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We Are Confused And Not Sure What to Do to Get Out of Debt. – Penelope

“Dear Steve,

We remodeled our home, refinanced, bought vacation time shares (which we enjoy), had unexpected expenses for our son who was going to JC, living at home, not working, and needed COBRA coverage. (He is now away at school on grants and loans). We had high credit card debt that was steadily decreasing as we were paying 5-7%. Then the credit card interest went up to 29%, the timeshare maintenance fees went up, and we are now barely getting by. We earn app. $150,000. We’ve looked at refinancing, but the values have fallen. We have $225,000 on our 1st 15-yr at 5%, and $182,000 on a home equity at 7.9%. Our credit card debt is app. $84,000. We are drowning.

We have looked into turning our 15-year mortage into a 30-yr. No go because the home equity part will not agree, and values are about $375,00 and we owe $412,000. I’m now looking at debt relief, but don’t know where to turn. I don’t want to get scammed (I even made an appt. with Covenant, and then cancelled after I read reviews.) We have a credit rating of 780, co-signed on our son’s college loans, and really don’t want to go into bankruptcy unless there is no other option. Is there any hope for us? Anything at all we can do? Thank you for your advice.

Penelope”

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The Answer

Dear Penelope,

You are definitely caught in nearly the worst spot, current but just barely. The problem is the debt load is so big that budgeting better is not going to give you a miracle cure.

Do you have any cash on hand or can get your hands on any cash, say like maybe $10,000-$20,000? If so, one possibility would be that with that cash and in conjunction with a loan from LendingClub.com you could get enough cash on hand to settle some or all of your debts. But settling your debts can have tax consequences and can hurt your credit.

Almost the larger question is about your outlook on the next three years. Do you want to spend the next three years repaying debt or rebuilding credit after shedding your debt? Would you rather scrape by or do better? Do you have a greater responsibility to repair the past or fix the future?

Post your answers in the comments section below and we’ll have dialogue that will lead us together to the right solution for you.

Keep in mind, this situation is unfortunate and not fun but it’s not fatal. We’ll get through this.

Big Hug!

We Are Confused And Not Sure What to Do to Get Out of Debt.   Penelope
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Penelope

    I can get $10,000 immediately, but as a teacher, I need $10,000 for the 2 months of enforced furlough in the summer. As far as my outlook, I have never defaulted on anything before, but my husband is to the point he wants to go through bankruptcy. I think we are at the point of starting over, even though I am 66 years old, still working, and without any plan of retiring from my current job. We want an easier life, but if we could sacrifice for 3 years and get out of this, we’re willing to do so. Our son is in school at Georgia Tech, living off grants and loans (which we cosign). The trouble is losing our ability to cosign could mean he loses his loans.
    I am talking to Credit Guard of America (referred by Pacific Debt), about negotiating for lower interest rates,
    but I’m not sure if that’s the way to go. Thank you for your help. Penelope

  • Penelope

    I can get $10,000 immediately, but as a teacher, I need $10,000 for the 2 months of enforced furlough in the summer. As far as my outlook, I have never defaulted on anything before, but my husband is to the point he wants to go through bankruptcy. I think we are at the point of starting over, even though I am 66 years old, still working, and without any plan of retiring from my current job. We want an easier life, but if we could sacrifice for 3 years and get out of this, we’re willing to do so. Our son is in school at Georgia Tech, living off grants and loans (which we cosign). The trouble is losing our ability to cosign could mean he loses his loans.
    I am talking to Credit Guard of America (referred by Pacific Debt), about negotiating for lower interest rates,
    but I’m not sure if that’s the way to go. Thank you for your help. Penelope

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