First, thank you for providing this service to those of us who desperately need some direction.
I have Fibromyalgia and Chronic Fatigue and have not been able to work for many years now…. I applied for and was denied (as many are) for disability. I filed in 2010 and just got my final answer at the end of 2016. I have been forced to use credit cards to live on…. and have accumulated close to $30,000 in debt.
I am also caring for my elderly mother who has lost 90% of her eyesight and is living with me in my 1 BR apt because she can’t live alone. Between the two of us we have a combined yearly income of approx $25,000.00 from Social Security. We are making it….. but with an extremely narrow margin. I still have to put some charges on my credit card to make that happen.
My bills are current and paid on time but I go further and further into debt each month due to the high interest rates. My credit rating is still good…..but I did lose some points due to my high debt to income ratio.
What is the best way to resolve my debt?
I’m hoping to come out of this and still maintain my good credit rating…. but not sure if that’s possible.
The choices I’ve been considering are:
A personal loan (bank or credit union)
Bankruptcy (which would destroy my credit…as a last resort)
You may have a different answer than any of those….. but I am so looking forward to hearing from you…
Thank you in advance for your help…….and for your caring heart that leads you to help others…..
It sure sounds as if you are dealing with a lot of stress and disadvantages at the moment. From your question what jumped out at me most was your apparent reservations about bankruptcy. The worst thing you can do initially is draw any lines in the sand about what is or is not a good solution for you.
Based on the information you shared I would be hard pressed to say any debt consolidation loan is going to be a smart choice. You’re already at $30,000 of debt and still have to put more expenses on credit to get by. Debt consolidation loans for people in similar situations are often at higher interest rates than the credit cards and are capped at about 60 months for most. I don’t think it will significantly lower your payment. But feel free to take a look at LendingClub.com or Prosper.com for this type of loan.
Your credit rating should be a concern far down the list on how to make it month to month in your situation. Credit is stupid easy to rebuild. The most important consideration is what solution puts you in a financially safer position moving forward.
To be financially safe you need to be able to live within your income and save some money each month into a savings account to protect you in the face of an unexpected financial surprise.
When it comes to settling your debt, you will have to default on the accounts, wind up in collections, and face collections calls and potentially threats of being sued. This will hurt your credit but if you’re going to go down this road and you have no other assets but public benefits then why settle? You could be what is called “judgment proof.” In the case of you being sued and losing, which is likely, the creditor would not be able to seize any money from your public benefit income.
I’m not a huge fan of this approach because it can lead to very stressful collection efforts, threats, and potential collection activity far into the future as the bad debt gets sold and resold. I’m a bigger fan of closing the door quickly on bad debt to give you a better chance to move forward, faster.
Out of all the solutions, the one that seems to make the most sense based on the information you shared is bankruptcy. Bankruptcy would put a legal stop to any collection activity, eliminate your debt in about 90 days, and give you a chance to live within your income. Hopefully without the payments you’ve been making towards your debts you will be able to build that safety net through savings that I mentioned.
So without any preconceived ideas or assumptions, I would suggest you meet with a local bankruptcy attorney who is licensed in your state to discuss what bankruptcy would mean for you.
I think you’ll also find these articles very helpful. Read How to Find a Great Bankruptcy Attorney, Those That File Bankruptcy Do Better Than Those That Don’t, So You Are Going to File Bankruptcy, and How to Easily Rebuild Your Credit and Have Good Credit Again After Bankruptcy.
Finally, one area that you should explore is to discover what additional public benefits you and your mother may be eligible for. I’d suggest spending some time on Benefits.gov. Every additional dollar that you are already qualified and eligible to receive will be helpful in making your situation just that much safer.
If you need to get back in touch with me on this, leave a comment below.