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I’m Running Out of Money Fast. What Do I Do? – Dana

“Dear Steve,

Self-employed single mom in flooring industry (ca) Real Estate owned (2) rentals-devalued but currently rented but combined after rents is -(negative) $300.00 per month. Currently living in my home devalued with equity line maxed out. Credit card debit on personal <$20,000.00> credit card debt on business (corp) <$35,000.00> business currently has $15,000.00 in cash

Business line of credit taken away from AMEX 2 years ago. Business bank loan not an option so I had to self fund my business by putting everthing on credit cards and write check for that specific amount and hold them. Every plan I come up with. ie: I will get this job and pay the mortgage then this job will pay the credit card bills etc. is blowing up in my face. Jobs cancelling, jobs postponing, not enough work etc. (construction industry down 60% with gross profit margins narrowing) Been looking for part time work for over a year (no-response) been looking for full time work for last 3 months – no response

Personal Monthly bills including mortgage: $5000.00 per month
Business Monthly bills: $2000.00 per month

I dont know what to do. File bankruptcy on business? (all business debt is based on personal SS#) That is my only source of income. I am told I would be bared from working in the field of flooring. File bankruptcy on personal debt? OMG my father didnt raise me that way. My business bond is based on FICO score etc. What a mess! For the first time in 16 years I am unable to provide for my daughter (no child support – her father abondoned her)

Business: $15,000.00
Savings: $4000.00
Home Equity Line access: $3000.00
401K $14,000.00
529 acct $25,000.00 (received for my daughter when I shut down my old business with ex-husband 1/4 of appraised business)

I am running out of money – credit card access – I have cashed out my IRA

It is snow balling fast. My only solution right now is pray and work my ass off to get business coming in but every where I turn I am faced with yet another job cancelling another job postponing or being under bid another unexpected bill etc. Bankruptcy is tricky because I own a business that is my only souce of income

What do I do?

Dana”

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The Answer

Dear Dana,

I can hear the panic in your words. I’m glad you reached out to me.

One thing we know for sure, since you’ve already cashed out your IRA and using credit cards to make ends meet, the time will soon come when this all hits the wall.

I totally understand the temptation to use the cards and cash to get by but once the cards are run up more than you can afford to pay and the cash is gone, what’s the next move?

Essentially this is not a debt problem. It’s an income problem. There are two ways to address the shortfall, either decrease your expenses or increase your income.

Decreasing expenses seems possible but that would probably require intervention and that’s probably bankruptcy. It’s time for you to read “The Honest and Unvarnished Truth About How to Get Out of Debt.”

The good news is that the entire real estate chain in California has suffered in recent years. It’s good news because everybody is in the same position and that makes it easier for everybody to understand and forgive.

For you this is a life altering horrible event, for the area you live in it’s just an issue of “next.”

The reality is that the business, for whatever reason, has not been able to sustain you for some time. You’ve made up that shortfall by robbing your IRA and using the credit cards to get by. That gave you the illusion of making ends meet but in fact you were just running in the negative each month.

The fear you have right now is the fear of the unknown. What will happen, how will I provide, what do I do? Those are all valid and real fears. But until you deal with your situation you are only living more days facing those same uncertainties. The time has come to stop living in fear and start living with a plan of action on what you are going to do to take action to alter this situation rather than sit in it.

If you don’t take action you are simply going to be totally broke and in the same spot.

Your homework is for you to find a to find a local bankruptcy attorney and go talk to them. I need for you to discuss your situation with a local bankruptcy attorney, not necessarily with the intention of filing, but to better understand what bankruptcy would mean for you.

Once you meet with a local bankruptcy attorney, come back here and post an update in the comments section below. Armed with that information we can plan a way forward.

You can click here to find a local bankruptcy attorney and if you’d like a second opinion about your situation or a personal consultation by another debt coach, please feel free to contact Damon Day.

Big Hug!

Im Running Out of Money Fast. What Do I Do?   Dana
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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.
  • Dave

    Yes I saw that after! my bad! I just think people should always at least try and settle a debt before defaulting on it!

    Dave

  • J_vinup

    I am a loan officer and know quite a bit about finance. If you call a creditor and they settle for less then what you currently owe. Your creditor will place this on your credit report and most banks look at this just like a BK. If you do file BK you will have to wait at least 2 years before you can get a mortgage.

  • Steve Rhode

    As a point of clarification, I did not say Dana should file bankruptcy. I urged her to speak to a bankruptcy attorney so she can be better informed about what bankruptcy would mean to her. Armed with that information she can then make a more informed decision about how she wants to move ahead.

  • Dave

    Dana, I disagree with Steve, I dont think you should go running to file BK, if I were you I’d start talking to your bank right away, I would definately stash the cash and keep that as an Emergency Fund (I DO agree with Steve on that) however in your case, I do NOT see a need to Rush to go BK, $55K is alot of debt but I’m sure you could get that down to half or less without going BK, the good news is that since you are Prepared to go BK and you are no longer afraid of it, use that as your leverage to get your creditors to accept less than you owe as payment in full, YES your credit score is going to get damaged but not damaged as bad as BK, give it a few months with your creditors, if they dont want to give you a substantial reduction, then you can always file BK, at least you will know in your heart that you at least tried to work with your creditors.

    Good luck.

    Dave

  • http://www.mydebtportal.com Dave

    Dana, I disagree with Steve, I dont think you should go running to file BK, if I were you I’d start talking to your bank right away, I would definately stash the cash and keep that as an Emergency Fund (I DO agree with Steve on that) however in your case, I do NOT see a need to Rush to go BK, $55K is alot of debt but I’m sure you could get that down to half or less without going BK, the good news is that since you are Prepared to go BK and you are no longer afraid of it, use that as your leverage to get your creditors to accept less than you owe as payment in full, YES your credit score is going to get damaged but not damaged as bad as BK, give it a few months with your creditors, if they dont want to give you a substantial reduction, then you can always file BK, at least you will know in your heart that you at least tried to work with your creditors.

    Good luck.

    Dave

    • http://GetOutOfDebt.org Steve Rhode

      As a point of clarification, I did not say Dana should file bankruptcy. I urged her to speak to a bankruptcy attorney so she can be better informed about what bankruptcy would mean to her. Armed with that information she can then make a more informed decision about how she wants to move ahead.

      • http://www.mydebtportal.com Dave

        Yes I saw that after! my bad! I just think people should always at least try and settle a debt before defaulting on it!

        Dave

    • J_vinup

      I am a loan officer and know quite a bit about finance. If you call a creditor and they settle for less then what you currently owe. Your creditor will place this on your credit report and most banks look at this just like a BK. If you do file BK you will have to wait at least 2 years before you can get a mortgage.

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