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We’ve Been Downsized Into a Financial Disaster. – Annie

Annie

“Dear Steve,

My husband ran an in-house print shop until four years ago. The company decided to out-source and he lost his job, but was offered another position in the company (in their residential construction department – can you see the writing on the wall?) but took a 20% pay cut. We made $120,000 before this cut.

At that time, we should have sold our house, but didn’t – we refinanced, borrowed from 401k accounts and tried to make things work. Then, a year ago, he lost his job because they quit building houses. He took another job at the same 20% pay cut (selling printing products), but that company downsized in December and he lost his job. He has been unemployed for 6 months now. I make $65k a year and if you calculate his unemployment out for a year he is making $20,400. He is looking for new employment, but nothing yet. We have 5 in our family – 3 teenage sons. No car payments, but lots of medical and credit card debt.

What do we do – we cannot make our house payments – in fact have moved out and are trying to get the bank to take a deed in lieu. Our rent is $1,200 a month, utilities and phone bills are $600 a month, we spend about $300 for gas for all of the drivers (the kids contribute a little), our credit card debts add up to $40k, medical bills of $5000. The only “assets” we have are about $40k in a 401k and project cars that really don’t have a value, but someday could, our daily driver cars that total maybe $12,000 combined (for four), and a boat that maybe has a value of $8000. I don’t know where to start or what to do. Any ideas?

Annie”

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The Answer

 

Dear Annie,

I sure wish you had found me before you borrowed from your 401(k) but the past is the past.

The refinancing and borrowing prolonged things but did not resolve the underlying issue, the loss of family income.

Based on the likelihood of employment and the level of debt and house situation, I really think there is only one solution, bankruptcy.

Bankruptcy sure sounds scary but it is time to put the debt behind you and live within your income. There is no reasonable expectation that a flood of income is going to come soon to return you back to where you once were.

The printing business is a tough industry right now. The margins are tight and customers are shopping by price rather than loyalty.

I would urge you to find a local bankruptcy attorney, call and ask for a free bankruptcy consultation, and go in and talk to them. Don’t go with the intention of filing, go to learn.

You might lose something, like the boat, but bankruptcy will resolve the bill problem and let you keep stuff and start over again. Having that breathing room will aid all of you in looking forward in hope rather than looking backward in fear.

Big Hug!

Weve Been Downsized Into a Financial Disaster.   Annie
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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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