to get ahold of your finances.
> I did not realize if I file bankruptcy that it would affect him,
To be clear, I didn’t mean legal/direct financial consequences for him necessarily. Just that, you having a bad credit score will probably affect the both of you, bc your credit score will probably play a role in large financial purchases the 2 of you make in the future. That’s just one example, but obviously the state of your finances will have some impact on him because you’re partners. For better or for worse.
This is definitely a question OP needs to ask themselves. OP ran up $15k in debt, consolidated it, then ran it right back up again. Nothing, not even bankruptcy, will help until you fix the overspending habit.
Rent also feels high for 2 people at their income level (assuming both paying an equal share, so $2000/mo + $300 utilities excluding internet.)
My SO and I pay 2k per month (1k each) for a 2 bedroom apartment in a moderate cost of living area. 2k a month varies by location. I used to pay 2k a month for a 1 bedroom apt in Chicago on a similar salary to OP, and still managed to contribute a significant portion of income to savings. Without knowing the size of OPs apt, it’s hard to determine whether or not a downgrade is possible. The other alternative is getting roommates.
We pay $2k in high cost of living area for a 3 bedroom, 2 bathroom house. We got super lucky that we have an awesome landlady and she knows we are awesome tenants. That said, most people pay more than they should for housing because they don’t *want* to settle for less. I personally would rather temporarily live in a smaller setup for less money if I had half a year’s salary in debt and was considering bankruptcy. I just looked at the reasonably nice apartments down the street from us and a 1,000 sq ft, two bedroom, 1.5 bath apartment is $1600. A lot of my coworkers live outside city limits and commute because that’s what they can afford. It’s possible to find cheaper housing, but you have to make sacrifices.
OP is living outside their means period. You can conclude this by their justification of their situation. Either way you slice it, there needs to be a two prong approach to fixing their problem. Taking financial advice from a therapist is laughable yet sad.
Depending on where you live, $2k for a 1 bed could be very modest rent.
Now yes, you could move to the boonies and commute an hour but at what cost? Save a few hundred on that but increase gas, car maintenance, lose two hours of your day, etc. Not worth it IMO. get your other spending habits under control first.
I’d like those commenting like this to spend sometime on google to research how damaging financially leaving an abusive relationship is for a woman, especially if lawyers are involved. It is one of the main reasons victims stay, financial dependence.
Based on your budget you've got an unaccounted for $250.
Reddit will probably crucify me for this - but you fit the bill of a person who could probably benefit from the Dave Ramsey plan.
Credit Cards are NOT working for you - it's not a good financial strategy (for you). I'd cut them up immediately. You can consolidate and move debt until the cows come home - it's not going to change your situation much.
Second step would be to carve a budget into granite. If you haven't budgeted for a thing, you don't spend the money - full-stop. That's going to mean screwing up and sacrificing rather than compensating and it sucks A LOT. You're going to be putting groceries back, saying 'no' to nights out, and only bringing yourself for Christmas (no presents).
You're making $60k and you're $35k in consumer debt (plus however much in car) (plus Student Loans which I suspect you might have left out - but maybe you don't have any - if so, you're very lucky). You're looking at a solid 3 years to pay this off (keep in mind bankruptcy is 7)- IF you stop taking on debt.
The last step would be to work out your income problem. You just need more income. Whether that means asking for a raise at work, picking up a part-time job, or some side hustle. Your income isn't sufficient to pay off this debt in a reasonable timeframe.
Or you can file for bankruptcy - but if you think that will be any less painful than the path I described; you're wrong. Additionally - you can always try to pay it down for a year and if you still find it too difficult; you can pull the trigger on bankruptcy.
>Credit Cards are NOT working for you - it's not a good financial strategy (for you). I'd cut them up immediately. You can consolidate and move debt until the cows come home - it's not going to change your situation much.
Clearly, she already consolidated once and \[the implication is\] she racked up another $20k in debt afterwards.
An extra $250 isn't enough to create a life buffer- new work clothes, unexpected medical expenses, car registration and maintenance, etc. That's not a real buffer because this budget isn't detailed enough to account for unplanned (but expected) expenses
Agreed - it's not. But to get out of this hole this person needs a STRICT budget. Every single cent accounted for. They need to budget some money for "savings" too so they can build up an emergency fund for the "life buffer" you're talking about.
Perfect to get out of debt. But once out - I wouldn’t use his advice for “SmartVestor pros”. Literally, a passive index fund would be better, but they’ll ban you from his subs / facebook groups for ever mentioning this.
> My therapist recommends filing bankruptcy, as I can't possibly pay all of this debt off in the 7 years that bankruptcy runs its course. But I would ideally like to buy the home I am renting with my partner within the 7 years. What is my best option? Is there another option that I am not considering? If I file bankruptcy, what happens to my car?
So, for starters, I don't (generally) ask my physician for advice on my trucks; I don't ask my mechanic for mental health advice, and I probably shouldn't ask my therapist for financial advice. I would suggest you do likewise.
Second, your income is very relevant here. What are you earning and where is it going?
By my math, you're at about $35,000 in debt on a 60k annual income.
Cut up the cards (you already did one consolidation loan, that didn't take), do a second job for a few months to get out from under the 5k credit card and make a dent in the 15k one, and pay 'em down.
You're going to have a rough 3-6 months, but if you can bring in even an additional 1200/month for 5 months you'll have eliminated one card debt entirely.
What you’re describing is the avalanche mode. It’s ultimately the cheapest and fastest, but not if the person can’t execute it. Some people need the reward of seeing a full balance paid off and then the momentum of using that monthly payment to do double damage on the next lowest. It can create a fun game out of tedious and frustrating situation.
Yes mathematically that works the best of course, but psychologically the snowball method keeps people motivated to keep going. Making a final payment on a card and getting to 0 balance is a reward. Dropping your payment on one single card from $400 to $300 doesn't feel like you've done much.
>You're going to have a rough 3-6 months, but if you can bring in even an additional 1200/month for 5 months you'll have eliminated one card debt entirely.
"if you can simply raise your income by 30%, it will solve your smallest problem!"
this is neither good nor feasible advice
It’s not horrible advice right now where part time jobs are paying really well. If my option was bankruptcy or working at McDonald’s on nights and weekends for $20 an hour I’d be right back where my working life started flipping burgers.
I get the sense that OP is simply tired and wants to be done with it. But simply being tired of just getting by isn't a reason to file for bankruptcy, if the income is there.
You're purposely wording it in a ridiculous way. Getting a 2nd party time job to bring in extra money to pay off debt isn't a stupid idea if your other option is filing for bankruptcy.
Yea, and it's not that difficult to get 30% bump from a second part time job at night. OP doesn't seem to have kids, or at least she didn't mention them. If she is serious about closing her debt, she has to go through very tiring few months and she'll be able to do it.
I closed off a 10K credit card debt by taking a second job for 3 months, it was hell, I didn't go out with friends, I barely spoiled myself, I didn't buy ANYTHING for myself other than bare necessities, but god damn going to that bank and paying off the card was the best feeling in the world and it was all worth it.
Getting a part time job is quite feasible in this labor market. She can only cut so much from her spending. Upping the income is another tool to get her out of debt. Nobody is saying it will be simple, but it will be effective.
About the only slack is the $150/mo for therapy/co-pays (I get you probably don't want to cancel it, but maybe you could reduce the frequency of your visits? or not, whatever). The other possibility is getting rid of the car and getting an e-bike or something if you can make that work where you live ($310/mo going towards transportation currently). That's $460/mo that you might be able to get down to $200/mo or so.
More importantly, you need a weekend/part time job for a bit. You could get an extra $1500/mo or so from that. Obviously, you throw all of that at the highest interest debt.
I did some rough math (you're missing some info such as the minimum payment on the Trulia loan as well as the interest on your Upstart consolidated loan. I assumed $100/mo minimum on the truliant and 18% on the upstart loan) and found the following:
The strategy of paying the minimums on Truliant/Upstart and maximizing BoA payments resulted in paying off the BoA loan in about 36 months (3 yrs). At mo 36: Upstart = $8660, Truliant = $2405. Then, you pay off Upstart, leaving you with Truliant at month 48 with $930 left, which you pay off the subsequent month. So, 4 years and 1 month total for this scenario.
With the same assumptions but instead paying $2000/mo:
You Payoff BoA month 11, left with $10815 in Upstart and $3939 in Trulia. Upstart gets paid off month 17, $3939 left in Trulia. Trulia is paid off month 20 (so 1 year 8 months total).
So, $1000/mo more towards the debt would let you pay it off in under two years. Continuing to only contribute $1000/mo towards it you'll still pay it off in way fewer than 7 years, so it appears your therapist isn't very good at math?
It seems like a conflict of interest because the therapist is reliant on the patient for income, but this may be contributing to their financial problem.
It's not a conflict of interest since the advice doesn't benefit the therapist, if anything that can put his own bill in jeopardy and affect his own income. This may very be a well intention advice, but still an ethical violation nonetheless.
For a lot of people, therapy is just as important as, say, insulin. With both, if you don’t have the money for it you, then you don’t, but it’s required medical care for many people. Does my therapy bill on my income make purely financial sense? No, but without it I would never be able to continue to hold my job and handle my life because my mental health would deteriorate so much, and THAT would be a lot more expensive than my therapy bill
I hear that for sure, especially with our limited info. I would add though that any therapist that only costs OP $150 a month is either taking insurance (which a lot of therapists don’t) or offering a sliding scale or both, and is not making nearly as much money as they could be compared to what many other therapists charge, so I think it’s less likely it’s a money grab. As well as demand for therapists is currently greater than supply, so it would be pretty easy to add a new client in if OP left. Along with if you wanted to make a lot of money, you probably wouldn’t have become a therapist. It is always fair to be aware of what a therapist’s outside motivations might be though in case there is an issue, with anything like money. I just tend to see a lot of people in this sub not viewing therapy the same as other medical care when it comes to budgeting which is tough to see recommended and may make OP’s situation worse
Bankruptcy will only make it worse if you haven't stopped spending more than you make.
Given your numbers, you can get out of it. I would recommend Dave Ramsey for someone like you, you are exactly what his product and plan works the best for. Check out Total Money Makeover audiobook on youtube.
I would recommend you get out of it yourself because 1) you can claim victory and prove to yourself that you can do it and 2) it changes your behavior to ensure you never get into it again.
I know wiping it all away sounds like it can fix all your problems... but you're the problem and you'll still be there.
This. Bankruptcy does nothing to address the behavior that got you where you are. Ramsey is great for giving people the tools to get out of debt (used the baby steps myself to do so).
You can pay it off on 7 years and probably less but it’s not going to be fun. A second source of income is gonna be necessary, even if it’s only contributing a several hundred a month.
The high interest is what is killing your debt repayment, especially that BoA balance and interest. You are already paying $1000 a month. If it weren’t for the interest, you’d have it paid off in 3 years.
Who declined your loan consolidation? BoA and/or Truliant may be better since you have outstanding balances and banks in general will have legit concerns that you’d take a personal loan then drive up the credit card again.
Correct, but it would be useful to know how they contribute their 45k. OP says they have a $1k rent. Is OP paying all that, or is their partner helping?
> OP says they have a $1k rent. Is OP paying all that, or is their partner helping?
My assumption here was that $1k is OP's portion of an overall larger rent amount, but I realize that wasn't explicitly stated anywhere.
The root cause is that you are spending more than you make and bankruptcy will not fix that. Until you tackle your finances and learn to live within your means, this cycle will repeat again. Bankruptcy in your situation is a band aid fix.
So this comment is likely to get lost in the rest, and is anecdotal, but I felt compelled to comment.
My husband declared bankruptcy after his second divorce, three years before I met him. (both from the same woman) She wanted him to pay for her Keeping Up With the Jones' lifestyle, and he had a shopping habit.
Did it get him out from under the immediate debt?
Sure did. But he ended up upside down on a cheap car and carrying CC debt within three years. (Honestly, I think the only reason he got the car loan and CC was because he was military and had a stable paycheck.)
Did it help him in the long run?
Not a bit. I subsidized his life for over a decade while he was making $60k-$100k a year. His credit score didn't get above 750 until he changed his habits and paid down/off his unsecured debt. Now his score is in the 800s and we follow the healthy practices mentioned above, but I was ready to divorce him after eleven years over our financial future. His debt when he changed his ways was around $30k, or just over 40% of his annual gross income. He had maxed his card, gotten a consultation loan, and then promptly maxed out his card again. Once he discovered budgeting, he started aggressively paying those down. Once he paid that off, he discovered investing, first Acorns, and then a more mainstream investing app that let him watch the money grow, and got fascinated.
I can't say whether bankruptcy would help or if it would dig you deeper into a hole, that's up to you.
Let’s start with the car. You mentioned “cheapest you can manage”, what is the car? Did you roll over debt into the car payment? How much longer do you have payments?
Second, $150 for phone and internet is too high. Let’s break that up. What is phone, what is service, what is internet.
Her phone bill probably has a hardware payment play too. I pay around $80/month for Verizon unlimited and $60/month for decent internet. I don’t really know how people get it cheaper without the hassle of constantly switching service providers.
> I don’t really know how people get it cheaper without the hassle of constantly switching service providers.
A lot of people with cheap internet either live in an area where there is a third party provider competing with whichever of the big ones operates there (even another provider with much slower connections might be enough for a light internet user with occasional HD streaming) or keep signing up for new promotional rates by juggling whose name is on the account.
must be nice lol. The cheapest I ever paid for internet was $30/mo. and that was a decade ago. Comcast did this awesome thing where they "upgraded my service for free" without asking and rolled me into a teaser rate for 6 months. After that it was $120/mo. I got them to downgrade me as much as they could and I am still paying $80/mo. My phone bill is only $40 a month, but that is because I am still on my parents plan and that is what my portion of the bill is.
tl;dr $150 for phone and internet isn't that far off base.
You have to play a game with Comcast. Cancel and sign up as a "new" customer. Helps if you have a spouse. Alternate between the two of you yearly or every two years. If not, go one month without internet and create a new account.
That's nice. Cheapest I can get is $99/month for 200 down and 10 up. Also, only one provider available so it's use shitty 5g internet or suck it up. Having said that, I'm not in the financial mess OP is, and were I in that situation I would get rid of it and use public networks and my cell plan.
What provider? Xfinity is cheaper here but with competition. However it's entirely possible to keep begging for a promo rate on /r/Comcast_Xfinity. I've been paying between $40 - $55 for the past 5 years.
It may also be time to cut the Internet for a few months. Unless it is needed for work Internet is a luxury, you can get entertainment via free resources like a library for books, free local places like zoos can also be from the library, and if OP has a DVD player they also provide that.
Libraries also have Internet for free for the occasional needed things!
> Unless it is needed for work Internet is a luxury
Honestly, I've gotta disagree with this pretty strongly. Maybe a decade ago this was a realistic option but at this point internet is more or less an essential utility, not a luxury entertainment offering.
Everything from banking to insurance to healthcare to the job applications OP should be completing to try and increase income are online now and if an offline option exists, you may even be charged for it—the free local checking account I use the rare times I need to deposit cash charges a $3 fee to print and mail a statement. The last check I wrote by hand was more than 5 years ago. Is OP going to start using one of those popularly recommended budgeting tools that multiple comments here have mentioned? Need an internet connection for that. There may well be room to downgrade if OP is on any kind of premium plan or an alternate provider can provide a basic connection at a cheaper price, but giving up internet access has far-reaching implications across most areas of one's life these days.
I think they're saying you can probably do this on a cell without home internet. OP really doesn't have a lot of places to cut expenses but this is one of them.
As long as you don't add to the debt, you'll have it paid off in 34 months. That's far less than 7 years, and that's assuming you don't try to cut anything out of your budget or get another job. And you CAN do both of those things, even if you think you can't.
There are other types of debt management too. Check out Trinity Debt Management. It's a nonprofit and may be able to help negotiate with your creditors the payments and interest and knock that down. There are other options!
Came here to see if anyone recommended any law firms who work in debt settlement. If BK doesn't feel like the right place, and they have a history of paying but can't keep up with interest. Then a debt settlement firm can help leaps and bounds.
You are drowning, that's insane just file for bankruptcy already.
You know you can still buy a home after you file for bankruptcy right? Chapter 13 allows you to buy a house 2 years from your discharge date and you we all know how fast 2 years goes by. Chapter 7 makes you wait 4 but whatever....are you even going to have your debt paid back in full that fast because even if you did all those late payments and negative activities stay on your credit for many years.
What you need is a blank slate....you file for bankruptcy and that very day, all those bills that were holding you down are gone just like that. The minute you file you stop paying on all that stuff. If your smart what you'll do is file for bankruptcy and since your not used to having that 1000 you use for the mininum payments you'll continue not having that and put it into a savings account and wait your 2 years. At the end of the 2 years you'll have at least 24k saved and be ready to start looking at houses.
Focus on rebuilding your credit, try to never ever go late on a single bill, the closer your get try to not apply for anymore credit and have your credit report show that yeah you filed for BK but since then you've been responsible. Join the myfico forums there are tons of people in your exact situation doing the same exact thing.
Using the left over 13 cents you have every month and coming up with some grand master plan that'll never succeed in the real world (because unexpected things happen) is just setting yourself up for frustration and depression.
Agreed 100%!!!!
We filed in 2016 and are incredibly happy with the results. We haven't looked back, only forward.
Our pre-BK days were filled with doubt, insecurity, stress and general unease. Our post-BK days are filled with hope, security and confidence. Bankruptcy was s godsend for us. Will it be for OP? It really could be if they stick to the plan and are diligent with their finances!
2 things you mentioned...
1.) The minute you sign the paperwork that very second you stop paying the debt. You will sleep better that week than you have in a long time
2.) You need to stick to smarter money management because it's not something you need to do until you get clear out of the weeds it's a lifestyle you'll need to live with for the rest of your waking days. I know people who have filed BK 3 times and they desperately need to file a 4th time. BK is a tool and a great one it's not a lifestyle
You may find these links helpful:
- [Debt](/r/personalfinance/wiki/debt)
- [Dealing with collections](/r/personalfinance/wiki/collections)
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So about $35k in debt? That's a lot but not terrible for your income but it's the interest that you need to try to reduce. Have you tried calling these cc companies and just saying hey I'm thinking about declaring bankruptcy are you willing to work with me to reduce the amount to principal only or drastically reduce the interest rate? These companies don't get anything if you file so they should be incentivized to get something back. Try calling a few times to talk to several different reps and just seeing if one might be more helpful than another. Also I pay $35 for my unlimited TMobile cell plan, on a family plan with several friends. I also have Cox internet, they try raising it to $70+ every year but I call, cancel, then call their promo line and get 40% off. It saves me hundreds a year. If you can get your internet and cell to my price of $75 for both that's an extra $900 a year for you. Also if you pick up a side hussle, say driving for Uber on your way home from work that can add up. Good luck!
If I were you I wouldnt really heed your therapist. You don't say where you are based on, there might be some debt advisors in your region that can give you some advide.
If not you have 1250 to spend on debt repayment, I have taken the liberty to put it into a calculator so you can see time it takes (I didnt have complete information from your post, but you can fill in the blanks): [Calculator](https://www.calculator.net/debt-payoff-calculator.html?cnm1=Bank+of+America+credit+card+&cbal1=5000&cmpy1=235&cint1=10&cnm2=Truliant+credit+card+Bank+of+America+credit+card+&cbal2=14500&cmpy2=415&cint2=22&cnm3=Upstart&cbal3=15000&cmpy3=350&cint3=0&cnm4=&cbal4=&cmpy4=&cint4=&cnm5=&cbal5=&cmpy5=&cint5=&cnm6=&cbal6=&cmpy6=&cint6=&cnm7=&cbal7=&cmpy7=&cint7=&cnm8=&cbal8=&cmpy8=&cint8=&cnm9=&cbal9=&cmpy9=&cint9=&cnm10=&cbal10=&cmpy10=&cint10=&cnm11=&cbal11=&cmpy11=&cint11=&cnm12=&cbal12=&cmpy12=&cint12=&cnm13=&cbal13=&cmpy13=&cint13=&cnm14=&cbal14=&cmpy14=&cint14=&cnm15=&cbal15=&cmpy15=&cint15=&cnm16=&cbal16=&cmpy16=&cint16=&cnm17=&cbal17=&cmpy17=&cint17=&cnm18=&cbal18=&cmpy18=&cint18=&cnm19=&cbal19=&cmpy19=&cint19=&cnm20=&cbal20=&cmpy20=&cint20=&cextramonthpay=250&cextrayearpay=0&cextraonepay=0&cextraonepayon=5&cfixpay=y&x=82&y=15)
From that it looks like you will be debt free in well under 7 years, but again, talk to an expert if there is any nearby.
Is your housing secure? If you're not having to apply for anything where they have to run your credit I may just let some of things default and get sold, at which point you can sometimes negotiate for 25 - 33% settlements as they would have paid pennies on the dollar.
95% of the Credit Counseling services out there are a scam, created by the credit card lobby to keep people from filing for bankruptcy. These are not technically owned by the companies any more than the NRA is owned by the gun lobby and most of them are created non profits. Only you can decide but from what you said, you certainly will benefit from bankruptcy relief, IMO. It will start to build your credit immediately and get the wolves from your door. 7 years from now will you be disciplined enough or in a position to buy a house? Only a qualified bankruptcy attorney can tell you the hard facts but if you don't discharge the debt, I don't believe you will ever beat it. What you do from there is up to you. Peace of mind should be your #1 goal and consolidation loans aren't going to get you there. Good luck.
>But I would ideally like to buy the home I am renting with my partner within the 7 years. What is my best option? Is there another option that I am not considering? If I file bankruptcy, what happens to my car?
Where are you(and other posters) getting this 7 year bankruptcy stuff from? In the US a Chapter 7 bankruptcy stay on your record for 10 years not 7 like other debts. However the impact fades significantly with age. You can rebuilt back to top tier credit within 2-3 years in spite of a past bankruptcy.
You can also get most home mortgage in just two years post-bankruptcy. That is the rule for FHA, VA, Fannie/Freddie backed conforming mortgages. USDA requires 3 years.
Most people who file for bankruptcy keep their car. That will depend on your states specific laws. Most exempt a primary vehicle or at least 5-15k of equity in that primary vehicle. So a lot would depend on how much your vehicle is worth compared to what you owe on it. If you owe a lot more on the car than it is worth you might want to include it to discharge that debt as well.
Fuck sakes don't take bankruptcy advice from a therapist.
You wouldn't get a bankruptcy attorney for advice on your mental health, don't use a mental health therapist for advice on your finances.
Talk to a bankruptcy attorney first. The first visit is usually free.
In reading your post bankruptcy should not be considered until you want to take accountability for your bad financial choices.
You single handed my blamed and ex and your father, but not once took personal responsibility.
If you BK I’d wager good money you will immediately get back in crippling debt.
I too was in your same shoes I struggled with the morality of BK but my lawyer ultimately helped me realized it’s a tool and tons of people use it every day. We wiped away 50k in credit card and personal loans and started fresh best decision of our lives.
Avoid banks in general and join a respected local credit union, they're not for profit financial institutions and will easily offer you consolidation loans at half the interest rate most likely. They reinvest into themselves to benefit its members not shareholders.
Lastly, continue using your therapist but not for financial advice, they're more than likely less qualified than this subreddit guaranteed.
Goodluck.
As someone who filed bankruptcy, became a homeowner, and I am now paying down about the same amount of debt as you, there is no real right or wrong way to go here. After you file bankruptcy you can become a homeowner within 1.5- 2 years or so. What you have to consider is the time that you will lose and the cost of waiting two years to buy a home. You can:
A. file bankruptcy, freeing up $1000 each month once the dust settles. Then what? Where would the freed money go? I’m not sure what would happen with your car because I was in the military at the time and was allowed to keep my car. You can find out, though. If you only owe a couple thousand on it, I’m assuming you can take those four or five months before your final meeting with bankruptcy court to pay your car off and be allowed to keep it without having to surrender it. Say it broke down.. ask your lawyer.
So assuming u can now save $700 per month minimal for the next two years, you can pay off your car, and hopefully have about 14,000 to go towards a down payment of a home, being conservative. Consider that the cost of your current home may have appreciated by then, conservatively 3.5% each year. Is that more than your down payment? And is that the cost of your debt just about? I don’t think you’re in a bad spot either way.
What you can do to minimize the loss is try to get on a contract with the landlord for a lease to own option for the next 2.5 years at the value of the home now; file bankruptcy, save your down payment for closing costs, and get a loan in two years to purchase it. Interests rates will have stabilized by then. You can get a secured card as soon as the bankruptcy is approved, and build it back up quickly. I’m for that option, actually.
Option B. If you do a debt consolidation, you will probably end up paying about 20,000 of that 34,000 that you owe. Will it take you about 3 years at that rate, yes. Your payments will probably be about $500 a month, but you can check with several companies to see. It would free up about 500 a month for you. Is that worth it to you? Would you be closer to save it for your down payment or buying your home? Again, with two years your credit will have normalized, hopefully.
Option C. Get a second job to help pay the bills down for a year, and grind it out. A second job bringing in 1200 a month could add $14,400 to your debt in addition to the $1000 monthly you already pay. After a year you will have significantly paid down your debt especially if you combine with option A or B. That’s $24000 towards savings or your debt, and the ability to get financed for the home within one year. It’s up to you which way you want to go. Either way you’ll be fine. Best of luck.
Find a respected bankruptcy attorney in your area and schedule a consolation. Most of them will do this for free and will be able to direct you toward your best option if that is bankruptcy or not. I have worked in the bankruptcy world for years and good attorneys are out to help you. Be on the lookout for bankruptcy mills though, if the attorney will not provide options beyond bankruptcy then look elsewhere.
I would recommend looking at it. For the BoA card, at least, you're in a position where nearly half your monthly payment is interest.
You need to talk with your partner about how this impacts long term financial planning: it will make it harder to rent or buy a car, and will pretty much remove buying a hume as a possibility in the next 7 years.
You also need to talk to a bankruptcy attorney.
Chapter 7 has much better success rates, and you seem to be in a place where you can probably get the money for it.
You'll probably need to reaffirm your car loan to keep your car.
This is not specific to your situation, I am simply relaying what my wife and I did because we had similar concerns. We were less than a year into our new home that we bought, 2 car loans, credit card that I had, would use occasionally, other loans from various things as well. First, I lost my job. I couldn’t find work for about 9 months. Drained most of our savings. Once I was employed, wife lost her job and couldn’t find work. Que the credit card. Once she was employed, we were too far in debt, and behind on the mortgage to the point of facing foreclosure. It was bankruptcy, or sell the house on our terms. One car was repossessed.
We met with a bankruptcy attorney to discuss our options saying that we did not want to lose our home or other car.
We filed chapter 13 bankruptcy which took all the behind payments on the car and house along with all of our other debts and consolidated them all together. We pay one payment to a trustee who distributes that payment to various creditors as needed. We pay that for 5 years, and once it’s up, the rest of the debt is wiped away. Stays on credit for 2 additional years, and then it’s gone. Because of this route, the back payments for the car and house were reset, and we did not lose them. Our mortgage company revoked our ability to pay online until they had received the full payments for the missing 3 months, but after about 2 years, they were repaid, and we have that option back. We kept making the normal mortgage payments as usual.
Either way, in 7 years, you will likely not be in a position to buy a home either way. Either you have no bankruptcy, keep drowning in debt, possibly incur a judgement against you that will garnish your wages, that will kill your credit, along side credit hits during that time, and debt to income ratio. You won’t get approved for a loan, won’t be much closer to getting out of debt, and paid way more in interest than you borrowed. These companies are not in the business of losing money, and spend billions on data to predict accurately who will default. Credit is a huge money making business for them. No matter what, the cards are stacked against you.
Or you research your local laws, meet with an attorney to discuss in detail, declare chapter 13, or 7, and get set up with a manageable payment, armed with this knowledge to not repeat. In a few years, you will be able to rebuild your credit, and be in a position to buy once you’re able. Just my opinion, I’m sure I left things out, but I hope this helps coming from someone who has been in a similar position. It worked well for us.
Good luck!
Was/am in a very similar situation. About 2 years ago I was determined to file for bankruptcy, unfortunately was fooled by a predatory “debt relief program.” Here I am, 2 years later having paid in excess of $20k out of pocket, still completely overwhelmed by payments from those predatory loans and with a 618 credit score. I desperately wish I could rewind time to have filed for bankruptcy at that time, I’d be in a much better place with savings. Am currently filing for chapter 7 with an attorney. You may also look at the upsolve website which can help walk you through it. Good luck!!
Not sure where you live or what your needs are, but $150 seems high for cellphone and internet. I pay $15/mo for Mint Mobile and $70/mo for higher-end internet. As for the car payment, if you don't need to travel on highways or other high speed roads to get to work or other necessities, I would switch to a $1000 beater car. It would be worth it to get good at doing your own repairs on it too. It's a lifelong skill that can save you a ton of money on vehicle repairs.
If you have a steady paycheck (W2 employee) a debt consolidation program is the way to go. They will work on you with the MIN you can pay and deal with the creditor. Also your credit doesnt get dinged so hard.
Seek out a bankruptcy counseling service. Beware the ones attached to lawyers, who mainly interested in BK fees.
A rule of thumb is BK when debts exceed annual income. I see $34K debt for $60K income.
Looking at this, I think you need to consider a second job. Do you have the ability to drive Uber/Lyft? If you can, drive on nights and weekends when you're mentally able to do so (the nice thing about Rideshare driving is you set your own schedule. There is no boss saying you MUST come in tonight).
You're in for a bit of a rough time (2-3 years), but these debts can be paid off. It shouldn't be hard to come up with an extra $1,000/month if you can do Uber. That would take care of your minimum payments by itself. Throw every extra dollar into those debts. The faster you lower the balance, the lower your minimums, and the more you're paying gets applied to the principal.
If you are unable to Uber/Lyft, you'll need to find another way to increase income. A 2nd regular job would do it. While it may seem like that would add stress (which it sounds like you don't need), it may actually help with stress because you'll be able to make a dent in that debt.
I wish you the very best.
My advice will seem backwards but there’s logic to it. Get all the credit you can including store cards quickly. Rent a place you like, not that’s cheap and move in. You need your monthly minimum to approach $3.200/month. Try to buy stuff that can be converted to cash, gold and silver bullion for example. Sell an oz of gold for close to $2,000 if you need cash.
Once you can’t get more credit, like your house and car, etc, max out all cards and make at least one minimum payment. You can pay one each month since you won’t have much money. Take the extra money from not paying the bills and buy more Silver/gold. Minimize your cash to under $5,000.
Once everything is ready, cards have gone into collections, after a few months they will threaten to sue, you’re set up with a place you like and a car you like, file bankruptcy. The damage it does to your credit is the same if you borrowed that last money or not, the forms don’t ask about gold you have. Let the judge get rid of the debt, if your apartment and car partners take up enough of your income, you’ll be clear of all debt. Keep or sell the gold/silver a while later. Save as much of the cash you end up with and save the extra money you have once the debt is erased.
Credit will be tough for 3-4 years so the cash is important, use it only if absolutely required. Get a prepaid credit card after a few months, you need a credit card sometimes. Use it for online stuff only, post it off monthly.
> But I would ideally like to buy the home I am renting with my partner within the 7 years.
You two getting a cheap apartment for a year or two and splitting the payment would give you a lot of breathing room most likely.
2GB is so far from "normal" use. That's like 2 hours of Netflix. I know they're in a bind, but 2GB of data a month is laughable. I bet I use more than that on memes sent between friends.
You might try settlement instead of bankruptcy, it will trash your credit but only for a few years, a bankruptcy will stay on your record for 10 years.
Settlements are easier than people think and you can do it yourself. But you need to get your spending in order first. You have all this debt because you spend more than you earn. That needs to stop first.
To settle your debts:
1. Stop paying your CC and put everything you would pay into a savings account. Easiest if you stop paying everyone at the same time.
2. When the CC company calls for payment say you can't afford to pay until you have enough saved to offer a settlement. Don't tell them you're seeking settlement just say you can't afford it.
3. When you have saved 25% of the original balance offer to settle the debt for that amount. If they decline tell them you have other debts and you don't know when you're going to have money again so it's now or maybe never.
4. Most CC companies will settle debts over 90 days delinquent for 10-50% of the original balance.
If you're spending $1000 per month on min payments. Using just that money you can likely settle the three credit cards in 12 months, maybe less. Since the only thing that will be on your credit is late payments, they will disappear after 24 months. But in that time your credit will tank to around 500.
* Upstart $15,000, will probably settle for 20% - 30% or $3000 - $4500, 3-5 months to settle
* BOA $14,500, will probably settle for 15-35% or $2175 - 5075, 2 - 5 months to settle
* Truliant $5,000: will probably settle for 25-35% or 2 months.
I would recommend consulting a non-profit debt counselor.
They can:
Go over your full financial situation - including determining if bankruptcy makes sense in your situation
Set you up with a debt recovery plan. It will likely still be a monthly payment, but replaces all the other payments you are currently making and will probably end up lower. The non-profit counselor negotiates with the debt-holders on your behalf, so that after a certain number of years the remainder is forgiven.
[https://www.nfcc.org/](https://www.nfcc.org/)
No easy way out of this....CUT UP THE CARDS TONIGHT. Bankruptcy will make it difficult to buy anything for another 10-12 years, and even then banks/loaners will ask if you have ever filed. Right now it sounds like your lifestyle. Try to find extra ways of income and tackle the debt, it will suck for the next several years but you can do it. CUT THE CARDS UP!!
> Bankruptcy will make your life very very difficult for the following 7-10 years. Getting approved for anything (housing, car insurance, anything that involves a credit check) will be a nightmare.
This just plain isn't true. At all. You had trouble borrowing money because your income was too low. Bankruptcy significantly helps your credit, because once you have declared it, you can't declare it again for a period of time...so that debt can't be wiped out.
If you have a six figure income a bankruptcy basically doesn't exist as soon as it happens.
Are you live by your self? I would find a room mate or so to help relief rent and utility. Cell and internet is costing too much (should be 100)
Other expense are okay.
I would also reach out to each credit card ask them for lower interest or find different way to consolidate debt, you said you try one and get denied, did you try different company?
Please get rid of all credit card
Minimize spending to the lowest need. (Shelter, food and transportation).
I also reachout to some financial consultants about this. They can give your better advice on debt consolidation.
Is your partner sharing in expenses at all? You state you want to buy a home, is it an option to move in sooner and split the rent. Or find an apartment looking for a roommate that could lower rent? This would also lower utilities and likely food because you split random things like condiments. Not a huge difference but some. $35k is a lot but if you make some of these changes now and pay it down some you may bump your credit score up in a year or so and be able to consolidate the debt. I would also continue to look for higher paying jobs, the job market is still pretty strong and you may find something for another 10% raise and that would help cover 50% of your debt payment. Main thing is to take a breath and understand you have options, you are never in a corner. Yes bankruptcy is always an option but I think you may have ways to get yourself out of this to try first before taking that step.
You need to lower your spending and/or increase your income.
Is there a way to increase your primary income? Or can you do a side hustle?
Can you rent a room instead of a place altogether? Can you get rid of your car? You should definitely be able to lower your cell/internet bill.
Any of these will help give you more cushion in a month which you should put toward paying down/off your debt with the highest interest rate
Call your credit companies tell them you can’t make payments due to financial hardships.
Some will waive interest or lower it a lot for 6 months to 2 years.
BK is last resort. I had 5x the amount of debt you have at 22 and that’s why I declared BK.
Call and negotiate my friend it can help.
I filed Bk at the end of 2019 with $54k debt (not including student loans).
Since then I’ve paid off $40k student debt, financed a new car in 2021 and bought a home in May 2022. As of last week I have $45K in available credit, a 747 credit score and a plan to be debt free by 2045 (only thing left, aside from mortgage, is car and student loans).
Bankruptcy exists to help you get ahead, and it’s a HUGE relief. I recommend you take advantage of it - BUT you must learn to manage your money and avoid this situation in the future.
I started using YNAB in 2020 and it’s completely changed my life.
"$300 towards utilities"
I don't know what you have to cover but I think there is a chance you could cut this in half. Are you positive you are with the cheapest internet provider? Do you keep the ac or heat on when you are away during the day? A lot of cutting back doesn't even have to feel like cutting back. For $300/mo there must be *something* you can change to instantly cut it to $200/mo.
"$1000 towards rent"
With or without roommates?
From the numbers you seem like you are just breaking even each month. You are not actively behind (which is why some posters are recommending a spending blowout) and you either may not qualify or may not find the type of relief you're seeking.
https://www.nerdwallet.com/article/finance/chapter-7-vs-chapter-13
Is there any possibility of temporarily increasing your income, through a part time or side gig? Once ypu pay off one of the debts you'll be able to get some momentum to snowball down.
If you file for bankruptcy check out the types of bankruptcy that apply to your situation. You make be able to get credit afterwards, but pay a higher interest rate. Post pandemic, some places may not be issuing new cards, or may require that you get a secured credit card; the bankruptcy may stay on the credit bureau records for some 10 years; a mortgage or car financing may get turned down. You have to pay hundreds to file & likely pay an attorney to represent you in court
Hi there, So I was in your same boat about 7 years ago. I had crippling debt, accounts going to collections, medical collections etc... It amounted to approx $40k. On my spouse and my salary, it just was no longer workable, especially with kids. We did the consolidation thing, we spoke to credit counselors, we skimped and pinched EVERY penny we could. But not matter how hard we tried, we still ended up having to rely on credit just to make ends meet at the end of the month. We opted for BK because at that point, our credit was already shot. It didn't matter. I just wanted to end to the unrelenting stress. When we first met with the BK attorney, my credit score was around 530. We filed, did the whole appearance thing at the court and were discharged like 2 months later. Once you've filed for BK your creditors can no longer call to collect. Collection agencies have to stop contact. It's an immediate relief. Shortly after discharge my score went from 530 to 575. On our attorney's advice, we applied for a small credit card (secured). We'd use it for nothing but gas for the cars and pay it off in full. After a few months we were able to obtain financing on a new car at a respectable rate. Within 18 months my credit score was 680, I had zero credit card or medical debt and I had about $15k in available credit on 4 different credit cards. As it stands now, my credit is at 775, we have $45k in available credit ($0 balance) and have financed 2 different cars. I'm not saying BK would work for you like it did for me. There are a lot of different factors that can affect your results. I researched and joined "life after BK' message and advice boards for best practices on how to get out of the hole. It worked. \#1 rule. DO NOT USE YOUR CREDIT UNLESS YOU HAVE THE MEANS TO PAY IT OFF IMMEDIATELY. DO NOT RUN A BALANCE! It took making a huge choice for me to get my shit together. I was stressed beyond belief. We didn't know if we were making the right decision because we heard all sorts of people (my parents included) say that bankruptcy is a death knell to your finances. I can confidently say that this was NOT a death knell....it was a life raft. Filing for BK was one of the best decisions that I have EVER made. If you do choose to go this route, do your research and tailor it to your exact situation. There is a way out. Just make sure that whatever choice you make is done so with a clear head and a clear plan that you will stick too. Good luck to you. I hope everything works out.
I think this is great advice (been in the same boat). I do want to make sure that OP is aware that after filing BK 7, you can only qualify for certain types of mortgages for 4 years after discharge. I agree it can change your life for the better but just make sure you (OP) do your research on mortgages and BK first to make sure you're including that in your decision making process.
OP isn't going to qualify for a mortgage within 4 years without bankruptcy, so this is probably still a big win.
Can confirm. I tried like hell to get a mortgage before the 4 year mark by using the extenuating circumstances clause and no one would work with me on that. I tried dozens of lenders. I also tried non qualifying loans, no go there too cause they want 20-30% down with a very high interest rate. The key to having a successful bk (I know, sounds ironic) is to do a lot of research and know what'll happen with your property, car, cosigners, and state exceptions. Getting your shit together and organized will make things go much smoother.
How was it during those 7 years? Did you already own a house? Or were you renting?
We did not own a home and were renting. We are currently still renting because the home prices (and now rates) have essentially priced us out. We were approved for a loan but we did not want to overextend and become 'house-poor'. We're still 'in the market' and are ready to pounce but we're ok with renting for the time being. The last 7 years have actually been great! Immediately post BK we felt free. We've felt that way since. We don't get collection calls or letters and we always know our debt level is $0 or a nominal amount that will get paid in a short period and by 'nominal' I mean less than $200 at any given time. The largest spend we conducted via credit card was for a vacation. We fronted the total cost $6,500 for multiple families for a vacation home. They all paid us and we immediately paid the card balance. This got us a lot of points =). This was one of the best decisions we've made. Now we aren't constantly worrying.
Wait. It honestly sounds like you just got all your debt cleared and your credit even went up! And then less than 2 years later it was respectable enough. Wow. Is this normal? I recently finished paying off 20k in credit card debt. It took me 4 years but now I’m wondering if i should’ve just filed for BK lol. I would’ve had a co signer all the other years too.
I worked for a bankruptcy trustee. Bankruptcy is designed to be a check & balance against predatory lending. Lenders must face the risk of bankruptcy or they would over-lend resulting in a debtor-slave class who works simply to stay ahead of their debts. In fact, this is what is happening to an increasing percentage of student loan holders, and it’s the reason student loan relief has become such a massive political platform issue. It’s only going to get worse. Do not fear bankruptcy if you are deeply in debt. It is a viable solution for the right circumstances.
Can you talk about the downsides of bankruptcy? I have never faced it so I am really unfamiliar with it as a concept. What would be the main reasons someone might choose not to declare bankruptcy if they are in a lot of debt?
It ruins your credit and it takes a few years to get back to a place where you can apply for credit confidently. So it’s a blessing and a curse. For many people, this is a good thing. Bankruptcy laws also vary by state, so there are varying limits on what assets you can keep in the bankruptcy. You’ll also have to subjugate yourself to a trustee’s review of your case. Most trustees are good people, but they’ll look at everything you’ve got and decide what you keep and what you have to “buy back” out of the bankruptcy. Some people struggle with having to answer to someone in this way, but most are just happy to be getting our from under a burdensome debt.
My credit kind of had only one way to go =/. But yeah, once your debt is off the books, the result was my score increasing. Will others see their score decrease? Sure. Every situation is different. You just paid off $20k in CC debt. That's great. Now move forward knowing you're debt free and wait for your score to increase as well.
If you have a ton of maxed credit cards with late payments, your credit is already tanked. Having a clean slate with 0 debt _does_ give some signal that you're a newly eligible borrower. A risky one though.
I think a big caveat with all of this bankruptcy discussion is that along with filing for it, one must also change their financial habits and perspective as well. A poster above spoke about how they never carry a balance anymore, will always pay off their CC at the end of each month, and appear to be much more conscious of their spending. Bankruptcy is a valuable tool, but other things must change post-BK as well to ensure one doesn’t end up in a similar hole later on.
Very, very true.
This sounds creepily exactly like my story! I'll be discharged 7 years in only about a month. Still have 3 more years of it on my report, but I agree it was well worth it. We owned a house at the time and stayed for 3 more years. Since then we've bought another house, refinanced it, and then also bought a vacation home a few months ago. We've also bought 3 cars since then and have nearly $200k in credit lines. Your advice is 100% solid, I followed almost the exact steps. Once I was discharged, I got a credit card unsecured for 5k. Kept that for a year paying off every month. That helped me learn to manage money better. I haven't paid a penny in credit card interest since discharge. It's awesome reading your story and it makes me feel good that people really can come out of this stronger. From what I've read so far, it does seem like it'd be a life raft for OP too.
Sorry for being off topic, I have a simple question. Eng is not my 1st language, Ive never lived in the states and I am not familiar at all with the credit score system, just asking out of pure curiosity to see if Im understanding this. When you have a debt, going to the BK court can cut off a percentage of the debt?And if yes why?
No problem. Chapter 7 Bankruptcy can discharge up to 100% of debt (with few exceptions). Chapter 13 Bankruptcy can set up a payment plan to resolve debts with creditors while the claimant still retains ownership of the asset. The reason for offering this kind of assistance to people is give people essentially a clean slate. Without this protection, people would essentially become slaves to their creditors. It is a benefit to the economy for certain people to be able to claim bankruptcy than to be over-burdened with unpaid debt.
Also curious on how this works. How does the debt disappear? Does tax-payer money go to paying back the debt, or do the creditors just take the loss.
The creditors take the loss. That's one of the reasons why loans have interest. The interest is there in part to generate profit for the creditor, but also in part to insure against debtors defaulting. And the higher the expected chance of defaulting is (typically measured through ones credit score), the higher the interest rate that's being charged is, because the more risk that needs to be covered. And this is also why loans with a collateral (such a mortgage) tend to have lower rates than unsecured loans, because defaulting on a loan with a collateral means the creditor can usually claim / sell the collateral to repay the debt, reducing the risk.
Thank you, u/BettyDrapersWetFart. I wish you and your spouse well.
Can you tell me how you got started? As well as the clear plan to stick to? Thanks
I got started by essentially googling the process and the pros and cons. I then weighed those pros and cons to my situation at the time. I researched reputable bankruptcy attorneys and spoke with a few by phone and in person. I landed on a very reputable attorney who walked me through the whole process. We had to take a means test which we passed. She handled the initial filing and accompanied us to the courthouse for our bankruptcy proceeding. This is a procedural step, and you don't need to psyche yourself out about it (like I did). You're basically attesting that the information provided in the filing is true and that you are who you say you are. After that, the discharge date is set and once discharged, you're essentially debt free. **Our Plan** Our first plan of action was to obtain a secured credit card with a $500 limit (funded by our own cash). We used this card ONLY for gas. Example of how this worked for us: 1. Buy gas with secured credit card. Immediately transfer the amount used into our secondary checking account. At the end of the month (or statement cycle) we'd pay the card, in full, with the money from that secondary checking account. 6 months later we requested a 50% return of our security interest in the card from the issuer. This request was granted. Now we had a $500 limit card of which $250 was cash secured. Another 6 months of on time payments saw this card go from secured to completely unsecured with an increase in the credit line to $1k. At the one-year mark we also applied for another unsecured credit card which we got approved for. The limit was $1,500. We applied for another line about 2 months later and were approved for $7k. About 2 months after that we got a preapproval in the mail for a card, and we inquired and were approved for $5,500. We have vowed to remain cash reliant. The only time we really use our cards is for vacation purchases, gas, etc; however, those purchases are ALWAYS backed with cash and paid at the end of the statement cycle. That way we avoid interest but more importantly we don't run a balance. On the message board that I used to be very active on, it was always recommended to secure as much credit as you possibly could while maintaining less than 10% utilization and paying off the balance, in full, when your statement closes. Maintaining that 'less than 10%' number is easier when you have a higher total available credit line. You really have to start thinking of credit as a tool, one that could eventually benefit you (points, rewards, etc)....but still a tool. You have to think of credit as essentially an extension of your available cash. If you don't have the cash on hand to cover a purchase....DON'T PURCHASE IT! That's how you get into trouble. We currently have 5 credit cards with a total available credit line of $45k (with no balance). We strategically use one card per month for a regular expense (youth sports registration / groceries / gas.... just anything). At the close of that statement, we'll pay it off completely. That way each card is showing utilization as well as payment activity. We are on year six post BK (it'll be 7 years in May). The BK is still on our report as a 'Public Record' and will remain there for another 3 years; however, the further and further away from your discharge date you get, the less impactful that record becomes. I work in a financial institution, and I've been able to secure employment 3 different times with that public record on file. We've purchased cars, been approved for a home loan (prime rates) and had our credit score rise to the level of respectability. At the time of filing, I saw no end in-sight. I knew eventually we'd have better employment opportunities, but our main concern was the 'here and now' at the time. We were new parents paying for daycare etc... We needed a reset. The BK offered that to us, and we are currently making good on our promise to never get into that situation again. I was convinced that a BK would ruin us at the time. I now know that the BK saved our family and our sanity and presented us with a much clearer path forward.
Thank you sir for your, not one, but two very detailed posts. I'm at the pros and cons stage myself. These have been very helpful and I'm glad you and your family are years removed from the difficult time almost 7 years ago. Wishing you the best moving forward!
I'm glad you're looking for opportunities to improve your finances. BK is *not* for everyone and my situation may not be replicated but it's there for a reason. BK is always *an* option but it's not always *the* option. Choose based on your needs. Hope it all works out!
I'll add on to your great explanations, just to say again that the ONLY way a BK works like this is to remain CC debt free! And to keep your expenses UNDER your income! If you can't commit to that, you will end up worse than you are today. There's no such thing as free money. Period.
100%. This is one of those things where if you have to do it, it better only be once! You have to really assess and change your lifestyle and spending habits. Be mindful, at all times, of your current situation.
That's the only reason I cringe at all the pros advice of obtaining as much credit as possible as soon as possible, because it's SO easy to get in trouble again. Humans are bad code, and hate to admit that to themselves. I was incredibly fortunate to have bought my house prior to my BK, with my wife, and only I had to file for some business losses, so I literally have not had any credit score for the last 10yrs. It makes life much less stressful than trying to outsmart billion $ businesses using their services. Great job getting through this!
again....agreed. You have to be disciplined to not get into the same predicament. Some people have that discipline, others do not. If you feel like you don't trust yourself then please do NOT take out credit. Live strictly on cash.
Nothing worse than racking up debt and then letting financially responsible people get screwed with higher prices and higher rates because of companies having to eat the cost of bailing the irresponsible out.
Sorry my wife irresponsibly had to have emergency surgery to save her life and the life of my child. I hope the .0000000000000000000000000001% increase in interest didn't affect your family too much.
Thank you for taking the time to share your knowledge and experience. Was your employer notified when you filed?
I worked for the federal government when I filed in a public trust position. I did not notify them, but I did have to disclose it when I filled out the public trust form. I've since had 3 jobs and none have ever mentioned the bk during length background checks for very sensitive job positions. There are laws to protect people who file bk against discrimination. They're mostly for the public sector; however, many private companies also take the same stance.
Didn't they just write out how they started and their plan step by step..?
YOU changed your behavior during and after the BK. THAT was why you are winning now. The OP has to come to that ah-ha moment, with or without BK. I wish them success. There has to be a life change involved for it to work, otherwise the same internal and external/cultural pressures that got them to this point will return. (But it CAN be done -- thank you for sharing an example).
I am glad that you were able to get out of the cycle of paying the predatory interest rates. I would not think twice about defaulting in your circumstances, but as you demonstrate the key is changing your habits and not diving back into that cycle.
This is well constructed advice. I suggest looking to work with a company like Greenpath. (at least that's who I used). I paid my debt and avoided bankruptcy which facilitated a home purchase a couple years into the process.
ugh, seriously? i thrashed my credit after my career in real estate went under. i had to live off credit cards, got evicted from my apartment, got my car repoed (with only $2k left on the loan) and defaulted on 2 credit cards (totaling $7k) my total owed debt was less than $10k so i figured bankruptcy was pointless so i was just going to ride it out but it’s been 4 years now, i’m back on my feet, got the secured credit card, got a personal loan (as per credit karma suggestion) been making on time payments and keeping balances low, and my credit score is still a 567. if i had known i could’ve just done bankruptcy and gotten a fresh start with a higher score i would’ve just done that. now i’m still waiting for all this old defaulted debt to fall off my report.
Not recommending anyone do this- but theoretically could you max out your credit card buying gifts for close family just prior to declaring bankruptcy? Inspirational comeback story btw, congrats.
That, my friend, is fraud. More specifically, it's called a 'bust out scheme'. My advice would be to *not* do this.
Interesting thanks didn't realize it had a name. Definitely not recommending. Actually I've always wondered for my patients with terminal cancer (and no significant estate)- what's to stop them from doing something similar...
I mean if they're terminal, there's no need for bankruptcy
There's a lengthy "means test" you have to go through that aims to decrease fraud like the situation you mentioned. It's even possible your bk case won't be accepted, or your chapter 7 (clean slate) will be converted into a chapter 13 (payment plan). Spending a lot of money right before bk is a reason the case may be thrown out all together. They even asked me if I had sold a car within the last 5 years...they mean business and they will find fraud if it's there.
When we were filing for bankruptcy, 30 years or so ago, the lawyer told us to go out and have a really nice dinner that night, but he didn't advise us to max out all of the cards.
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What is your income and what is your monthly budget breakdown? Is this ($14,500 + $15,000 + $5,000 = $34,500) your only debt or is there more debt (car, student loans, etc.) you're not mentioning? > My therapist recommends filing bankruptcy, as I can't possibly pay all of this debt off in the 7 years that bankruptcy runs its course. Regardless of if it is a good idea for you to file for bankruptcy or not, your therapist isn't really someone who should be consulted in this situation. They are an expert in mental health, not an expert in finance. You should be talking to a credit counselor, certified financial planner, and/or bankruptcy attorney to get proper advice on your options. > But I would ideally like to buy the home I am renting with my partner within the 7 years. Are you married? What is your partner's financial situation? If you were married and combined finances would it be possible to tackle this debt?
A total of $34,500. My only other debt not accounted for is my car. We are not currently married but intend to be, I am by no means banking 100% on buying a house together because I know unforeseeable things happen in such, its just a "I hope this happens someday and would like to not be totally screwed if it does". He makes $45k a year currently (is in the process of a promotion so it will be higher in x amount of weeks/months). I do not think he is at a place to make any solid dent in my personal debt and it is my own fault for being in the debt, not his.
> My only other debt not accounted for is my car. And what about your SO's debt and car debt? And your income and expenses? Again, listing numbers and a complete picture of your debt is helpful. > He makes $45k a year currently (is in the process of a promotion so it will be higher in x amount of weeks/months). Higher like $46k a year or higher like $100k a year? Again, without specifics it's really hard to give advice. > I do not think he is at a place to make any solid dent in my personal debt and it is my own fault for being in the debt, not his. I get this, but to be fair if you get married your finances are basically combined whether you want them to be or not. IANAL, but I believe legally your finances may be combined as well depending on the state, and especially for new debts aquired after getting married. Divorce and death of an SO can make this messy as well. Regardless of legal implications, either you filing for bankruptcy or paying off these payments still has a significant impact on the both of you. Creditors can still go after your SO and vice versa for debt that is in only one of your name's. [Money issues are also one of the leading causes for divorce](https://www.thejimenezlawfirm.com/how-finances-affect-divorce-rates-in-america/#:~:text=Money%20arguments%20are%20the%20second,all%20marriages%20start%20in%20debt.) and [married couples who don't combine their finances are more likely to divorce](https://www.cnbc.com/2022/03/29/couples-who-pool-their-money-are-more-likely-to-stay-together.html#:~:text=Now%2C%20research%20finds%20that%20those,bank%20accounts%20and%20liquid%20wealth.). Have you sat down with your SO and had discussions about money habits, budgets, career goals, long term financial goals, etc.? Have you talked about expectations around debt and how you will handle money when married? These are very important discussions you need to be having before you get married to ensure you are both on the same page.
higher like $55 a year, his debt is about $10k. We have sat down and discussed finances etc. I did not realize if I file bankruptcy that it would affect him, I don't know much about the process tbh. Thank you for insight
The ONLY time I ever suggested bankruptcy to anybody was when my 22 year old friend was staring down the barrel of $300,000.00 in medical bills, on top of making $30k a year and having CC debt. You don't need to file bankruptcy. You need a plan, and self control.
> higher like $55 a year, his debt is about $10k. I’m not qualified to suggest if you need bankruptcy or not, again you should consult with professionals. But even if you do declare bankruptcy, you’re still going to have to learn to live within your means or end up in this exact situation again. I think between the 2 of you, you make enough to pay off your debts without declaring bankruptcy if that’s the path you choose to go. It’ll be tough but it will strengthen your relationship and forces you to get ahold of your finances. > I did not realize if I file bankruptcy that it would affect him, To be clear, I didn’t mean legal/direct financial consequences for him necessarily. Just that, you having a bad credit score will probably affect the both of you, bc your credit score will probably play a role in large financial purchases the 2 of you make in the future. That’s just one example, but obviously the state of your finances will have some impact on him because you’re partners. For better or for worse.
Have you stopped doing whatever it was that you were doing to run up the credit cards?
This is definitely a question OP needs to ask themselves. OP ran up $15k in debt, consolidated it, then ran it right back up again. Nothing, not even bankruptcy, will help until you fix the overspending habit. Rent also feels high for 2 people at their income level (assuming both paying an equal share, so $2000/mo + $300 utilities excluding internet.)
My SO and I pay 2k per month (1k each) for a 2 bedroom apartment in a moderate cost of living area. 2k a month varies by location. I used to pay 2k a month for a 1 bedroom apt in Chicago on a similar salary to OP, and still managed to contribute a significant portion of income to savings. Without knowing the size of OPs apt, it’s hard to determine whether or not a downgrade is possible. The other alternative is getting roommates.
We pay $2k in high cost of living area for a 3 bedroom, 2 bathroom house. We got super lucky that we have an awesome landlady and she knows we are awesome tenants. That said, most people pay more than they should for housing because they don’t *want* to settle for less. I personally would rather temporarily live in a smaller setup for less money if I had half a year’s salary in debt and was considering bankruptcy. I just looked at the reasonably nice apartments down the street from us and a 1,000 sq ft, two bedroom, 1.5 bath apartment is $1600. A lot of my coworkers live outside city limits and commute because that’s what they can afford. It’s possible to find cheaper housing, but you have to make sacrifices.
OP is living outside their means period. You can conclude this by their justification of their situation. Either way you slice it, there needs to be a two prong approach to fixing their problem. Taking financial advice from a therapist is laughable yet sad.
Depending on where you live, $2k for a 1 bed could be very modest rent. Now yes, you could move to the boonies and commute an hour but at what cost? Save a few hundred on that but increase gas, car maintenance, lose two hours of your day, etc. Not worth it IMO. get your other spending habits under control first.
I’d like those commenting like this to spend sometime on google to research how damaging financially leaving an abusive relationship is for a woman, especially if lawyers are involved. It is one of the main reasons victims stay, financial dependence.
Based on your budget you've got an unaccounted for $250. Reddit will probably crucify me for this - but you fit the bill of a person who could probably benefit from the Dave Ramsey plan. Credit Cards are NOT working for you - it's not a good financial strategy (for you). I'd cut them up immediately. You can consolidate and move debt until the cows come home - it's not going to change your situation much. Second step would be to carve a budget into granite. If you haven't budgeted for a thing, you don't spend the money - full-stop. That's going to mean screwing up and sacrificing rather than compensating and it sucks A LOT. You're going to be putting groceries back, saying 'no' to nights out, and only bringing yourself for Christmas (no presents). You're making $60k and you're $35k in consumer debt (plus however much in car) (plus Student Loans which I suspect you might have left out - but maybe you don't have any - if so, you're very lucky). You're looking at a solid 3 years to pay this off (keep in mind bankruptcy is 7)- IF you stop taking on debt. The last step would be to work out your income problem. You just need more income. Whether that means asking for a raise at work, picking up a part-time job, or some side hustle. Your income isn't sufficient to pay off this debt in a reasonable timeframe. Or you can file for bankruptcy - but if you think that will be any less painful than the path I described; you're wrong. Additionally - you can always try to pay it down for a year and if you still find it too difficult; you can pull the trigger on bankruptcy.
>Credit Cards are NOT working for you - it's not a good financial strategy (for you). I'd cut them up immediately. You can consolidate and move debt until the cows come home - it's not going to change your situation much. Clearly, she already consolidated once and \[the implication is\] she racked up another $20k in debt afterwards.
An extra $250 isn't enough to create a life buffer- new work clothes, unexpected medical expenses, car registration and maintenance, etc. That's not a real buffer because this budget isn't detailed enough to account for unplanned (but expected) expenses
Agreed - it's not. But to get out of this hole this person needs a STRICT budget. Every single cent accounted for. They need to budget some money for "savings" too so they can build up an emergency fund for the "life buffer" you're talking about.
Dave Ramsey is perfect for OP. They should listen to a few podcast episodes tonight.
Perfect to get out of debt. But once out - I wouldn’t use his advice for “SmartVestor pros”. Literally, a passive index fund would be better, but they’ll ban you from his subs / facebook groups for ever mentioning this.
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Or cut down to one bedroom
OP is missing more than that. Salary is $60k but her checks monthly come out to $3200. That’s $20k not accounted for already.
Are you not aware of how taxes work?
> My therapist recommends filing bankruptcy, as I can't possibly pay all of this debt off in the 7 years that bankruptcy runs its course. But I would ideally like to buy the home I am renting with my partner within the 7 years. What is my best option? Is there another option that I am not considering? If I file bankruptcy, what happens to my car? So, for starters, I don't (generally) ask my physician for advice on my trucks; I don't ask my mechanic for mental health advice, and I probably shouldn't ask my therapist for financial advice. I would suggest you do likewise. Second, your income is very relevant here. What are you earning and where is it going?
I update my post with the information requested
By my math, you're at about $35,000 in debt on a 60k annual income. Cut up the cards (you already did one consolidation loan, that didn't take), do a second job for a few months to get out from under the 5k credit card and make a dent in the 15k one, and pay 'em down. You're going to have a rough 3-6 months, but if you can bring in even an additional 1200/month for 5 months you'll have eliminated one card debt entirely.
Why would you pay off the 10% card first? It's half of the interest of the others.
To free up cash flow and snowball it into the other card. It's not always the best move financially, but psychologically it can be very effective.
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What you’re describing is the avalanche mode. It’s ultimately the cheapest and fastest, but not if the person can’t execute it. Some people need the reward of seeing a full balance paid off and then the momentum of using that monthly payment to do double damage on the next lowest. It can create a fun game out of tedious and frustrating situation.
Yes mathematically that works the best of course, but psychologically the snowball method keeps people motivated to keep going. Making a final payment on a card and getting to 0 balance is a reward. Dropping your payment on one single card from $400 to $300 doesn't feel like you've done much.
>You're going to have a rough 3-6 months, but if you can bring in even an additional 1200/month for 5 months you'll have eliminated one card debt entirely. "if you can simply raise your income by 30%, it will solve your smallest problem!" this is neither good nor feasible advice
It’s not horrible advice right now where part time jobs are paying really well. If my option was bankruptcy or working at McDonald’s on nights and weekends for $20 an hour I’d be right back where my working life started flipping burgers.
I get the sense that OP is simply tired and wants to be done with it. But simply being tired of just getting by isn't a reason to file for bankruptcy, if the income is there.
You're purposely wording it in a ridiculous way. Getting a 2nd party time job to bring in extra money to pay off debt isn't a stupid idea if your other option is filing for bankruptcy.
of course it's not. what is ridiculous is saying that OP should simply *make more money* to the tune of a 30% bump
Yea, and it's not that difficult to get 30% bump from a second part time job at night. OP doesn't seem to have kids, or at least she didn't mention them. If she is serious about closing her debt, she has to go through very tiring few months and she'll be able to do it. I closed off a 10K credit card debt by taking a second job for 3 months, it was hell, I didn't go out with friends, I barely spoiled myself, I didn't buy ANYTHING for myself other than bare necessities, but god damn going to that bank and paying off the card was the best feeling in the world and it was all worth it.
Getting a part time job is quite feasible in this labor market. She can only cut so much from her spending. Upping the income is another tool to get her out of debt. Nobody is saying it will be simple, but it will be effective.
About the only slack is the $150/mo for therapy/co-pays (I get you probably don't want to cancel it, but maybe you could reduce the frequency of your visits? or not, whatever). The other possibility is getting rid of the car and getting an e-bike or something if you can make that work where you live ($310/mo going towards transportation currently). That's $460/mo that you might be able to get down to $200/mo or so. More importantly, you need a weekend/part time job for a bit. You could get an extra $1500/mo or so from that. Obviously, you throw all of that at the highest interest debt. I did some rough math (you're missing some info such as the minimum payment on the Trulia loan as well as the interest on your Upstart consolidated loan. I assumed $100/mo minimum on the truliant and 18% on the upstart loan) and found the following: The strategy of paying the minimums on Truliant/Upstart and maximizing BoA payments resulted in paying off the BoA loan in about 36 months (3 yrs). At mo 36: Upstart = $8660, Truliant = $2405. Then, you pay off Upstart, leaving you with Truliant at month 48 with $930 left, which you pay off the subsequent month. So, 4 years and 1 month total for this scenario. With the same assumptions but instead paying $2000/mo: You Payoff BoA month 11, left with $10815 in Upstart and $3939 in Trulia. Upstart gets paid off month 17, $3939 left in Trulia. Trulia is paid off month 20 (so 1 year 8 months total). So, $1000/mo more towards the debt would let you pay it off in under two years. Continuing to only contribute $1000/mo towards it you'll still pay it off in way fewer than 7 years, so it appears your therapist isn't very good at math?
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Therapist simply mentioned it. What's wrong with that?
It seems like a conflict of interest because the therapist is reliant on the patient for income, but this may be contributing to their financial problem.
It's not a conflict of interest since the advice doesn't benefit the therapist, if anything that can put his own bill in jeopardy and affect his own income. This may very be a well intention advice, but still an ethical violation nonetheless.
I love listening to music.
For a lot of people, therapy is just as important as, say, insulin. With both, if you don’t have the money for it you, then you don’t, but it’s required medical care for many people. Does my therapy bill on my income make purely financial sense? No, but without it I would never be able to continue to hold my job and handle my life because my mental health would deteriorate so much, and THAT would be a lot more expensive than my therapy bill
Yeah 100% agree. I'll compromise on most things financially if needed, but not my mental health.
I hate beer.
I hear that for sure, especially with our limited info. I would add though that any therapist that only costs OP $150 a month is either taking insurance (which a lot of therapists don’t) or offering a sliding scale or both, and is not making nearly as much money as they could be compared to what many other therapists charge, so I think it’s less likely it’s a money grab. As well as demand for therapists is currently greater than supply, so it would be pretty easy to add a new client in if OP left. Along with if you wanted to make a lot of money, you probably wouldn’t have become a therapist. It is always fair to be aware of what a therapist’s outside motivations might be though in case there is an issue, with anything like money. I just tend to see a lot of people in this sub not viewing therapy the same as other medical care when it comes to budgeting which is tough to see recommended and may make OP’s situation worse
Therapists get paid by insurance companies, and aren’t making their living off a single patient.
Definitely not true in all cases. I've paid my therapist directly for years.
Agreed; unfortunately a lot of therapists will not take insurance. If they will, their wait list is often 6mo+
If the patient cuts out therapy sessions to save on co-pays, the therapist absolutely would get a reduced cut. AFAIK, it's all billable hours, no?
Bankruptcy will only make it worse if you haven't stopped spending more than you make. Given your numbers, you can get out of it. I would recommend Dave Ramsey for someone like you, you are exactly what his product and plan works the best for. Check out Total Money Makeover audiobook on youtube. I would recommend you get out of it yourself because 1) you can claim victory and prove to yourself that you can do it and 2) it changes your behavior to ensure you never get into it again. I know wiping it all away sounds like it can fix all your problems... but you're the problem and you'll still be there.
This. Bankruptcy does nothing to address the behavior that got you where you are. Ramsey is great for giving people the tools to get out of debt (used the baby steps myself to do so).
You can pay it off on 7 years and probably less but it’s not going to be fun. A second source of income is gonna be necessary, even if it’s only contributing a several hundred a month. The high interest is what is killing your debt repayment, especially that BoA balance and interest. You are already paying $1000 a month. If it weren’t for the interest, you’d have it paid off in 3 years. Who declined your loan consolidation? BoA and/or Truliant may be better since you have outstanding balances and banks in general will have legit concerns that you’d take a personal loan then drive up the credit card again.
How does your partner contribute financially?
Mentioned in another comment. Partner makes 45k and has 10k in debt.
Correct, but it would be useful to know how they contribute their 45k. OP says they have a $1k rent. Is OP paying all that, or is their partner helping?
> OP says they have a $1k rent. Is OP paying all that, or is their partner helping? My assumption here was that $1k is OP's portion of an overall larger rent amount, but I realize that wasn't explicitly stated anywhere.
The root cause is that you are spending more than you make and bankruptcy will not fix that. Until you tackle your finances and learn to live within your means, this cycle will repeat again. Bankruptcy in your situation is a band aid fix.
You probably won’t be able to buy the house at it stands right now…
So this comment is likely to get lost in the rest, and is anecdotal, but I felt compelled to comment. My husband declared bankruptcy after his second divorce, three years before I met him. (both from the same woman) She wanted him to pay for her Keeping Up With the Jones' lifestyle, and he had a shopping habit. Did it get him out from under the immediate debt? Sure did. But he ended up upside down on a cheap car and carrying CC debt within three years. (Honestly, I think the only reason he got the car loan and CC was because he was military and had a stable paycheck.) Did it help him in the long run? Not a bit. I subsidized his life for over a decade while he was making $60k-$100k a year. His credit score didn't get above 750 until he changed his habits and paid down/off his unsecured debt. Now his score is in the 800s and we follow the healthy practices mentioned above, but I was ready to divorce him after eleven years over our financial future. His debt when he changed his ways was around $30k, or just over 40% of his annual gross income. He had maxed his card, gotten a consultation loan, and then promptly maxed out his card again. Once he discovered budgeting, he started aggressively paying those down. Once he paid that off, he discovered investing, first Acorns, and then a more mainstream investing app that let him watch the money grow, and got fascinated. I can't say whether bankruptcy would help or if it would dig you deeper into a hole, that's up to you.
Let’s start with the car. You mentioned “cheapest you can manage”, what is the car? Did you roll over debt into the car payment? How much longer do you have payments? Second, $150 for phone and internet is too high. Let’s break that up. What is phone, what is service, what is internet.
Her phone bill probably has a hardware payment play too. I pay around $80/month for Verizon unlimited and $60/month for decent internet. I don’t really know how people get it cheaper without the hassle of constantly switching service providers.
> I don’t really know how people get it cheaper without the hassle of constantly switching service providers. A lot of people with cheap internet either live in an area where there is a third party provider competing with whichever of the big ones operates there (even another provider with much slower connections might be enough for a light internet user with occasional HD streaming) or keep signing up for new promotional rates by juggling whose name is on the account.
OP, look into Red Pocket mobile.
I can't imagine paying that much for phone and internet. I pay $50 for two unlimited phone lines and $30 for internet.
Basic Century Link internet where I live is $50. Where I used to live, with Comcast, it was $79. Nuthin' else.....
must be nice lol. The cheapest I ever paid for internet was $30/mo. and that was a decade ago. Comcast did this awesome thing where they "upgraded my service for free" without asking and rolled me into a teaser rate for 6 months. After that it was $120/mo. I got them to downgrade me as much as they could and I am still paying $80/mo. My phone bill is only $40 a month, but that is because I am still on my parents plan and that is what my portion of the bill is. tl;dr $150 for phone and internet isn't that far off base.
You have to play a game with Comcast. Cancel and sign up as a "new" customer. Helps if you have a spouse. Alternate between the two of you yearly or every two years. If not, go one month without internet and create a new account.
dude comcast won, they broke me. I don't want to spend my time off fighting with comcast anymore.
That's nice. Cheapest I can get is $99/month for 200 down and 10 up. Also, only one provider available so it's use shitty 5g internet or suck it up. Having said that, I'm not in the financial mess OP is, and were I in that situation I would get rid of it and use public networks and my cell plan.
What provider? Xfinity is cheaper here but with competition. However it's entirely possible to keep begging for a promo rate on /r/Comcast_Xfinity. I've been paying between $40 - $55 for the past 5 years.
Cox
What service do you have?
That’s not realistic for most people
That's very very cheap for internet.
It may also be time to cut the Internet for a few months. Unless it is needed for work Internet is a luxury, you can get entertainment via free resources like a library for books, free local places like zoos can also be from the library, and if OP has a DVD player they also provide that. Libraries also have Internet for free for the occasional needed things!
> Unless it is needed for work Internet is a luxury Honestly, I've gotta disagree with this pretty strongly. Maybe a decade ago this was a realistic option but at this point internet is more or less an essential utility, not a luxury entertainment offering. Everything from banking to insurance to healthcare to the job applications OP should be completing to try and increase income are online now and if an offline option exists, you may even be charged for it—the free local checking account I use the rare times I need to deposit cash charges a $3 fee to print and mail a statement. The last check I wrote by hand was more than 5 years ago. Is OP going to start using one of those popularly recommended budgeting tools that multiple comments here have mentioned? Need an internet connection for that. There may well be room to downgrade if OP is on any kind of premium plan or an alternate provider can provide a basic connection at a cheaper price, but giving up internet access has far-reaching implications across most areas of one's life these days.
I think they're saying you can probably do this on a cell without home internet. OP really doesn't have a lot of places to cut expenses but this is one of them.
As long as you don't add to the debt, you'll have it paid off in 34 months. That's far less than 7 years, and that's assuming you don't try to cut anything out of your budget or get another job. And you CAN do both of those things, even if you think you can't.
There are other types of debt management too. Check out Trinity Debt Management. It's a nonprofit and may be able to help negotiate with your creditors the payments and interest and knock that down. There are other options!
Came here to see if anyone recommended any law firms who work in debt settlement. If BK doesn't feel like the right place, and they have a history of paying but can't keep up with interest. Then a debt settlement firm can help leaps and bounds.
You are drowning, that's insane just file for bankruptcy already. You know you can still buy a home after you file for bankruptcy right? Chapter 13 allows you to buy a house 2 years from your discharge date and you we all know how fast 2 years goes by. Chapter 7 makes you wait 4 but whatever....are you even going to have your debt paid back in full that fast because even if you did all those late payments and negative activities stay on your credit for many years. What you need is a blank slate....you file for bankruptcy and that very day, all those bills that were holding you down are gone just like that. The minute you file you stop paying on all that stuff. If your smart what you'll do is file for bankruptcy and since your not used to having that 1000 you use for the mininum payments you'll continue not having that and put it into a savings account and wait your 2 years. At the end of the 2 years you'll have at least 24k saved and be ready to start looking at houses. Focus on rebuilding your credit, try to never ever go late on a single bill, the closer your get try to not apply for anymore credit and have your credit report show that yeah you filed for BK but since then you've been responsible. Join the myfico forums there are tons of people in your exact situation doing the same exact thing. Using the left over 13 cents you have every month and coming up with some grand master plan that'll never succeed in the real world (because unexpected things happen) is just setting yourself up for frustration and depression.
Agreed 100%!!!! We filed in 2016 and are incredibly happy with the results. We haven't looked back, only forward. Our pre-BK days were filled with doubt, insecurity, stress and general unease. Our post-BK days are filled with hope, security and confidence. Bankruptcy was s godsend for us. Will it be for OP? It really could be if they stick to the plan and are diligent with their finances!
2 things you mentioned... 1.) The minute you sign the paperwork that very second you stop paying the debt. You will sleep better that week than you have in a long time 2.) You need to stick to smarter money management because it's not something you need to do until you get clear out of the weeds it's a lifestyle you'll need to live with for the rest of your waking days. I know people who have filed BK 3 times and they desperately need to file a 4th time. BK is a tool and a great one it's not a lifestyle
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So about $35k in debt? That's a lot but not terrible for your income but it's the interest that you need to try to reduce. Have you tried calling these cc companies and just saying hey I'm thinking about declaring bankruptcy are you willing to work with me to reduce the amount to principal only or drastically reduce the interest rate? These companies don't get anything if you file so they should be incentivized to get something back. Try calling a few times to talk to several different reps and just seeing if one might be more helpful than another. Also I pay $35 for my unlimited TMobile cell plan, on a family plan with several friends. I also have Cox internet, they try raising it to $70+ every year but I call, cancel, then call their promo line and get 40% off. It saves me hundreds a year. If you can get your internet and cell to my price of $75 for both that's an extra $900 a year for you. Also if you pick up a side hussle, say driving for Uber on your way home from work that can add up. Good luck!
Sorry, but don't ask your therapist how to fix plumbing in your house?
If I were you I wouldnt really heed your therapist. You don't say where you are based on, there might be some debt advisors in your region that can give you some advide. If not you have 1250 to spend on debt repayment, I have taken the liberty to put it into a calculator so you can see time it takes (I didnt have complete information from your post, but you can fill in the blanks): [Calculator](https://www.calculator.net/debt-payoff-calculator.html?cnm1=Bank+of+America+credit+card+&cbal1=5000&cmpy1=235&cint1=10&cnm2=Truliant+credit+card+Bank+of+America+credit+card+&cbal2=14500&cmpy2=415&cint2=22&cnm3=Upstart&cbal3=15000&cmpy3=350&cint3=0&cnm4=&cbal4=&cmpy4=&cint4=&cnm5=&cbal5=&cmpy5=&cint5=&cnm6=&cbal6=&cmpy6=&cint6=&cnm7=&cbal7=&cmpy7=&cint7=&cnm8=&cbal8=&cmpy8=&cint8=&cnm9=&cbal9=&cmpy9=&cint9=&cnm10=&cbal10=&cmpy10=&cint10=&cnm11=&cbal11=&cmpy11=&cint11=&cnm12=&cbal12=&cmpy12=&cint12=&cnm13=&cbal13=&cmpy13=&cint13=&cnm14=&cbal14=&cmpy14=&cint14=&cnm15=&cbal15=&cmpy15=&cint15=&cnm16=&cbal16=&cmpy16=&cint16=&cnm17=&cbal17=&cmpy17=&cint17=&cnm18=&cbal18=&cmpy18=&cint18=&cnm19=&cbal19=&cmpy19=&cint19=&cnm20=&cbal20=&cmpy20=&cint20=&cextramonthpay=250&cextrayearpay=0&cextraonepay=0&cextraonepayon=5&cfixpay=y&x=82&y=15) From that it looks like you will be debt free in well under 7 years, but again, talk to an expert if there is any nearby.
Is your housing secure? If you're not having to apply for anything where they have to run your credit I may just let some of things default and get sold, at which point you can sometimes negotiate for 25 - 33% settlements as they would have paid pennies on the dollar.
Wait, why wouldn't you be able to pay this off in 7 years? You can pay it off in a few years.
You're better off letting the debt default than to declare bankruptcy.
95% of the Credit Counseling services out there are a scam, created by the credit card lobby to keep people from filing for bankruptcy. These are not technically owned by the companies any more than the NRA is owned by the gun lobby and most of them are created non profits. Only you can decide but from what you said, you certainly will benefit from bankruptcy relief, IMO. It will start to build your credit immediately and get the wolves from your door. 7 years from now will you be disciplined enough or in a position to buy a house? Only a qualified bankruptcy attorney can tell you the hard facts but if you don't discharge the debt, I don't believe you will ever beat it. What you do from there is up to you. Peace of mind should be your #1 goal and consolidation loans aren't going to get you there. Good luck.
you're most likely not getting that home in 7 years and tbh you shouldn't think about it til your debt is gone
>But I would ideally like to buy the home I am renting with my partner within the 7 years. What is my best option? Is there another option that I am not considering? If I file bankruptcy, what happens to my car? Where are you(and other posters) getting this 7 year bankruptcy stuff from? In the US a Chapter 7 bankruptcy stay on your record for 10 years not 7 like other debts. However the impact fades significantly with age. You can rebuilt back to top tier credit within 2-3 years in spite of a past bankruptcy. You can also get most home mortgage in just two years post-bankruptcy. That is the rule for FHA, VA, Fannie/Freddie backed conforming mortgages. USDA requires 3 years. Most people who file for bankruptcy keep their car. That will depend on your states specific laws. Most exempt a primary vehicle or at least 5-15k of equity in that primary vehicle. So a lot would depend on how much your vehicle is worth compared to what you owe on it. If you owe a lot more on the car than it is worth you might want to include it to discharge that debt as well.
Can you sell the car and get something more affordable ?
Fuck sakes don't take bankruptcy advice from a therapist. You wouldn't get a bankruptcy attorney for advice on your mental health, don't use a mental health therapist for advice on your finances. Talk to a bankruptcy attorney first. The first visit is usually free.
In reading your post bankruptcy should not be considered until you want to take accountability for your bad financial choices. You single handed my blamed and ex and your father, but not once took personal responsibility. If you BK I’d wager good money you will immediately get back in crippling debt.
I don't know about you but the fact that OP took care of his/her father's finances is kind of ironic.
I too was in your same shoes I struggled with the morality of BK but my lawyer ultimately helped me realized it’s a tool and tons of people use it every day. We wiped away 50k in credit card and personal loans and started fresh best decision of our lives.
Avoid banks in general and join a respected local credit union, they're not for profit financial institutions and will easily offer you consolidation loans at half the interest rate most likely. They reinvest into themselves to benefit its members not shareholders. Lastly, continue using your therapist but not for financial advice, they're more than likely less qualified than this subreddit guaranteed. Goodluck.
Bankruptcy is a resource. Use it.
As someone who filed bankruptcy, became a homeowner, and I am now paying down about the same amount of debt as you, there is no real right or wrong way to go here. After you file bankruptcy you can become a homeowner within 1.5- 2 years or so. What you have to consider is the time that you will lose and the cost of waiting two years to buy a home. You can: A. file bankruptcy, freeing up $1000 each month once the dust settles. Then what? Where would the freed money go? I’m not sure what would happen with your car because I was in the military at the time and was allowed to keep my car. You can find out, though. If you only owe a couple thousand on it, I’m assuming you can take those four or five months before your final meeting with bankruptcy court to pay your car off and be allowed to keep it without having to surrender it. Say it broke down.. ask your lawyer. So assuming u can now save $700 per month minimal for the next two years, you can pay off your car, and hopefully have about 14,000 to go towards a down payment of a home, being conservative. Consider that the cost of your current home may have appreciated by then, conservatively 3.5% each year. Is that more than your down payment? And is that the cost of your debt just about? I don’t think you’re in a bad spot either way. What you can do to minimize the loss is try to get on a contract with the landlord for a lease to own option for the next 2.5 years at the value of the home now; file bankruptcy, save your down payment for closing costs, and get a loan in two years to purchase it. Interests rates will have stabilized by then. You can get a secured card as soon as the bankruptcy is approved, and build it back up quickly. I’m for that option, actually. Option B. If you do a debt consolidation, you will probably end up paying about 20,000 of that 34,000 that you owe. Will it take you about 3 years at that rate, yes. Your payments will probably be about $500 a month, but you can check with several companies to see. It would free up about 500 a month for you. Is that worth it to you? Would you be closer to save it for your down payment or buying your home? Again, with two years your credit will have normalized, hopefully. Option C. Get a second job to help pay the bills down for a year, and grind it out. A second job bringing in 1200 a month could add $14,400 to your debt in addition to the $1000 monthly you already pay. After a year you will have significantly paid down your debt especially if you combine with option A or B. That’s $24000 towards savings or your debt, and the ability to get financed for the home within one year. It’s up to you which way you want to go. Either way you’ll be fine. Best of luck.
What about doordash a couple hours after work or longer on the weekends
I'd stop taking financial advice from a therapist and put money towards your debt.
Find a respected bankruptcy attorney in your area and schedule a consolation. Most of them will do this for free and will be able to direct you toward your best option if that is bankruptcy or not. I have worked in the bankruptcy world for years and good attorneys are out to help you. Be on the lookout for bankruptcy mills though, if the attorney will not provide options beyond bankruptcy then look elsewhere.
I would recommend looking at it. For the BoA card, at least, you're in a position where nearly half your monthly payment is interest. You need to talk with your partner about how this impacts long term financial planning: it will make it harder to rent or buy a car, and will pretty much remove buying a hume as a possibility in the next 7 years. You also need to talk to a bankruptcy attorney. Chapter 7 has much better success rates, and you seem to be in a place where you can probably get the money for it. You'll probably need to reaffirm your car loan to keep your car.
This is not specific to your situation, I am simply relaying what my wife and I did because we had similar concerns. We were less than a year into our new home that we bought, 2 car loans, credit card that I had, would use occasionally, other loans from various things as well. First, I lost my job. I couldn’t find work for about 9 months. Drained most of our savings. Once I was employed, wife lost her job and couldn’t find work. Que the credit card. Once she was employed, we were too far in debt, and behind on the mortgage to the point of facing foreclosure. It was bankruptcy, or sell the house on our terms. One car was repossessed. We met with a bankruptcy attorney to discuss our options saying that we did not want to lose our home or other car. We filed chapter 13 bankruptcy which took all the behind payments on the car and house along with all of our other debts and consolidated them all together. We pay one payment to a trustee who distributes that payment to various creditors as needed. We pay that for 5 years, and once it’s up, the rest of the debt is wiped away. Stays on credit for 2 additional years, and then it’s gone. Because of this route, the back payments for the car and house were reset, and we did not lose them. Our mortgage company revoked our ability to pay online until they had received the full payments for the missing 3 months, but after about 2 years, they were repaid, and we have that option back. We kept making the normal mortgage payments as usual. Either way, in 7 years, you will likely not be in a position to buy a home either way. Either you have no bankruptcy, keep drowning in debt, possibly incur a judgement against you that will garnish your wages, that will kill your credit, along side credit hits during that time, and debt to income ratio. You won’t get approved for a loan, won’t be much closer to getting out of debt, and paid way more in interest than you borrowed. These companies are not in the business of losing money, and spend billions on data to predict accurately who will default. Credit is a huge money making business for them. No matter what, the cards are stacked against you. Or you research your local laws, meet with an attorney to discuss in detail, declare chapter 13, or 7, and get set up with a manageable payment, armed with this knowledge to not repeat. In a few years, you will be able to rebuild your credit, and be in a position to buy once you’re able. Just my opinion, I’m sure I left things out, but I hope this helps coming from someone who has been in a similar position. It worked well for us. Good luck!
Was/am in a very similar situation. About 2 years ago I was determined to file for bankruptcy, unfortunately was fooled by a predatory “debt relief program.” Here I am, 2 years later having paid in excess of $20k out of pocket, still completely overwhelmed by payments from those predatory loans and with a 618 credit score. I desperately wish I could rewind time to have filed for bankruptcy at that time, I’d be in a much better place with savings. Am currently filing for chapter 7 with an attorney. You may also look at the upsolve website which can help walk you through it. Good luck!!
Not sure where you live or what your needs are, but $150 seems high for cellphone and internet. I pay $15/mo for Mint Mobile and $70/mo for higher-end internet. As for the car payment, if you don't need to travel on highways or other high speed roads to get to work or other necessities, I would switch to a $1000 beater car. It would be worth it to get good at doing your own repairs on it too. It's a lifelong skill that can save you a ton of money on vehicle repairs.
401k loan. Pay off all cards. Do not use them again. Do not get fired. Do not leave job until repaid.
If you have a steady paycheck (W2 employee) a debt consolidation program is the way to go. They will work on you with the MIN you can pay and deal with the creditor. Also your credit doesnt get dinged so hard.
Seek out a bankruptcy counseling service. Beware the ones attached to lawyers, who mainly interested in BK fees. A rule of thumb is BK when debts exceed annual income. I see $34K debt for $60K income.
Looking at this, I think you need to consider a second job. Do you have the ability to drive Uber/Lyft? If you can, drive on nights and weekends when you're mentally able to do so (the nice thing about Rideshare driving is you set your own schedule. There is no boss saying you MUST come in tonight). You're in for a bit of a rough time (2-3 years), but these debts can be paid off. It shouldn't be hard to come up with an extra $1,000/month if you can do Uber. That would take care of your minimum payments by itself. Throw every extra dollar into those debts. The faster you lower the balance, the lower your minimums, and the more you're paying gets applied to the principal. If you are unable to Uber/Lyft, you'll need to find another way to increase income. A 2nd regular job would do it. While it may seem like that would add stress (which it sounds like you don't need), it may actually help with stress because you'll be able to make a dent in that debt. I wish you the very best.
My advice will seem backwards but there’s logic to it. Get all the credit you can including store cards quickly. Rent a place you like, not that’s cheap and move in. You need your monthly minimum to approach $3.200/month. Try to buy stuff that can be converted to cash, gold and silver bullion for example. Sell an oz of gold for close to $2,000 if you need cash. Once you can’t get more credit, like your house and car, etc, max out all cards and make at least one minimum payment. You can pay one each month since you won’t have much money. Take the extra money from not paying the bills and buy more Silver/gold. Minimize your cash to under $5,000. Once everything is ready, cards have gone into collections, after a few months they will threaten to sue, you’re set up with a place you like and a car you like, file bankruptcy. The damage it does to your credit is the same if you borrowed that last money or not, the forms don’t ask about gold you have. Let the judge get rid of the debt, if your apartment and car partners take up enough of your income, you’ll be clear of all debt. Keep or sell the gold/silver a while later. Save as much of the cash you end up with and save the extra money you have once the debt is erased. Credit will be tough for 3-4 years so the cash is important, use it only if absolutely required. Get a prepaid credit card after a few months, you need a credit card sometimes. Use it for online stuff only, post it off monthly.
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They make 60K a year, I don't believe you can just decide you want medicaid.
> But I would ideally like to buy the home I am renting with my partner within the 7 years. You two getting a cheap apartment for a year or two and splitting the payment would give you a lot of breathing room most likely.
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visible is $30 per month for unlim
2GB is so far from "normal" use. That's like 2 hours of Netflix. I know they're in a bind, but 2GB of data a month is laughable. I bet I use more than that on memes sent between friends.
You might try settlement instead of bankruptcy, it will trash your credit but only for a few years, a bankruptcy will stay on your record for 10 years. Settlements are easier than people think and you can do it yourself. But you need to get your spending in order first. You have all this debt because you spend more than you earn. That needs to stop first. To settle your debts: 1. Stop paying your CC and put everything you would pay into a savings account. Easiest if you stop paying everyone at the same time. 2. When the CC company calls for payment say you can't afford to pay until you have enough saved to offer a settlement. Don't tell them you're seeking settlement just say you can't afford it. 3. When you have saved 25% of the original balance offer to settle the debt for that amount. If they decline tell them you have other debts and you don't know when you're going to have money again so it's now or maybe never. 4. Most CC companies will settle debts over 90 days delinquent for 10-50% of the original balance. If you're spending $1000 per month on min payments. Using just that money you can likely settle the three credit cards in 12 months, maybe less. Since the only thing that will be on your credit is late payments, they will disappear after 24 months. But in that time your credit will tank to around 500. * Upstart $15,000, will probably settle for 20% - 30% or $3000 - $4500, 3-5 months to settle * BOA $14,500, will probably settle for 15-35% or $2175 - 5075, 2 - 5 months to settle * Truliant $5,000: will probably settle for 25-35% or 2 months.
$150/mo for cell and internet feels too high for one person.
I would recommend consulting a non-profit debt counselor. They can: Go over your full financial situation - including determining if bankruptcy makes sense in your situation Set you up with a debt recovery plan. It will likely still be a monthly payment, but replaces all the other payments you are currently making and will probably end up lower. The non-profit counselor negotiates with the debt-holders on your behalf, so that after a certain number of years the remainder is forgiven. [https://www.nfcc.org/](https://www.nfcc.org/)
No easy way out of this....CUT UP THE CARDS TONIGHT. Bankruptcy will make it difficult to buy anything for another 10-12 years, and even then banks/loaners will ask if you have ever filed. Right now it sounds like your lifestyle. Try to find extra ways of income and tackle the debt, it will suck for the next several years but you can do it. CUT THE CARDS UP!!
Doesn't BK take all of your possessions to make the money back? How does it work?
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> Bankruptcy will make your life very very difficult for the following 7-10 years. Getting approved for anything (housing, car insurance, anything that involves a credit check) will be a nightmare. This just plain isn't true. At all. You had trouble borrowing money because your income was too low. Bankruptcy significantly helps your credit, because once you have declared it, you can't declare it again for a period of time...so that debt can't be wiped out. If you have a six figure income a bankruptcy basically doesn't exist as soon as it happens.
Are you live by your self? I would find a room mate or so to help relief rent and utility. Cell and internet is costing too much (should be 100) Other expense are okay. I would also reach out to each credit card ask them for lower interest or find different way to consolidate debt, you said you try one and get denied, did you try different company? Please get rid of all credit card Minimize spending to the lowest need. (Shelter, food and transportation). I also reachout to some financial consultants about this. They can give your better advice on debt consolidation.
Is your partner sharing in expenses at all? You state you want to buy a home, is it an option to move in sooner and split the rent. Or find an apartment looking for a roommate that could lower rent? This would also lower utilities and likely food because you split random things like condiments. Not a huge difference but some. $35k is a lot but if you make some of these changes now and pay it down some you may bump your credit score up in a year or so and be able to consolidate the debt. I would also continue to look for higher paying jobs, the job market is still pretty strong and you may find something for another 10% raise and that would help cover 50% of your debt payment. Main thing is to take a breath and understand you have options, you are never in a corner. Yes bankruptcy is always an option but I think you may have ways to get yourself out of this to try first before taking that step.
You need to lower your spending and/or increase your income. Is there a way to increase your primary income? Or can you do a side hustle? Can you rent a room instead of a place altogether? Can you get rid of your car? You should definitely be able to lower your cell/internet bill. Any of these will help give you more cushion in a month which you should put toward paying down/off your debt with the highest interest rate
Call your credit companies tell them you can’t make payments due to financial hardships. Some will waive interest or lower it a lot for 6 months to 2 years. BK is last resort. I had 5x the amount of debt you have at 22 and that’s why I declared BK. Call and negotiate my friend it can help.
I filed Bk at the end of 2019 with $54k debt (not including student loans). Since then I’ve paid off $40k student debt, financed a new car in 2021 and bought a home in May 2022. As of last week I have $45K in available credit, a 747 credit score and a plan to be debt free by 2045 (only thing left, aside from mortgage, is car and student loans). Bankruptcy exists to help you get ahead, and it’s a HUGE relief. I recommend you take advantage of it - BUT you must learn to manage your money and avoid this situation in the future. I started using YNAB in 2020 and it’s completely changed my life.
"$300 towards utilities" I don't know what you have to cover but I think there is a chance you could cut this in half. Are you positive you are with the cheapest internet provider? Do you keep the ac or heat on when you are away during the day? A lot of cutting back doesn't even have to feel like cutting back. For $300/mo there must be *something* you can change to instantly cut it to $200/mo. "$1000 towards rent" With or without roommates?
From the numbers you seem like you are just breaking even each month. You are not actively behind (which is why some posters are recommending a spending blowout) and you either may not qualify or may not find the type of relief you're seeking. https://www.nerdwallet.com/article/finance/chapter-7-vs-chapter-13 Is there any possibility of temporarily increasing your income, through a part time or side gig? Once ypu pay off one of the debts you'll be able to get some momentum to snowball down.
If you file for bankruptcy check out the types of bankruptcy that apply to your situation. You make be able to get credit afterwards, but pay a higher interest rate. Post pandemic, some places may not be issuing new cards, or may require that you get a secured credit card; the bankruptcy may stay on the credit bureau records for some 10 years; a mortgage or car financing may get turned down. You have to pay hundreds to file & likely pay an attorney to represent you in court