“Dear Steve,
My husband and I were laid off in Nov of 2008 within 24 hours of each other, and I was eight months pregnant! We both looked for work for a long time. My husband just got a job about a month ago and I am still currently looking. We each have 2 credit cards in our name only. The two that I have are both through the same company (Bank of America). My husband two cards are through two different companies. All together we have about $46,000 in credit card debt.
With both of being out of work and only getting unemployment, we went through all of our savings account and all of another checking account we had money in to pay off a couple years of my husband’s student loans (which we have about $26,000 left to pay off). My husband’s job is working for a University and he has just started school again (for free!) to get his masters.
We called the student loans and they said they will defer the payments since he is back in school. We went and saw a credit counselor and he said our only option would be to do a Debt Management Plan.
We own our house we are living in now and I have just called to have them send me the paperwork to fill out to see if we can get a loan modification. With the housing prices much lower now we can not sell our house for anything close to what we have left to pay on our mortgage (we own about $192,00 on our mortgage and the houses in our neighborhood are going between 135,000-150,00).
We own both of our cars no we do not have any car payments at this time. The minimums we pay for our credit cards is about $1,200.00 right now, which we can not afford. I still need to pay last months payment and this months is due at the beginning of March. I was planning on calling and seeing if they could help me out with the payment amount.
We are current on our mortgage right now, but have really struggled to pay our bills for the past couple of months. My parents have been helping us out with money when we need it, but I don’t want to keep asking them for it! Our credit scores are good, I have about a 729 and my husband has about a 709.
My question is what is the best way to go about getting rid of our credit card debt without hurting our credit score too bad? We would like to figure out a way to have all of our credit cards payed off in 5 years so we can start saving for college and retirement!
Kristen”
Dear Kristen,
Wow, what a situation!
First I need to tackle this notion that you can “get rid” of your debt without hurting your credit. Anything less than making the minimum contractual payments will impact your credit in one way or another. But right now your credit score is the least of your worries and on your wish list you really should not put that at the top of the list.
What we need to do is work this problem backwards. First we need to figure out what part of your life can fit within your current income and then see what may be possible.
The classic mistake people make is spending down savings and borrowing money from others without a game plan that will result in a resolution. The typical outcome is the person or couple is still in a bad spot but just a few more months down the road.
Just based on what you’ve shared so far I can’t see that a debt management plan would be a logical solution. If you can’t afford the minimum payments on your credit cards then a debt management plan based on a similar payment plan is doomed to fail.
So what can you afford to pay on the one income? Can you make the house payment and living expenses? What else?
Do you want to struggle your way out of this hole or do you want to start over and rebuild a new life?
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.
Do you have a question you'd like to ask me for free? Go ahead and click here.
- Who Knew TitleMax Sucked This Bad? - February 23, 2023
- Litigation Practice Group Lawsuit by Business Partner All Service Financial – We Want Our Money - January 24, 2023
- HomeAdvisor and Angi to Pay Up To $7.2 Million and Stop Deceptively Marketing its Leads for Home Improvement Projects - January 23, 2023