We Are Expecting Our First Child and Want to Get Out of Debt. – Michelle

“Dear Steve,

My husband and I are expecting our first child in April. We have been married for nearly 8 years and were trying to pay off our debt before starting a family but after this long it seems as though it would never happen.

We currently owe $89k ($850 monthly) on our home that we have lived in for 6 years, about $30k ($400 min monthly payment) on 1 credit card and about $65k ($600 monthly payment) on my student loans. Together we bring in about $4200 per month and our monthly costs are that or more. To make matters worse my husband was recently in a car accident in which no one was found at fault so we are down to 1 vehicle. With the baby coming around the corner and us barely scraping by we are considering all our options. One of those options being to stop paying the credit card.

I would like to know what the laws in Texas are regarding credit card debt and repayment. What will happen if we stop paying it? What do you suggest we do?

Michelle”

Dear Michelle,

Interesting situation. The problem here is that your issue is not one of just unsecured credit card debt. You are carrying a fair amount of mortgage and student loan debt as well.

By the way, congratulations on the pending birth. Children are a blessing and also a source of unexpected expenses.

If you simply stop paying the credit card it will lower your monthly obligations but not resolve the situation. In Texas wages cannot be garnished for payment on this debt but that does not mean you can’t be sued and have a lien placed against your house.

Probably the best course of action is to inquire if your student loan payments can’t be adjusted down using the IBR (Income Based Repayment program). On top of that I think that exploring bankruptcy is a reasonable approach. With a new child on the way the last thing I imagine you want is collection pressure and threats from collectors.

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Bankruptcy would allow you to eliminate the credit card debt you can no longer afford and keep the house. You should use this link to find a local bankruptcy attorney you like and go talk to them about what bankruptcy would mean for you.

The options will come down to two choices:

  1. Default on the debt and then deal with debt collectors, collection attempts, potential lawsuits, and potential property lien.
  2. Seek legal protection under the legal bankruptcy protection available to you. Silence the collectors and then focus on restarting your financial life.

Please update me on your progress by

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.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

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