Author Topic: Debt Crisis/Emergency Relief Needed  (Read 6587 times)

djulian529

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Debt Crisis/Emergency Relief Needed
« on: August 31, 2013, 07:07:38 AM »
Hello All,
I am new to this site, I was referred by a friend and glad that I was.  I am in a severe debt crisis and looking for some advice.

I currently have about $42,000 on CC.  I have not been able to make even my minimum payments in months.  I am getting daily calls and letters (not overly threatening yet).  I have two car loans and a mortgage. 

Last June I lost my job and was on unemployment for a while.  I was then able to get a commission only job which I worked for the last year.  In June of this year, I was fortunate enough to get a FT job back in my field of social work.  However, I am making less than I was in my last job that I lost last June. 

As a result of the job loss and pay cut, I have fallen seriously behind.  I am not able to make any payments on CC and have borrowed lots from family. 

I have contacted Creditguard of America, and based on the information I gave them, I am not able to even make the payments that they can arrange for me to try and get debt free.  I am considering the following:

1. Calling the bank to voluntarily repo one of my vehicles, the one I pay most on each month. 
2. Contacting a bankruptcy attorney and filing bankruptcy.

My question, has anyone recently been down the path of bankruptcy?  If I can make payments on my mortgage and other car (both are current and I can keep them current) will I be able to keep them?  If I lose both cars I can't work, and if I am going to lose my house and therefore dogs, I feel like it will just be time to give up.

Any advice?

Paul der Krake

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Re: Debt Crisis/Emergency Relief Needed
« Reply #1 on: August 31, 2013, 07:35:37 AM »
Hi djulian, and welcome!

Bankruptcy laws vary by jurisdiction and typically offer exemptions. For example in NC, you may keep a personal vehicle of value up to $3500, and a home of $35k in value.

42k in high interest debt is a lot and it doesn't like you are in position to earn much in the near future. Depending on your assets, bankruptcy can be an excellent solution but you (or a bankruptcy attorney) need to know what you are getting yourself into. Google away, cross check the laws of your jurisdiction and you will be in a much better position to make an informed decision.

Best of luck.


ArtieStrongestInTheWorld

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Re: Debt Crisis/Emergency Relief Needed
« Reply #2 on: August 31, 2013, 07:45:33 AM »
That's a tough situation, but it sounds like you might have at least a few more options before declaring bankruptcy.  Bankruptcy can haunt you for a very long time.  You mention that you have a mortgage and at least two vehicles.  Are you underwater on any of these assets?  How much equity do you have in them?  I would strongly consider selling off everything I could to pay off the CC debt.  Can you get by without a car?  You can find places to rent that will still allow you to have dogs, but honestly, in this situation I would consider asking family to watch them for a while while you got back on your feet.

If you can provide some more information/numbers, then the forum can provide you with more concrete options.  Good luck.

Another Reader

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Re: Debt Crisis/Emergency Relief Needed
« Reply #3 on: August 31, 2013, 07:49:08 AM »
You may be able to do this without filing bankruptcy just yet.  Is either car worth more than the remaining loan?  If so, sell that car.  If not, you can call the lender to voluntarily surrender one of the cars. 

You have rights under the fair debt collection practices act.  You can write each of the credit card companies and request they no longer contact you by telephone.  Explain that you have been unemployed and that you cannot pay them right now.

You can contact a bankruptcy attorney.  Finding a competent attorney that does not want to rush you through the process can be difficult.  Pay him or her a retainer and tell your creditors you have retained an attorney and give them the name and number.  The credit card companies then know you can file at the drop of a hat and wipe them out.   They should back off. 

A Chapter 13 bankruptcy will likely allow you to affirm the debt on the house and the cars.

Credit card companies will settle.  The longer the time that passes since the last payment, the less they will take to settle.  If they think they can sue and get a better return, they will.  That's why you have the bankruptcy attorney ready to go.

I have a friend who lost his six figure real estate sales income and whose wife went through diagnosis and treatment for breast cancer without insurance at the same time.  He had six figures of credit card debt, two car payments, and a first and second on the house.  He has avoided bankruptcy so far while they wait for either Obamacare or Medicare to take over future medical bills and it has been over five years.   His bankruptcy attorney deals with the creditors and he works on paying off the bills, one at a time.

Clearly, you were living well beyond your means.  Hopefully you can stay out of debt after this experience.

djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #4 on: August 31, 2013, 08:03:41 AM »
My mortgage and car loans are all current.  I am only behind on CC

Monthly Net Income: 2476.76
Monthly Expenses: 2364 (without cc payments) and surrendering 1 car.
Creditguard Estimate of monthly payment under their plan: 1037. 

Does anyone know how to voluntarily surrender a car???

I was making payments on everything until I experienced the job loss...now I feel like I am drowning and like there is  no life guard on duty

ChiStache

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Re: Debt Crisis/Emergency Relief Needed
« Reply #5 on: August 31, 2013, 09:35:31 AM »
If you want to dig your way out of this, and you're willing to make some real changes in your lifestyle, post your monthly budget. There are a lot of wise folks here who will give you valuable feedback.

Another Reader

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Re: Debt Crisis/Emergency Relief Needed
« Reply #6 on: August 31, 2013, 09:39:04 AM »
Why do you have two cars?  Are there two drivers?  Are they both underwater?

Please post the numbers, as you will get lots of suggestions on how to trim the budget.


djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #7 on: August 31, 2013, 09:42:27 AM »
Monthly expenses

Mortgage $1046
Cells $160 (working to replace with cheaper plans)
Car 203.10
Life Insurance 14.20
Electric Bill 276 (budget plan)
Cable 57.44
Fuel 250 (approximate)
Food 300 (approximate)
Furniture Payment 57.54

Monthly Income (Net) 2476

This is after I will be surrendering a car with a payment of 498 a month.

There are two drivers, currently one 1 working.  Hence the reason I/we are willing to surrender one. 

ChiStache

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Re: Debt Crisis/Emergency Relief Needed
« Reply #8 on: August 31, 2013, 09:45:14 AM »
Do you have any equity in your house or in retirement accounts? What are the balances and interest rates on each of your loans?


djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #9 on: August 31, 2013, 09:49:38 AM »
I have owned the house for 2 years next month.  I am not sure if there is equity in it or not.  How would I find that out?

ChiStache

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Re: Debt Crisis/Emergency Relief Needed
« Reply #10 on: August 31, 2013, 09:54:26 AM »
A. What is the estimated current value of your home?
B. What is the remaining balance on your mortgage? (this info should be on your mortgage statement.)

Subtract A from B, and you'll know how much equity you have in your house.

For example, if my house is worth 100,000, and my mortgage balance is 80,000, I have 20,000 in equity.

djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #11 on: August 31, 2013, 09:57:16 AM »
OK, my last assessment was for 165,000
Balance on Mortgage 154,857.15

So equity = 10142.85

ChiStache

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Re: Debt Crisis/Emergency Relief Needed
« Reply #12 on: August 31, 2013, 10:05:03 AM »
Ok, last question: why are you the only income generator in your household? Do you have a spouse who is raising small kids or something?

Also, people are going to need to understand the interest rates on your loans before they can offer meaningful advice.

I'm recovering from a debt burden that was four times as big as yours, so it can be done. The first step is what we are doing now--taking stock of all the numbers.

djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #13 on: August 31, 2013, 10:15:16 AM »
no children at home.  My other half has some legal issues, and hurt his arm, since he does construction, it was hard to go to work.  Injury was at home.  He has a follow up with the doctor this week, and has been looking for something until he can go back to the construction, which will hopefully be this month.

Frankies Girl

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Re: Debt Crisis/Emergency Relief Needed
« Reply #14 on: August 31, 2013, 11:31:40 AM »
If this was me in the same situation...

Cancel cable. That should be a no-brainer.

Surrender one of the cars or sell if you can get more than you own on the loan.

Pay to break the cell phone contract (sounds like you both have "smart" phones with a data plan? Get out of that ASAP) Check the fee to break and it is probably less than a few months' payments.) and cancel them both and get $20 prepaid basic phones (although I would technically only get one phone  -  people did live just fine without cell phones once upon a time, but if you have no other way of contact, at least one is necessary for the person that doesn't have access to a phone through work or coworkers or neighbors)

What is "furniture payments?"
Can you surrender the furniture to stop paying on that crap?
You can always replace most necessary things with stuff from thrift stores - won't be fancy, but it will get you through for a whole lot less.

Sell everything possible that could to bring in some extra money.

Both people get an extra job working nights or weekends in a grocery or whatever - SOMETHING that brings in more money.

Cut the expenses to the bone. The electric and food are both high for only 2 people.

You don't mention car insurance, but do have life insurance? I'm confused on that one.

I would seriously consider selling the house if it's possible to pay off the mortgage and find an efficiency apartment somewhere that is MUCH less than your mortgage payment. Don't know what the home sales or the rental are like in your area, but this is something else to get info on ASAP, since owning a house comes with quite a few money traps (repairs/maintenance) that you will not be able to keep up with until you dig out of this hole of debt.

Or get a room mate or two if possible.

Depending on the interest rates on the credit cards, you might also look into getting a loan from someplace like the Lending Club to consolidate at a lower interest rate: https://www.lendingclub.com/landing/partner.action?partnerID=80019&param2=GzB001zA002z1zDzg&gclid=CM6S2fGaqLkCFU1k7Aod4UsAMQ

I'm not sure how you accumulated that much debt, but it's pretty obvious that you had no cushion for things like losing your job or emergencies, and were living WAY over your means like someone else already mentioned. You definitely could try to declare bankruptcy, but the situation is not completely in the toilet if you and your partner are willing to REALLY get serious about doing every last thing you can to get out of this.

The problem with declaring bankruptcy is that while it might get you some temporary relief, you'll have trashed your credit, and still be trying to live the same lifestyle that got you into this. I know that losing a job or an injury that sidelines someone isn't something that you expected, but you both need to seriously think why both of those instances were so catastrophic and make sure that you adjust your lifestyle going forward - make plans, save and be willing to sacrifice - to make sure you never end up back in this situation ever again.

And I say this as someone that was unemployed for around 6 months at one point during my career. I know this is all pretty scary and you probably are feeling angry, depressed and sometimes hopeless... but you can do this. You just have to commit to going all in on it. Good luck.

djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #15 on: August 31, 2013, 12:20:51 PM »
All this feed back has been great! 

My cable is for the internet at home.  I actually cancelled the TV part over a year ago. 

The cells are no longer under contract as of last month.  I just spoke with my provider today and can not really lower to a cheap enough plan with them, so I will be looking at the prepaid ones later today. 

The furniture is bedroom furniture that we have.  The credit card that is on, is actually in my mom's name and she is willing to pay that for now, but I want to do it.

The car insurance is already paid for the year, the only reason I did not mention that.

I am currently working a PT job, which brings me about $400 a month, but that is seasonal and ends in October usually.  I usually work Easter - October, so I don't include that in my numbers.

The electric is high because I am in an all electric house.  I have been on a budget.  So it also includes times during the winter when the heat is run on electric too.

apennysaved

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Re: Debt Crisis/Emergency Relief Needed
« Reply #16 on: August 31, 2013, 12:45:08 PM »
Home-I would get a comparative market analysis from a realtor.  If the assessment you provided is a tax assessment, then it may be low.  It normally takes a realtor no time to do this for you and you should be able to find one that will do it for free.

Cars-I did not see the numbers posted, but if either one of the cars is worth more than you owe, then that is the car I would sell for now, so that you would eliminate one payment and have some extra cash in your pocket.

Income-Both of you should be able to find part-time jobs.  I suggest waiting tables as restaurants may be able to accommodate nights & weekends easier than some other companies.  Just making an extra $1,000 a month could change your situation.  When I waited tables back in college, I made @$250/week part-time.

I know that people on the MMM have different thoughts about Dave Ramsey, but you may want to read his "The Total Money Makeover" book which focuses quite a bit on getting out of debt.  You should be able to get it for free at a library.  Besides some general tips on getting out of debt, he also talks about negotiating with credit card companies to reduce your balances if you get to that point. This could be a good supplement to this website regarding your situation.

Don't give up.  I know you may be hassled by creditors (and they can really make you feel like crap) , but it sounds doable.  I just think if you can keep your head above water especially until your husband finds a job or you guys get a little extra income, you will come out ahead.  It would be awful to file bankruptcy and then have your situation turn around in the next year.  Keep asking questions, search this forum, and hang in there.  Many people get to the point where they can't pay the mortgage, and you are still managing that.


mm1970

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Re: Debt Crisis/Emergency Relief Needed
« Reply #17 on: August 31, 2013, 01:41:32 PM »
Where do you live? How big is your house?  Can you rent out a room?

djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #18 on: September 07, 2013, 09:46:00 AM »
I have a 3 bedroom house in NJ.  I am giving real consideration to renting a room

sleepyguy

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Re: Debt Crisis/Emergency Relief Needed
« Reply #19 on: September 07, 2013, 11:18:53 AM »
Get rid of a car, that is a no brainer... go talk to your bank and see of they can get a LOC with a low rate and put the CC amount on it... leverage the house if necessary.  42k isn't too bad, it's just it's on the CC with insane rates why it's pretty bad.

Try to rent out a couple of rooms for a few hundred a month.  Cancel anything you don't "need"...

djulian529

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Re: Debt Crisis/Emergency Relief Needed
« Reply #20 on: September 07, 2013, 12:05:55 PM »
Yes, we are planning on having the bank come get one of the vehicles this month, since the one we really feel we need to get rid of is upside down in the loan.

Does anyone know, when you file a bankruptcy, do you have to close out any 401K accounts you have?  Thinking that may be an option for me

Another Reader

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Re: Debt Crisis/Emergency Relief Needed
« Reply #21 on: September 07, 2013, 01:19:34 PM »
NEVER gut a retirement plan if you are thinking of filing bankruptcy.  If you are leaning in the direction of bankruptcy, please find a reputable attorney that will go through all your options with you, including ways to avoid filing, and who will explain what assets are included in the filing vs those that cannot be touched.  This is not the time to take advice from random internet folks.  This is the time to find an expert attorney.