I asked my friend, Gerri Detweiler, to also answer this question so you could get two independent points of view. You can learn more about Gerri and contact her by visiting her blog.
I’m a 42 year old married woman with 2 little girls. All the credit cards are in my name. Several years ago, I added my husband as an additional user on at least 2 of my credit cards. We currently have approximately $135,000 in credit card debt (from bad real estate investments, and using other cards to do balance transfers to pay off cards) which includes a $40,000 equity line of credit.
We pay out approximately $1700 a month toward our debt. This does not include mortgage, food, phone, or utilities. I’m currently unemployed, and my husband has been laid off at least twice in the last 12 months.
He returned back to work in November 2008. I have always had good credit. I have never paid a bill late. However, due to my debt to income ratio, my credit has been affected somewhat. Last check it was 689. I’ve tried so hard to maintain my credit with hopes of someday buying a house. We currently live in a town home. We can barely buy groceries. We use our credit cards to buy groceries and to put gas in the car. By the way, we only have 1 car and it is paid for.
I have been told by family members that I need to file bankruptcy. I am so afraid of doing this, but, something has to be done. Last year I contacted a couple of the credit card companies to see if I could have my payments reduced, and they said that they would have to close my account, and I was told whenever you have a high balance on your credit card that that can really destroy your credit. I don’t want this to affect my husband, although he doesn’t mind. My credit is much better than his is right now. However, it would be nice if he could work on his credit.
Should I file for bankruptcy or try to work out smaller payments with the credit card companies and let them close my credit card accounts which will still give me bad credit?
If I file bankruptcy, will it affect my husbands credit since I added him to 2 of my cards?
I can imagine how stressful this must be for you.
Given the amount of debt you have, I would strongly encourage you to talk with a bankruptcy attorney sooner rather than later. The sooner you get help, the more options you’ll have. I can’t say for certain that bankruptcy will be the right option for you, but the attorney will be able to give you specific advice. If you can file for Chapter 7 (straight bankruptcy) then that may be the best route. If you can only file Chapter 13, then you may want to also consider debt settlement as an alternative.
I understand your desire to buy a home, but put first things first. Even with a really strong credit score, you will not be able to buy a home if your debt levels are too high. You also need to start saving for a downpayment and you cannot do that right now. And, of course, you would have to be able to afford the payment which also could be impossible right now.
As for your concern about your husband’s credit, if he is only an authorized user on your accounts, it should be easy to have him removed before you file (if that’s the route you go). In addition, you may be able to file without including him in your case. Again, the attorney can advise you.
Take the first step, talk with an attorney, and keep moving forward one step at a time.
Your credit score number is currently a misrepresentation of your true financial reality right now. While you score is 689, it is only that high because you have been current on bills by living off of other credit.
This sounds like an opportunity for you to finally get your life back inline with your financial life. The only logical way to do that is through bankruptcy since there is no reasonable expectation that you will be able to dig your way out of your debt with your income situation.
Starting over may be painful for you but in the long run, it will be more beneficial. Only by addressing your debt through bankruptcy will you ever have a chance of buying a home in the future. Without bankruptcy your current financial noose will continue around your necks for decades to come.
Rather than worry about the choice, consider this, the choice of what to do has already been made for you. Soon your access to credit will be tapped out, if not already. Unless you step up and take some action to address your debt situation, it won’t be long before you won’t be able to afford to put food on the table.
If all the debt is in your name only then it should not drag your husband in to your bankruptcy, but so what if it did. You are both in this mess together and only by working and emotionally supporting each other are you going to successfully see light on the other side.
I would strongly urge you to find a local bankruptcy attorney, call and schedule a free bankruptcy consultation, and go in and ask all your questions. Only once you have answers to all of your questions will you be able to determine if bankruptcy is right for you, but from what you’ve shared it sounds like the right path to follow.