“Dear Steve,

I am a 36 year old single mother of 1. By single, I mean no dad to even help with child expenses. I work FT and contribute 4% to my company’s 401k which is matched 100%. My monthly mortgage is 52% of my take home and I’m currently looking at refinancing from the 5.25% interest rate I currently have. The initial estimates from Wells Fargo show me saving about $160/month by doing so (over time of course, I would still have to pay up front fees like an appraisal, which would set me back for awhile). I realize my mortgage is way too high of a percentage of my take home, but selling my home or getting out from under this mortgage is not an option right now.

I do not have any car payments. I am in the process of rolling my old company’s 401k from Vanguard to NY Life into an annuity (about $17k). I do not have any other real assets.
My major concern is the $10k I have in credit card debt. I am constantly reviewing and tweaking my budget (I have a monthly budget through 2013!). I have plans to continue to increase payments as I can to my credit card, but would love to get this paid off. But then I use it again and rack up twice as month per month than I just paid. It’s a vicious cycle!
I am using part of my tax refund next spring to get that down to $7k. I am considering using my Roth IRA with Ameritrade to help get this lower, down to about $4k by next summer. I would feel much better I think.

I’ve read all about the cons of using my Roth IRA. Won’t the penalty fee of 10% be waived if I have medical expenses over 7.5% of my take home? If so, my co-pays, out of pockets, etc. would qualify I think?

If not, I guess I would be dinged the $400 or so. Is this really such a terrible idea?
PS – I would never borrow from family, also not a consideration!

Jennifer”

The Answer:

Dear Jennifer,

Before you touch the IRA, which is protected money from creditors, why don’t you look at an unsecured debt consolidation loan through LendingClub.com or Prosper.com.

That could lower your monthly payment and give you some additional breathing room.

I agree, it looks like things are tight with you falling back each month trying to make ends meet. But between this as a possible solution and the possible debt consolidation loan for the credit card debt, that might make the difference.

Before you invest all of your tax refund in the debt reduction I want you to think about two things. First, if you are getting that much back it sounds like you are overwithholding each month when you need the money the most. Second, don’t use it all for debt reduction if you don’t have an emergency fund in a savings account. You need a safety net.

You might also want to look at ReadyForZero.com to help automate your debt reduction plan. It’s a free service.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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• I Got Divorced And Can’t Afford to Live. – Rhauny
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• Divorced, Single Mom, and Being Sued by Chase. What Should I Do? – Ellen
• I’ve Just Been Sued. How Do I Get Out of My Debt Settlement Program? – Heidi
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Read the full article at GetOutOfDebt.org, click here: Single Mother, No Help, Trying to Make Ends Meet. – Jennifer

I divorced about 5 years ago and moved with my work. I am a single mom. I lost my job 2 years ago, used up all my savings. I also accumulated a lot of credit card debt. I work and make just enough to pay the basics.

I am being sued by Chase and know I need to answer in 20 days. I would like to ask for an extension to find a good bankruptcy attorney. How do I do this?

Ellen

Click here to help people to get out of debt.

This reader question was submitted for site members to answer.

This is your chance to be a hero and help out this person by providing your feedback and answer to the question. Post your response in the comments section below.

If you have a credit or debt question you’d like to ask just use the online form.

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: Divorced, Single Mom, and Being Sued by Chase. What Should I Do? – Ellen

Beginning to go through a divorce and I have a two year old son. We share custody of him. Last year my job was cut from full-time to part-time. Down to three days a week. I have be working odd jobs and retail to supplement.
With money scarce I entered into a debt settlement program. I have been in it since January and nothing is happening other than all my credit card bills going to collections and my credit in the toilet. I just received a summons from one of the creditors.

I have many questions….what do I do with the summons? And how do I get out of this debt settlement program? They will not answer my calls or emails anymore. I am scared they are going to keep all this money that I have put into the account. I need help!!

Heidi

Click here to help people to get out of debt.

This reader question was submitted for site members to answer.

This is your chance to be a hero and help out this person by providing your feedback and answer to the question. Post your response in the comments section below.

If you have a credit or debt question you’d like to ask just use the online form.

@GetOutOfDebtGuy

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Read the full article at GetOutOfDebt.org, click here: I’ve Just Been Sued. How Do I Get Out of My Debt Settlement Program? – Heidi

“Dear Steve,

25 year old single mom, about $12,000 in consumer debt. also with about $60,000 in student loans.

as is the usual story, i started using credit cards while i was in college and spent more than i earned. i had an unplanned pregnancy about a year and a half ago, right after starting a new job. with very little vacation time built up, i ended up using my credit cards to finance my maternity leave and have been using them to help make ends meet since then. i also got behind on some payments, so i have late payment demerits.

my son was in and out of the hospital after his birth, so i have about $1600 in medical bills that have now gone to collections because i was unable to pay the hospital what they were asking for.

i owe about $1200 still on my car, which i’ve actually made every payment for (on time!), and it’s at a “lower” interest rate than my credit cards (those are now in the 25-29% apr range, eeek).

i have no savings account or emergency fund, and live very paycheck to paycheck. i get paid once a month. i do receive child support, but it is irregular and goes pretty much to daycare. here are my basics:

income:
salary: $36,000/month
child support: $965/month

monthly expenses:
rent: $595
cell phone: $106
daycare: $862
car insurance: $55
health insurance: $92
internet: $30
gas: $100
food: $300

debt:
credit card: $950 at 25%
credit card: $1500 at 29.99%
credit card: $3000 at 29.99%
credit card: $250 at 27%
credit card: $2300 at 14%
car loan: $1200 at 12.6%
medical bills in collection: $1600
student loans: approx. $60,000

i am feeling so overwhelmed by the debt that i have wracked up… i don’t even know where to start. i would like to be able to make just one (or a few) payments a month, instead of the 15-20 that i’m currently making. i can’t keep track of them all, nor do i feel like i’m making any sort of dent. i do have some unavoidable expenses, so the amount of money i can pay towards the debt is limited.

i just don’t know what to do. should i do debt consolidation? credit counseling? how do i find a reputable company? are there good resources for young, single moms?

i really, really, really want to get to a good place financially to set a good example for my son. plus, i’d like to be able to buy a home someday and provide for our futures. please help!

Lea”

The Answer:

Dear Lea,

You have a duty to care for yourself but more importantly to care for your child that depends on you. In order to do that you need to make decisions which create a safer financial environment, even if those decisions are tough to make.

I really don’t see where you have any other logical option other than bankruptcy and here’s why.

• You situation does not allow you to work a second job. You can look for a job with a higher salary but in this job market that is not a reasonable expectation.
• Right now you are just making it paycheck-to-paycheck.
• You have no savings and are unable to save.
• Things are so tight that one unexpected event is going to be a disaster.

It looks like you need to do three things:

1. Ask for help form the court to enforce the child support payment so you receive it on a regular basis. Take the father to court if you have to. The payment is not for you, it is so you can properly care for the child.
2. Find out what government benefits you may be eligible for.
3. Click here to find a local bankruptcy attorney and go talk to them. Once you discharge the debt you will be better able to make ends meet and SAVE SOME MONEY.

If your student loans are government backed loans then look into the income based repayment program (IBR) to get your payments reduced on the student loans. They won’t be discharged in bankruptcy.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

@GetOutOfDebtGuy

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

Other Related Articles to Read

• Single Mother, No Help, Trying to Make Ends Meet. – Jennifer
• I Got Divorced And Can’t Afford to Live. – Rhauny
• Can’t Afford My Credit Cards. Living on Food Stamps, Child Support and College. – Stacy
• Divorced, Single Mom, and Being Sued by Chase. What Should I Do? – Ellen
• I’m in a Bind and Need a Recommendation for Legitimate and Reputable Debt Help. – Mike
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• I Think I Did Everything Right, But I Still Seem to be in Debt! – Bel
• I Always Heard Not to File Bankruptcy. Now I Wish I Had. – Kathy
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Read the full article at GetOutOfDebt.org, click here: I’m a Young Single Mother, Buried in Debt and Student Loans. What Do I Do? – Lea

Trisha

“Dear Steve,

I am a single mom and heavily in debt. I was living with my husband (we are legally separated) because of finances but recently I moved out. I am not behind on my payments at this time because I didn’t have to pay rent, utilities, etc. It is only a matter of time before I can’t make my credit card payments. I don”t know what I should do. Help!!

Should I file bankruptcy?

Trisha”

The Answer:

Dear Trisha,

Your situation is fairly typical. When a couple splits they now have two households to maintain on the same income they used to maintain one. Divorce and separation is often the event that leads one or both partners to bankruptcy.

I suspect that the only reason you are not behind yet is that since you recently moved out, all the new payments have not hit yet, or that you are using what little saved money you might have to make ends meet.

I think that you should use this event to not only start your marital life over but your financial life as well. If you do decide to go bankrupt it will eliminate and debt in your name and remove your liability to repay any joint debt that he has said he would pay.

The most important thing to remember about divorce is that even if he agrees to pay a debt that you might be jointly responsible for, it is still your responsibility to repay that debt if he does not. When you get divorced, you divorce your spouse, not your creditors.

Before you make any decision and certainly before you send any more money to creditors, I think you should find and meet with a local bankruptcy attorney for a free bankruptcy review. Get a legal opinion from the bankruptcy lawyer about what bankruptcy will mean for you and then make a choice about what you want to do. If you decide to not go bankrupt than come back and let me know. I’ll come up with a Plan B for you at that point.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Trisha is a Single Mom, Separated, and Facing Bankruptcy. What Should She Do?

“Dear Steve,

I am a single mom, my daughter is 17 and trying to get a job, but even for her it’s hard. I have a couple of credits cards that I just can’t pay. My priorities are rent first, then car payment, utilities, then food, gas.

I am still married but I can’t go to my husband for help, all I can say about that is temper. One credit card has already sent my account to a collection attorneys office. I am so afraid they will garnish my wages, which if they do, I will really be in the hole. After I pay my regular bills, I have about 350-400.00 to last the whole month, that has to buy gas, groceries and misc.,

I have nothing I put in savings. I have $1.26 in my savings account and have sold just about everything I can. We moved and had a garage sale, hoping I would make enough to get us moved.

We now have no furniture, both of us have a mattress on the floor, no bed. Believe me, 54 yrs old, it’s hard to get up off the floor. My credit is already ruined, so I wish they would just write of the debt and be over with it. By going further with an attorney and whatever his fees would be, I still wouldn’t be able to pay anything, so I don’t understand why they would pursue something that I can’t pay.

Pam”

The Answer:

Dear Pam,

My deepest sympathies about the bed on the floor routine. I agree it was a lot easier when we were younger. Just this year I spent two months sleeping on the floor as I waited for my possessions to arrive from overseas. That first night in my own real bed was heavenly.

It certainly sounds like you are just making ends barely meet at this point. I was certainly encouraged to see that you’ve got your payment priorities in the right order. Good job.

Without any income to be able to afford a bankruptcy lawyer, which is what you probably really need, your options are to not pay those credit card accounts and deal with being sued and a latter garnishment if it happens. The garnishment can be neutralized with bankruptcy so that can be addressed.

You can find local legal aid that might be available in your area by doing a net search. If you are not eligible for free legal aid assistance, contact a local bankruptcy attorney and see what payment arrangements could be made that you can manage.

Bankruptcy at this point is not going to improve your financial situation, just close the door on debts you just can’t pay. In order to improve your financial situation you’ll have to find a better job or a second income.

See if your daughter can find anything local through the snagajob.com website. It seems to be able to easily connect people with entry level jobs. I’m sure she would love to help any way she can.

Unless you can increase your household income I’m afraid the next step is homelessness and I don’t want to see that happen to you.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Pam and Her Daughter Are Sleeping On The Floor

Rhauny

“Dear Steve,

I got divorced and now live on one income of 1600.00 monthly my car payment is $556.00 A MONTH and my rent is 550.00 leaving me roughly 500.00 to pay for childrens school lunches lights phone car insurance food etc. I am falling apart because of the car and I owe 35,000.00 for 84 months.

I dont know what to do? the car is worth $14,000.00 and I owe 35k

Rhauny”

The Answer:

Dear Rhauny,

What about child support? Are you not getting it? If not, you should pursue that.

You really have few options in this situation. The problem has arisen because you are not earning enough money to support your limited obligations. And when your car payment is higher than your rent, you’ve really got issues!

Your only option is going to be to give the car back to the bank or lose the car in either a voluntary or involuntary repossession. Unless your income increases, either through your own, or an infusion of child support money to support the children, the car will be history.

When that happens the car lender is going to come after you for a large balance due. They will sell your car at a public auction and the difference between what the car sells for and what you owe on it will become a big bill you will owe.

The most logical way to deal with that big bill will be with bankruptcy. Sure, you could ignore it and deal with the collection calls, being sued for it and then trying to make a future repayment plan but I’m not sure that you really need to add that kind of stress back in to what already must be a stressful situation.

Big Hug!

@GetOutOfDebtGuy

Other Related Articles to Read

• Single Mother, No Help, Trying to Make Ends Meet. – Jennifer
• We Are Getting Divorced After 24 Years and We Have a Lot of Debt. – Sherri
• My Ex-Wife Was Supposed to Pay Her 100K in Student Loans. I Can’t Find Her. – Patrick
• I’m Living Paycheck to Paycheck After a Divorce and Can’t Make a Dent in My Student Loans or Credit Card Debt. – Tonya
• I Got Divorced and My Debt Spiraled Out of Control. Should I Go With Fast Track Debt Relief? – Timothy
• Divorced, Single Mom, and Being Sued by Chase. What Should I Do? – Ellen
• I’ve Just Been Sued. How Do I Get Out of My Debt Settlement Program? – Heidi
• I’m a Young Single Mother, Buried in Debt and Student Loans. What Do I Do? – Lea
• I’m Divorced and Confused By a Demand That I Pay on an Old Mortgage. – Stephanie
• Two Months Late on Car Payment But Want to Avoid Repo. – Linda

Read the full article at GetOutOfDebt.org, click here: I Got Divorced And Can’t Afford to Live. – Rhauny

“Dear Steve,

I am no longer making ends meet. I have my daughters Sallie Mae $20,000 loan payments starting in one month, I can only afford to put little bits of gas in my car at a time, I have a $5,000 car loan and about $12,000 in credit cards.

I have not bought anything that I did not need only used my credit to make ends meet and now I have no more credit. I’m hanging on to a 700 credit score and wonder if theres any use to even worry about keeping my score since the market is crashing and the FEDS are ruining our economy.

I make $45,000 per year and am a single mom with two daughters Should I stop paying my credit card bills and use that money to live off of?

Pam”

The Answer:

Dear Pam,

Often times the hardest thing to admit that a moment of change has been reached and now is the time for radical or bold action.

From what you so kindly shared with me it is apparent that continuing the path of yesterday will not work for you tomorrow. You have student loan payments getting ready to kick in and you are all ready maxed out.

It does not sound like there is any reasonable expectation that your income is suddenly going to increase and allow you to pay both the student loan and the credit card debt.

I would suggest that you only make payments on the credit cards if you can afford them after all your other expenses. You don’t need to file bankruptcy right now but it is probably in your future if things don’t change.

While you can’t discharge or get rid of the student loan in bankruptcy, you can contact the Department of Education and see about getting on an ICR plan to pay what you can afford. See this previous answer for more information on that.

It is unfortunate that you have found yourself in your current situation but I think most people would recognize that when you are in a situation where you can only put a little bit of gas in your car at a time, that things are pretty severe.

I would not suggest that you enter a debt management or credit counseling program. That is not going to help you as tight as your finances are. The best way out of your current situation is to increase your income or reduce your expenses. And with your budget already trimmed to the bone, getting into the Department of Education ICR plan for the student loans and discharging your credit card debt is probably the best approach at the moment.

It would also be a good time for you to explain the reality of your situation to the kids and ask them how they can help in this difficult time. Maybe your daughter, with the student loan, can contribute some money each month towards the loan.

The reason I think that is important is that it sounds like you are living month-to-month and all it is going to take, even with bankruptcy, will be one unexpected and unaffordable expense and being homeless won’t be that far off.

The thing I’m least worried about is your credit score. Take your eye off your credit score right now and find a way to live within your income without resorting to credit. And every extra dollar you can manage to save, put it in a savings account for unforeseen expenses.

I’m worried about you. Be safe.

Big Hug!

@GetOutOfDebtGuy

The Answer:

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Read the full article at GetOutOfDebt.org, click here: Pam Is Out Of Cash And Out Of Time