My credit score is 580, my husband’s is 608. We are both in our early 30′s and we have a son. We have a combined debt of $31,000 which includes students loans, credit cards, and debt collections. We pay the bills on time but are struggling and have made a couple of late payments. We have no savings except for my 401K. A well placed emergency will place us into disaster. Recently, a lawyer for a collection agency has contacted me, saying I owe $10,000 on a four year old debt that was orginally $6,154. I fear wage garnishment and a lien being put on a car that we still owe payments on. We have only been late on a couple of cards but always manage to bring them back to good standing but we are struggling. We can only make minium payments. We work full time and bring in about $3,000 a month.
I’d love to tell you that your situation was unusual or unique, but many have found themselves in the same spot. Let me first tell you that while the situation may feel like it is closing in around you, there is hope, there is help.
Basically you are in a treading water situation. You will not be able to break this cycle unless you intervene, increase your income, reduce your expenses or a combination of the last two.
The fastest and least expensive way out of this situation is to consider bankruptcy. Let’s start with the basics.
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.
Does that sound like a reasonable approach?
After you’ve done some homework here and a bit of soul searching I’d like to discuss the next step with you.
Bottom line, we need to intervene in the situation and allow you to take what you learned from the experience and do better moving forward. Bankruptcy may allow you to build your emergency fund, avoid garnishment and suit, and most of all to provide a safer environment for your son. And don’t be too worried about your credit. Right now it’s not great and it’s stupid easy to rebuild. Just read this.Our Credit Scores Suck, We Have No Savings, and We Are in Collections. - Tara by Steve Rhode