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I Was Stationed Overseas With the National Guard and Returned Home Deep in Debt. – Michael

“Dear Steve,

40 years old, married, 3 children ages 14,11, 8. Have several credit cards with large balances. Most of the debt is several years old. I’m a veteran and have multiple deployments. Three of the credit cards were maxed out by my wife while I was deployed. We’re both full time teachers and contribute nothing to private retirement account because we can’t afford it.

We’re stuck. I’m 40 and my wife will turn 40 soon. We have three children the oldest will start high school this year. We are both full time teachers and our jobs are stable. We make decent money but most of it goes toward debt payments each month. We have five credit cards that are maxed out or nearly maxed out. The balance of the cards is $49,000. The largest one has a balance of $19,000. It hasn’t been used in several years but we can’t make any headway on the balance. We have two cars with balances of $11,000 and $9,200. They both have penalty APR’s one of 29% and the other is 25% . We owe $69,000 on a house that’s worth about $80,000.

A good share of the debt was accrued by my wife while I was on two separate one year over seas deployments with the national guard. I knew we were paying off a couple of credit cards but had no idea of the scale of the problem until late last year. It’s completely my fault for not staying on top of our situation. I took over control of all the finances after I found out about our problems. We had no savings and a van loan, and a truck loan.

We’ve built an emergency fund of $1,300. We paid off the van, finally, and will pay the truck off in a couple months. We’re making double payments on the truck at this time of $440 a month because it has the lowest balance of any of our debts. I’ve cut all the unnecessary expenses I can. Turned off the cable, cut back cell phone plans, etc in an effort to start paying things off. I even cancelled our dental insurance.

We are current on all our bills right now. The penalty APR’s are killing us. The penalty kicked in when my wife was late with some payments before I took over. The credit card companies won’t lower our rate and and have been unable to get a loan or open another card to try to get a lower interest rate. Our credit score is around 640 at this time.

We have no money left at the end of the month and we’re falling farther and farther behind. Budget items like car insurance, car repairs, clothing, all get left out of the budget because payments on the credit cards are eating all the money up. Insurance on both of our vehicles is due the end of this month. The total coast is $600 but I won’t be able to pay if without pulling the money out of our emergency fund. I’m not sure how much longer we can maintain our current situation. One little set back and we will go into default on something or everything. The stress on our marriage is horrible.

We can’t get a consolidation loan. The debt snowball isn’t working very well because of the high total of our minimum payments. We don’t have the cash to try for a settlement. I don’t believe that we will qualify for bankruptcy because we are current with our bills. I very worried because of our age and the inability to save for retirement. I’ve no idea what to do and need some help. What should we do?

Michael”

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The Answer

Dear Michael,

First off let me urge you that now that you made it here that you can take a deep breath. We’ll work through this together.

Had you advised your creditors you were deployed to try to get reduced interest rates during that time?

You’ve mentioned a number of goals and some different approaches. The most obvious change to make right now is to cut back on the double truck payments that will give you a bit more breathing room.

Then the issue becomes if an interest reduction alone, but with keeping payments around where they are now would be feasible for the next five years. Don’t rush to say it will be. Be honest with yourself first. If you can’t afford the minimum payments and build your emergency fund at the same time you are only one financial surprise away from being back in a big mess.

My biggest concern was your statement about bankruptcy. You don’t have to be behind to file bankruptcy and that makes me wonder what other preconceived notions you might have about bankruptcy that are incorrect as well. The best way to deal with that situation would be for you to click here to find a local bankruptcy attorney.

I’d like for you to take a step back and look at this like a military mission. The first thing we need to gather is facts and data from which we can make a battle plan that has the best chance of achieving the mission goals. Here is how you can do that in the debt world.

I’d suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction.

Then use the free How to Get Out of Debt Calculator to review your options.

After that, come back here and comment about what seems to make the most sense and let’s discuss that.

My initial opinion is that the situation seems like there is a plan buried in here to tackle the issue and help you achieve your goals.

Big Hug!

I Was Stationed Overseas With the National Guard and Returned Home Deep in Debt.   Michael
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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.
  • Michael

    Thanks Steve.  I noticed that I wrote above that we had two cars with balances and it should have said two cards.  Small difference but thought I should correct it none the less.  I also forgot to add that my wife as student loans from a masters program that total about $14,000.

    I’ve always tried to do the right thing with our finances.  We live in a small home that should have been well within our means.  We don’t have new vehicles and have never bought a new vehicle.  
    The family vehicle that my wife also drives to work is a 2005 and has 160,000 miles on it.  The vehicle I drive to work is a 2006.  We don’t own any “toys” like boats or motorcycles or anything like that.  

    I made one huge mistake a few years after I started teaching.  I put a large chunk of my masters degree on a low interest rate credit card thinking we would be able to pay it off in just a couple years.  That is the balance that still remains on our largest card more than 8 years after finishing the degree.  Dumbest thing I ever did I know now.We did receive lower interest rates while I was deployed.  The plan was to take advantage of the lower rates while I was gone and snowball our debts but it didn’t go that way.  There was no easy way for me to track our finances while I was gone.  Little did I know that my wife was fighting some depression and self medicated with credit cards.  It continued for a while after I was back but I believe with medical help that it’s under control now.I just found your site yesterday and have read the articles you mentioned and a few others.  I’ve downloaded one of your articles that goes into much greater detail about Ch 7 and Ch 13 and will read that today also.I’m so glad we didn’t fall into the debt relief trap.  We’ve received calls from companies like that and it would have been really easy to fall for their pitch.  I feel very lucky to have found your site before that happened.  I also feel very fortunate that we have been able to make all of our payments so far.I’ve accepted the fact that we are in serious trouble.  We’ve been treading water for a long time but the water keeps getting a little deeper every month.  I know that dipping into our small emergency fund to pay for vehicle insurance is not a solution to our problems.  It just brings us a little bit closer to disaster.  I’ve been tracking everything with one of the popular free financial apps that are available and the trends are not good.  In my opinion working with a debt relief of credit counseling service is not the right move for us.  We don’t have the cash to attempt a debt settlement.  I only see two options right now.  Keep treading water and following the debt snowball and hope there aren’t any disasters is the first option.  The second option is to talk to a trust worthy lawyer and see what our options are under BR.

    I can’t even make myself say the word out loud yet.

    Am I over reacting?  Is our situation now as bad as I’m making it out to be?

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