“Hi Steve,

I have one credit card with a $20,000 balance with a $450 minimum monthly payment. I’m not getting too far at paying this off. I would like to start paying higher payments to pay this off faster but im not sure how to figure out how much is the most I can afford to pay each month so I can still pay all my bills and not run out of money and write any bad checks.

Is there some kind of formula or spreadsheet to figure out whether i can afford to pay $600 or $700, or more? Is there a way to figure out what my max monthly payment is?

Thank you very much!

George”

The Answer:

Dear George,

Thank you so much for sending in your question.

I always like to keep things as simple and easy as possible so let’s start like this. First thing I want you to do is open a boring old savings account. Try this link, I really like this savings account.

Now, for the next three months I want you to continue to make the minimum payment due but the first month I want you to put $300 in the savings account, the next month pay the same minimum credit card payment but this time put $400 in the savings account. The third month do the same but this time put $500 in the savings account.

If you try this custom repayment approach you will wind up with two things. The first will be money in a savings account that you can ue in case of emergency, the second will be some real world knowledge about what you can use to add to you minimum credit card payment.

So let’s say that you get to the $500 level and you are not increasing your credit card debt at all and you can get by. In that case I’d like to see you add $250 to your minimum credit card payment and put $250 in the savings account each month.

If you can easily make the $500 deposit, keep increasing it till you reach your limit. If you try this approach then you test out your monthly commitment by paying yourself first. If you lept in first, making a huge monthly payment to your credit cards that you could not sustain, you’d only get discouraged. I want your debt repayment to be reasonable, affordable and sustainable so you can reach your goal of getting out of debt.

This way you will be digging yourself out of debt but if some unexpected event happened, you’d actually have the cash to pay for it, and how great would that feel?

Steve

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Read the full article at GetOutOfDebt.org, click here: How Can I Figure Out How Much I Can Afford to Pay My Credit Cards Each Month? – George

“Dear Steve,

Where to begin. We got ourselves in a huge amount of debt, around $20,000. I can’t make the payments as we are living above our means.

When we bought our house our incomes matched the house, then I lost my job and had to take a lesser paying position. My husband’s job was moved out of the country and he has been floundering since then.

I now work 50-60 hrs a week to try to make our monthly regular expenses. My husband is working very part time and will take early Social Security in July to try to bring in extra money. We lived off of our credit cards until that bottomed out. Now we are in huge trouble with creditors calling us, and don’t know where to go. I am afraid to answer phone and husband is no help at all with this. Also, have brought expenses down to a bare minimum.

Do I want to go for a bankruptcy or do I want to go for a debt management plan. I have been able to make some credit card payments, just can’t pay everybody what they want. In 3 months I will have capitol one paid off and that will free up enough to start paying on one of the larger cc.

Pam”

The Answer:

Dear Pam,

It’s good that you recognized what it is that lead to your financial demise. Some was under your control, some not.

I think the heart of the situation right now is if you are either still using the cards to get by or you are not able to make all of the minimum payments on all the cards. It sounds like you are not able to make sufficient payments to keep everyone happy.

I would suggest that you not enroll in a debt management plan at this time. Instead, I’d like for you to make an appointment and go see a local bankruptcy attorney for a free bankruptcy consultation.

With you already living at the bare minimum level, I think it is unlikely and unreasonable to expect you to live at that level for the next six years, which is about what a debt management plan might take. During that time, all it would take is one unexpected expense to put you behind and then all the years of debt management plan repayments would have been wasted.

If you want to repay your creditors what you can reasonably afford to, there is nothing preventing you from repaying them after you go bankrupt.

At this time in your life you need to spend the next six years saving money instead of making some payments that are unlikely to remedy the situation.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: We Are Living Above Our Means And Can’t Make Our Payments. – Pam

“Dear Steve,

My father and his brother got a loan to purchase a house for their mother about 12 years ago through BOA. Apparently, back in April of this year my dads brother wrote the April mortage check for the payment and it bounced. The next month my dad writes the May mortgage payment and so and so on. Well here it is July and my dad’s credit card limits with BOA start getting cut in half. So he calls them up to find out why and they tell him that the mortgage just got caught up in June but that the loan went 90 days past due to the bounced check, which my father never knew about. So he asks them how come he wasn’t informed?? They gave him 2 addresses, one to his mom’s house in which BOA had the wrong zip code and the other to the PO Box of his brothers business. They never contacted him through his home address and his mom says she never received a letter from them either. My dad has perfect credit and has never made one late payment. The same with the loan in question, 12 years and not one late payment, nothing. But they are giving him the run around and telling him that there is nothing they can do to get the negative mark on his credit removed. So, I guess my question is what can he do since he was unaware there was a situation with a bounced check??

Thanks,

Mary”

The Answer:

Dear Mary,

I’m hard pressed to see where your father has a case here. It is the responsibility of the customer to make sure that they are receiving statements. If he had not been receiving statements on his mortgage account he should have proactively contacted Bank of America to inquire why.

It does not sound like Bank of America misapplied the payment that resulted in the deficiency. They applied the payment, but it bounced. A fact that you uncle clearly knew about and does not appear to have told your father. I wonder why? If he had, this problem would also have been averted.

I’m not clear from your question if your dad and uncle were rotating making the payments. If only one payment was missed your father would be sitting at 30 days past due as each subsequent payment would have been applied to the previous month. To be 90 days past due three payments would have had to either not been made or bounced.

The best course of action your father can embark on now is to bring his mortgage current, correct his address with Bank of America, and give his brother a swift kick in the ass.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: Bounced Mortgage Check and My Dad’s Back Credit. – Mary

Norma

“Dear Steve,

Due to medical condition requiring several surgeries within last three years, I had to file for Ch 13 bankruptcy but it was dismissed by trustee for not being able to meet the amount of payments the court required. My debts are two mortgages, medical bills, personal loans to family members, a judgement and student loans.

What can I do to keep my home from foreclosure and get out of debt in 5 years?

Norma”

The Answer:

Dear Norma,

I’m surprised that you didn’t ask for a Chapter 13 plan modification to adjust your monthly payment before letting the case get dismissed. Did you discuss this with your bankruptcy attorney and if you did, what did your bankruptcy attorney say to you about reducing your bankruptcy payment to a level you could sustain?

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: My Chapter 13 Bankruptcy Was Dismissed by Trustee But I Want to Keep My House. – Norma

“Dear Steve,

60k in IRS debt and 20k in credit card debt, already living paycheck to paycheck supporting kids and adopted grandkids

What can I do, IRS has placed a federal tax lien so i can’t get a loan and credit card company is calling my work and home 20 times a day and applying 20% interest but is unwilling to talk settlement, I haven’t been able to pay payments vs. grogeries for 4 months now, I am going to have a nervous breakdown, Help?

Bill”

The Answer:

Dear Bill,

The reason you are feeling as if you are having a nervous breakdown is because the stress is extreme and you are in an un-winnable situation. So in order to change the stress level you are going to have to take some action to break the logjam you are in.

The IRS lien is going to prevent you from getting a loan. Without the loan you feel you can’t get out from under the credit card debt. You can’t afford to make payments and eat. As long as you remain under the credit card debt the collectors are going to call. The collection calls are stressing you out.

If you change one thing here, eliminate your debt, the calls and pressure stop. Your only real option to break this logjam is going to be with bankruptcy to discharge the credit card debt. The IRS debt will have to be repaid or a repayment offer or an offer in compromise might be to help deal with the IRS debt.

I would strongly suggest that you go and meet with a local bankruptcy attorney, discuss your situation, and take some proactive action to alter the current path you are on. Once you do that it will make your life and the lives of those around you, better.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: I’m About to Have a Nervous Breakdown Because of My Debt. –

“Dear Steve,

I have several credit cards that I haven’t been able to pay on, I am currently paying on one of them, Im just now starting to get calls from lawyers for collection. My wife and I also have a time share that we havent been able to use let alone afford, we havent made payments on that either.

How can I possibly recover from this mess?

David”

The Answer:

Dear David,

It seems senseless to pay on one credit card and not the others. That certainly does not address the bigger problem of you not being able to meet your obligations. You can’t be selective about paying one over others. It’s like favoring the right wing of a crashing plane. That does not stop the plane from going down.

If you take no action then you will wind up with more aggressive collections and potentially getting sued. You should expect to lose the timeshare as well. And there is certainly nothing that requires you to file for bankruptcy protection, you are allowed to stay on your current path but that doesn’t seem to be working too well for you.

In order to meet your obligations you will either need to increase income, reduce expenses, or a combination of both to allow you to have access to sufficient money each month to meet your obligations. If you had nearly enough money you could then think about a solution like a debt management program.

But as long as the financial altimeter is winding down towards impact with the ground you will either need to be mentally prepared to continue with the collection path or seek protection in bankruptcy. I would suggest that you schedule an appointment with a local bankruptcy attorney, you can click here for a free bankruptcy consultation. Meeting with a bankruptcy attorney does not mean that you will file bankruptcy. Meeting with a bankruptcy attorney simply helps to educate yourself about that option so you can make a better and more informed decision about how you want to proceed.

Big Hug!

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: I Have Several Credit Cards That I Haven’t Been Able to Pay On. – David