I’m Out of Work, In Debt, and Want My Good Credit Back


Dear Steve,

I am 47 yrs old. I had an excellent 30-year credit report with the only ding a short sale of my home during the 2009 recession.

My dad got cancer and I took time off work to help him. My debt to income ratio not working made me unlendable.

I have around $75k unsecured debt and my FICO went from 760 to 480.

My 2017 car is paid off. I have a great housing situation I don’t want to lose.

I am going through a divorce but no funds for an attorney- or anything. I cashed out all pension funds except the main one that has 180k (was 220 in Jan or Feb.

Bankruptcy appears to be my only reasonable option. Where do I start w that process? Do I need an attorney? I am out of work and no income now.



Dear Jason,

Thank you for your question.

Like so much other stuff in life, it’s complicated. What you actually have is a set of issues. The first is the desire to restore good credit, then a set of life issues, divorce, and a big math problem comprised of debt and income.

We need to focus attention on the primary issue which is replacing income. Without income, the rest of the situation is going to define itself.

I’m less worried about your credit score since good credit is easy to rebuild once you get the underlying issues under control.

I’d love to know more about the housing situation and if you are renting or you own a house. If you own a house, what do you think the loan balance is and the value of the home. I’d also like to know what state you live in. You can post your answers in the comments section below.

The big tragedy here is the draining of the retirement funds. People typically do this to deal with an immediate need but it is almost impossible to replace those funds and then some to get back to the same spot you were in before taking the funds out.

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And as you have observed, taking funds out just pushes the problem down the road rather than solve it most of the time.

The reason I would not rush to bankruptcy right now is that unless you wait until you replace your lost income you will simply file bankruptcy but still be in a situation that debt is likely to build.

I’d much rather like to see you weather the storm now, let all the debt pile up, and then file a Chapter 7 bankruptcy to end all the debt and give you a fresh start and easier chance to rebuild your credit.

So here is the plan of action:

  1. Answer my questions in the comment section below.
  2. Focus on replacing income.
  3. Understand you will not be able to repay your current debt and you will wind up in collections.
  4. Think about an amicable divorce agreement to keep the costs as low as possible. Maybe your ex-spouse is willing to pay the filing fees for that.
  5. Just let the collection efforts roll off your back. You can’t afford to pay or make a promise to pay right now. There is no need to be rude to any collector that might call.


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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Damon Day - Pro Debt Coach

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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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4 thoughts on “I’m Out of Work, In Debt, and Want My Good Credit Back”

  1. Hello, Steve. As usual, you are on target in defining and isolating the issues. However, I think Jason would be far better off hiring an attorney to protect him in the divorce.He could get stuck with non-dischargable family law obligations and other damages. The retirement account is an available fund and It is likely that he will suffer the division with his wife, anyway. Sometimes ya gotta do what ya gotta do!


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