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I Know You’ll Give Me a Straight Forward Answer On How to Best Deal With Our Debt. – Raymond

“Dear Steve,

This debt I’m faced with was accumulated over a period of time, and did not come primarily as an affect from an uncontrolled, frivolous spending lifestyle. Rather, a turn of events that has removed my wife’s income and has left me as the sole provider. During the time that this debt was accumulating, both my wife and I were working and our combined annual income was ~75 – 80K.

I’m seeking your advice, because I’ve read a lot of your blogs and I feel you’ll be one who would give me a straight forward – NO BS answer. BLUF Question: What do you suggest is the best way to deal with the remaining large unsecured debt (>38K), based on the background information provided? I want to do the right thing, but at the same time, I’m stuck as I can’t muster the finances needed to pay any of these off either in a settlement or full.

I appreciate your time, consideration and willingness to assit me with this perplexing dilemma.

This debt I’m faced with was accumulated over a period of time, and did not come primarily as an affect from an uncontrolled, frivolous spending lifestyle. Rather, a turn of events that has removed my wife’s income and has left me as the sole provider. During the time that this debt was accumulating, both my wife and I were working and our combined annual income was ~75 – 80K.

In June of 2009, our existing debt was about $101K, broken down as follows: My Student Loans: $51,000
Wife’s Student loans: $7,000
Bank open line of credit (since 2007): ~$25,000 ($27,000 limit)
Installment / Private Loan (Since 2007): ~$2,500 ($3,800 starting balance) Bank credit card #1 (since 2004): ~$2,000 ($2,700 limit)
Bank credit card #2 (since 2007): ~$6,500 ($7,000 limit)
Bank credit card #3 (since 2007): ~$3,000 (Monthly PIF)
Healthcare credit card: ~$4,000 ($5,000 limit) Home furnishings credit line: ~$ 4,100 ($6,000 limit) Computer credit line: ~$800 ($1,200 limit)
Discount store credit card: $850 ($1,500 limit)
Our monthly income averaged $5,500-$7,000 (after taxes)
Our monthly living expenses were: average $3, 500
Debt Bills (credit cards, loans, etc) $1,835
AMEX card – Bank Card #3 above (as required to pay in full) $300-$10,000; typically reimbursed business travel expenses.

In July 2009, I added some expenses to my AMEX card because we had family coming in for an extended visit and needed to take care of some stuff around the house ~$2,500. At the time, my wife was able to work some overtime and we weren’t having any issues paying our bills.

In August 2009, she suffered a neck injury that required surgery and she was out of work for over 6 months. We were proactive and up front with our creditors, believing she was going to be back to work sooner. We found that initially some were flexible and others were not.

In January 2010, my wife was released to go back to work, however, but at a less than full time (either hours were cut or she had to call off due to in ability to perform her job). She did eventually start getting some extra hours, but that was only through September. By this time the creditors had already starting pursuing collections. I had gone to a debit settlement company, and was with them about 8 months. During that time, even though I was paying them almost $400 a month, they only settled one debt; bank card #2. I then started getting summons, so I decided to move from the debt settlement company and retained a lawyer for bankruptcy. That lawyer has been on a retainer since that time. A couple of days ago, I asked about the release of the near $2,000 retainer and she states that, most of it is non- refundable but they would be willing to release about $500 of it. However, they stated that there is still an issue of pending summons (issued in 2010 from AMEX).
In September 2010, my wife attempted suicide (1 of 3 in a 90 day period), which caused her to be hospitalized. After each attempt, she was then released to in-patient care for a brief period then released to her own care, on the condition of maintaining out-patient treatment. Since that time she has not been able to return to work and I have started the process for her to receive disability, but it hasn’t been activated yet.

BLUF Question: What do you suggest is the best way to deal with the reaming large unsecured debt (>38K), based on the background information provided? I want to do the right thing, but at the same time, I stuck as I can’t muster the finances need to pay any of these off either in a settlement or full.

Raymond”

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The Answer

Dear Raymond,

I had to go look it up but now I know what BLUF stands for, Bottom Line Up Front. Did not know that before. Thanks.

What your spending tells me is your life expenses have exceeded your income for some time now and that shortfall has wound up on cards that are nearing their upper limits. Unless you are able to earn above what you are bringing in or to cut expenses sufficiently it is highly unlikely you will be able to dig your way out of this hole.

I sense a wavering hesitation in taking definitive action to actually address the situation by pursuing your bankruptcy. I’m struck by the one statement you made, “I want to do the right thing, but at the same time, I stuck as I can’t muster the finances need to pay any of these off either in a settlement or full.”

It tells me that somehow you feel like bankruptcy is not the right thing. But consider this, there is nothing that prevents you from repaying your creditors as you can after bankruptcy if that’s what you want to do.

I’m also struck by the apparent misalignment of your focus. I’m not casting blame, just noticing your wife has been significantly struggling and I can’t imagine this continued stress and financial pressure is assisting her in a positive way.

Raymond, you wanted it straight so here is what I can tell you based on what you’ve shared. Dude, you need to take decisive action to put this issue to rest so you can move ahead with a better life and learn from your mistake. As my old New England relatives would say, “You need to shit or get off the pot.”

If you legally discharge your debt with bankruptcy you will reduce the stress on your life and your wife and get back to a point where you can begin to live within your income and save again.

Bankruptcy Articles and Posts You Must Read

To get ready to read the information below with the right frame of mind, please first read How Do I Get Out of Debt Quickly? Change Your Mindset.

Bankruptcy Advice

Life After Bankruptcy

Filing Bankruptcy Yourself

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

I Know Youll Give Me a Straight Forward Answer On How to Best Deal With Our Debt.   Raymond
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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.

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