I have been talking to Damon Day…great guy, by the way….about my debt situation.
I have about $55000 in unsecured personal loan/credit card debt. He said not to go with any negotiation companies but that my goal should be to try to file Chapter 7.
But between my husband’s income and my own, combined, we make too much. We live in New York State.
The debt is all mine…none in my husband’s name.
In fact, he knows nothing about it. Damon suggested quitting my job or finding something that pays much less and going part-time and then filing. This scares me as I have always worked full-time.
I do have other things I have to pay…like my car payment, utilities, health insurance, etc….all necessities. To quit or go part-time for a lot less money would make it very difficult to pay just those things!
Does this sound like good advice or something that would really be feasible?
I am at my wit’s end. I can, in no way, afford to pay my creditors and now I am behind in everything. Help!??!
I talk to Damon Day every single day. He is a great guy and one of the most talented debt coaches out there who listens to what is going on with the person, create a custom solution to deal with the issue, and support the person on the journey to being debt-free.
If there ever were a job title of Debt Concierge, it would be Damon Day.
So, I talked to Damon about your situation, and we had a long conversation to give you the best possible advice.
I’ve changed your name to Anonymous because I want to share details to help many people that might read this.
You Are Scared and That’s OK
I can see that you wrote to me many months ago and asked a previous question about going with a debt settlement company.
You reached out to Damon Day, and you spoke to a local bankruptcy attorney you know that also does settlement.
The fact that you are still uncomfortable and in search of answers is entirely normal. I get it. You are faced with the best of not awesome options, and none of them feel comfortable. In your own words, you’ve said you are at your “wit’s end.”
I get it. I’ve been there. It’s not fun. It is terrifying.
Technically you are stuck in the paralysis of analysis. On top of that, you have to add in several potent emotional factors—for example, a pandemic, secrets from your husband, job stress, and uncertainty.
And let me be clear, I’m not suggesting you might be depressed on top of all of this, but that would not be a surprise. All of this can take an emotional toll on anyone.
The reason I mention depression is because of my previous studies on the subject. It is important because when debt impacts your emotional health, it can cause you to be unable to decide on a plan and take confident action.
“The survey found that 58 percent of women reported mild and major signs of depression, compared to 36 percent of men. More than six out of ten women reported their debt level to be very bad, while 46 percent of men described their situation that way. Women think about debt troubles more often than men and feel less competent to solve their problems. More than half of women reported their stress level to be high or very high.” – Source.
So if we consider that what I’ve said so far is reasonable to consider, let’s move on to the facts as I know them.
Here are the facts as I know them:
- You don’t want your husband to find out.
- You can’t afford to pay your creditors the minimum payments.
- You are behind in everything.
- You hate your job, not happy at work, and want to retire.
- You owe a particular debt that you absolutely can’t default on.
- Your household income is currently too high to qualify for a Chapter 7 bankruptcy.
- You don’t have cash on hand to settle the debts right now.
- A multi-year settlement strategy is going most likely wind up with you potentially being sued and your husband finding out.
- If you did quit your job or reduce the income as you suggested, you would be able to qualify for a Chapter 7 bankruptcy.
If those facts are correct, then here are is my take.
Not wanting your husband to find out is certainly a personal decision, and you have your reasons for not doing that. In my years of helping people with money troubles since 1994, that strategy does not turn out well.
When one spouse wants to keep financial trouble from the other, it impacts all of life and the relationship. The stress and emotional costs are giant.
I’m a big fan of approaching the spouse with a plan and being open about the situation. Sure, there will be some troubled feelings involved, but that will pass much faster than the effect of poor financial choices that can last till you die.
If you get over that hurdle, then better options are available and certainly with less stress.
So let’s look at Main Street options.
Credit Counseling – A credit counseling program Debt Management Plan can lower the interest rates you are paying on your credit card accounts. It can also potentially lower your payment a bit. But you’ve said the issue is you can’t afford the payment. But more importantly, you hate your job and have expressed a desire to quit.
Only you can answer if you could work at the job or an equivalent paying job for the next five years to complete a Debt Management Plan if you could afford the monthly credit counseling payment.
Debt Settlement – You are already delinquent on your unsecured debts, so that the first step towards getting to settlements. However, we have to deal with the job issue. If you want to quit your job or reduce your income, you might not be able to afford to settle.
You also might not be able to make your other necessary debt payments without your husband helping. Quitting has consequences but staying has ramifications.
More importantly, you can get sued by your creditors, you’ll still be in collections, and there might be a tax bill to pay on the forgiven debt if you are not insolvent when it all settles out.
This approach has a higher chance of your husband finding out given the long term and lack of creditor participation until a settlement agreement is reached.
Bankruptcy – With a Chapter 7 bankruptcy you could eliminate debts in about 90 days for the bankruptcy cost of about $2,000. There is no factual dispute that if you can file for a Chapter 7 bankruptcy, it is the fastest and least expensive way out of bad debt. It stops all collection calls, lawsuits and eliminates your debt tax-free.
It is the fastest way to a fresh start. In fact, those that file bankruptcy do better than those that don’t.
With a Chapter 13 bankruptcy, the repayment plan is five years, you will have to make payments as determined by a plan the bankruptcy trustee agrees to, and again, the problem is time. Most Chapter 13 bankruptcies fail because life changes in the time it takes to complete. If you wind up quitting the job you hate and your income is reduced, then you will most likely find yourself converting your Chapter 13 bankruptcy to a Chapter 7 bankruptcy. That is the typical path. Unofficially it’s called a Chapter 20 bankruptcy (13+7) because it happens that much.
Way Out Bankruptcy Option – Technically you could divorce your husband, live in the same house but now qualify to file Chapter 7 bankruptcy on your own. But you’d still be in the job you hate and your husband is going to catch on.
The Cost of Inaction
By not finding an approach that you are comfortable with executing, you are left not taking action.
That moves you further down the debt funnel, and as each month passes, you have less control to take action and make decisions because creditors will make them for you when they sue. Even increased debt collection calls will increase the stress level, and what if your husband discovers all of this from someone else other than you? How do you think that will end?
You either need to drive the bus or you get run over by the bus.
And I have not even mentioned the future cost yet to you by not taking action. The longer you take to resolve your current situation, the poorer you will be when you retire. You can calculate how much a delay now in wrapping this up will cost you in retirement if you use my calculator.
Damon is Great But…
Damon is a great guy, and one of the best debt coaches in the entire United States but none of that matters unless you find a way to agree with a plan and carry it out.
And whoever you select to assist you, it doesn’t have to be Damon but you need to pick someone you trust.
I look at debt situations like medical issues. I always encourage and applaud someone for getting a second opinion. But think about your situation like this, you have financial cancer, you’ve talked to more than one specialist, and now is the time to decide who you want to operate on you to try to save your financial life.
It is okay to be afraid but pick the doctor you want to operate on you and take confident action.
It is okay to be mad at me for being so direct and blunt with you in my answer.
But ultimately, I want to see your situation cured and not have your future finances die because you avoided taking action.
Don’t let financial cancer kill your future and/or relationship.
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