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I’m a Police Officer and Having Debt Problems. – Abby

“Hi Steve,

My name is Abby. I am so happy to have found your website. I am really hoping that you can help me. This is my story:

I am 35 years old. I use to be married. Had a great paying job. Owned a home. Had enough money to put away in an IRA. Pretty much living the American Dream. Then came some major life changes. I got a divorce. Changed careers. Moved to a different stated. All to start a new life. It came with a price, however.

I left the corporate world and traded in my business attire for a patrol car and blue uniform. I love my job, but I struggle financially. I was in debt before. Student loans…credit cards. But, with all of the “changes”, everything snowballed.

I make approximately $40k a year. I have approximately $90k in debt. At least half is in credit cards. The other half in student loans. I cannot afford to own a home, so I rent a modest apartment.

I am able to supplement my income by working part time security jobs. They pay well. They help me keep my head above water. They too come with a price, however.

In preparing my taxing for the previous year, I failed to take into account that these part time jobs are considered contractor positions. So..I have to pay self employment tax. This has put in debt with the IRS for approximately $8k. I can get on a payment plan with them. However, I would need to work more of the part time jobs… Which then leads to paying more self employment tax…which puts me further in debt…which makes it hard to pay down my credit card debt….and so on, and so on, and so on….

Not really sure if I have a question here. I don’t want to file bankruptcy. I just want to get out of this mess. But, not sure how. I WANT to get out of debt. I want (and need) to continue supplemental my income with part time work. But, I don’t want to get further in debt come tax time. I’m at a lost…

Any advice that you would be greatly appreciated.

Thank you,

Dear Abby,

I understand the chain of events that led you to where you are today. It’s be a chain of events that seems to push you further and further down a dark hole. The more you worked to get ahead the more of a liability it created for you. And now we’ve got to deal with it.

Honestly, I like to give everyone from the heart advice as if they were my brother or sister. In your situation, while you may be adverse to bankruptcy, here is why I think it makes perfect sense.

Your new tax debt is a priority debt. The last entity you want to fall behind on is the IRS. They have nearly more powers than God to collect what you owe. But as long as you are current on your payment plan with them they will be your best friend.

If half of your debt load is credit card debt then bankruptcy would eliminate about $900 a month in payments. This would give you the breathing room you need to live within your income, make your IRS payments and be able to save money in an emergency fund.

In addition, now that you are a police officer you may be eligible for the Public Service Student Loan Forgiveness program. This program discharges any remaining debt after 10 years of full-time employment in public service. The borrower must have made 120 payments as part of the Direct Loan program in order to obtain this benefit. Only payments made on or after October 1, 2007 count toward the required 120 monthly payments. For additional information, click here.

The plan of action to consider bankruptcy leaves you in a job you love, reduces your expenses, allows you breathing room to make your IRS payment and gets you back into financial shape to save for the future and protect yourself. If you agree this makes sense, click here to find a local bankruptcy attorney you like.

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About Steve Rhode

Steve Rhode
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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