Brenda Writes The Squirrel Asking For Advice. Is She Nuts!

Posted by Steve Rhode
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While I’m always scampering to give you great advice, you do realize that I am a squirrel in search of nuts to hoard for desperate times. Who knows if I’m the best supplier of financial advice. But one thing is for certain, I think a lot of humans could learn something from us squirrels about preparing for lean times. And we squirrels could learn a thing or two from you humans, like how to read the word ELECTRICITY.

Brenda sent this question in via treenet. If you are brave enough, you can too!

“I have approximate1y $34,000 in debt, all credit cards that I have kept moving around from one company to another to try and get interest free payments for 6 months to a year. They charge a 3% fee.

The kicker is I have excellent credit but Im down to 300 dollars a month operating cash.

I am retired and went through a bad time and started charging. I don’t want to file bankruptcy. I want to play my bills but I can’t on my salary; which is approximately $3,000 a month. In addition to the above debt, I have a mortgage of $1200 a month and a home equity loan of $35,000.

I do pay on time, but I cant keep up anymore trying to pay more than the minimum requirement. So, my question to you is; these cards are through American Express, Chase, and other companies like that so Im guessing they are what you call unsecured loans.

Can any company help me reduce those balances? ”

The Get Out of Debt Squirrel Says:

Brenda,

I would bet a month of acorns that all that time you were shuffling your balances around, they were increasing as well. Low rate balance transfers, simply as a stalling technique, can be bad. But a low rate balance transfer can be used as a smart way to get out of debt if you pay the balance off in full before the end of the introductory rate period.

And while you have an excellent credit report, which is admirable, your credit report isn’t going to help you to get out of debt if you have no available money to repay your debt each month.

At this point you have only a few realistic options.

Option 1

Continue on the path you are on, but the odds are that approach will be doomed to fail once you can’t shift your balances to the next low rate card or you add to the balances owed.

Option 2

Tap into your equity to borrow about $20,000 and use that money to settle your debts for less than you owe. There are consequences to doing that but it may be a better approach than bankruptcy so you can stay in your house.

Option 3

You could try a debt management plan from a credit counseling agency but since your monthly payments are already artificially low because of the introductory rate offers you are on, I don’t think that will help much.

Option 4

Now some may call this suggestion crazy but, bankruptcy is worth considering. Based on your age, income and working status it might make better sense for you to consider bankruptcy. But before you make any decision about if bankruptcy is for you I’d strongly suggest that you talk to a bankruptcy attorney to discuss how it will help and/or impact you. (You can find a local bankruptcy lawyer here.)

While you may have to give up the equity in your home or be forced to sell it to free some equity, a good bankruptcy attorney could possibly show how the sale of your house in this market may not return anything to use towards the debts and thus prevent the sale of your home in bankruptcy.

As long as you don’t start building up debts again, the fresh start you’d get in bankruptcy will eliminate all of your debt to give you some financial safety room on a monthly basis.

As painful as bankruptcy may feel or sound, based on your situation it is probably a solution you should strongly consider.

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