I have a couple of strikes against me. First strike is that I have an ex-husband who sticks me with medical bills and our 3 children’s extra curricular activities. All are under ages 15. The 2nd is that I am a poor money manager. Before I knew it I was over my head. Utilizing credit cards to pay for these things and common household uses I have managed to max 3 credit cards to about $30k. My credit score of 780 is now at 680 with many missed payments in the mix. In the past 1 1/2 years I have stuck to not missing payments and hope that will give me a chance to do a 0% balance transfer to help pay these balances down. Well that’s a snowball’s chance. I get rejected left and right. My ex-husband does eventually pay the medical portion however I have already used my credit card to pay. He can absolutely afford it, he just knows it puts me in a bad situation that I can do nothing about.
What do I do? Credit card companies won’t accept me. I am afraid to do a debt settlement because you are truly not paying your full debt and I read that is not something lenders like to see and could effect your credit score even more. My mailbox is filled with debt consolidation companies which I research everyone of them. 2 of them seem to have a good reputation. Greenlink and Personal Lending Group. Do you recommend if they accept my application I go this route? I should mention I am in the process of selling my home to get at least $60k in equity in which will solve my problem. But until than I have hit the wall.
Thanks for letting me give you a hand here.
There is no doubt that sticking a divorce into the mix certainly makes a mess of things. I don’t think I could even count the number of times I’ve heard similar situations from people over the years. And don’t beat yourself up over being a poor money manager, most people are in a similar situation. Take my money personality test and discover your true approach to money.
So let’s look at the situation, you wound up short and used credit to try and make ends meet. Hey, it happens. But what you are left with is an even tougher situation to dig out of where you need more money than before to pay your way out of debt.
When people are faced with this situation they tend to not look at the situation for what it is, a math problem. Instead they start to leap at solutions rather than stand back and look at the overall situation.
Thankfully you are a smartie and contacted me.
Let’s take that step back.
A safe and healthy financial life requires you meet your obligations, save money in an emergency fund each month, and absolutely save for retirement each month. If you are not doing this first, you will fail on multiple levels. And before you try to build a budget to fix this situation, read why budgets fail time and time again.
Trying to dig your way out of debt with payments might “feel” like the right thing to do. But before you think it is, you must evaluate what it will cost you in lost retirement. You should use my online calculator and see how many hundreds of thousands of dollars you will toss away because it “feels” right.
You should not give a damn about your credit score at this point. Credit is stupid easy to rebuild and making choices to protect your score send you running in fear, not logic.
The reason your mailbox is loaded with offers is because your credit bureau file is being sold to marketers because of your debt or payment status. You are being sold to and you need to weigh those offers in that context.
One post you must read is “Those That File Bankruptcy Do Better Than Those That Don’t.” It’s time for some facts and not assumptions.
I’m not sure I’m familiar with Personal Lending Group but they look like they are trying to sell you a loan. They describe themselves by saying “personal loans with a personal touch.”
And I think Greenlink is Greenlink Financial, another loan company.
In the right situation a consolidation loan can be helpful. But these situations are if you are saving each month, building your retirement, and the loan will not lengthen the repayment time nor increase the interest rate.
The only way to evaluate these loans is by doing the math. Otherwise you seriously need to consider bankruptcy to get you back on a firm foundation quickly. Bankruptcy is the fastest way to get out of debt, for the least amount of money, and get you back to saving as quickly as possible so you are not wasting the one component you can’t replace – time.
Before you do anything, I would strongly suggest you meet with some local bankruptcy attorneys and talk to them about your situation. Read “How to Find a Great Bankruptcy Attorney” for tips.
One consideration is going to be if you live in a state where the equity in your property is going to create an issue with bankruptcy. Again, that’s a question for the bankruptcy attorney who is licensed in your state.
If the home will sell in the next six or so months and you will get the cash when it does sell to payoff the debt, then one option is just to do nothing right now, default on the unsecured debt and pay it in full when your home sells. Even if you went the debt settlement route you’d have to default first anyway. In either case, defaulting will start collection activity, threats of being sued, and can make you do dumb things out of fear if you are not prepared for it.
You’ve already missed payments. It’s already hit your credit report. So more defaulting right now is not the worst situation when you will focus on rebuilding your credit once this is all behind you.
You can reach me int he comments section below for more follow-up.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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