My Wife and I Have Been Struggling to Get Out of Debt Ever Since We Got Married. – Ryan

“Dear Steve,

My wife and I have been struggling to get out of debt ever since we got married. Our monthly debt is as follows: mortgage $1,700, car payments $436, student loans $360, and $600 to her father for a $20K loan we borrowed from him, and about $600 on credit cards. After paying our monthly debt and bills, we have very little if any money left to put into savings. We are living pay check to pay check. On the days we get paid, most of the money is gone by lunchtime.

Our credit card balances are about $10K. My wife took out about $4K extra in student loans to pay down some of the credit card balance. I have about $10K in a Roth IRA and I was thinking about withdrawing $4K of this amount to pay down some more of the credit card balance. This will still leave us with $2K in credit card debt, but this will help our monthly cash flow greatly. We will then be able to start contributing more money to an emergency fund. I’m 26 and she is 24. Do you recommend I take out the $4K from my Roth to pay down the credit cards, or should we just continue to live pay check to pay check?

Ryan”

Dear Ryan,

If you have government backed student loans I would suggest you look into the Income Based Repayment Program (IBR) to lower your student loan payments.

Is your father-in-law flexible at all with this repayment amount at all? If so a little reduction there might help.

You could always take a loan against your IRA if possible but I’m almost never a fan of that approach. As long as the money remains in there it is protected from your creditors. Once you take some out you lose the protection and if you take it as a distribution you’ll have to pay fees and penalties.

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The two most logical solutions I see would be:

  1. Pay the $4,000 back on the student loans. Student loans are the worst type of debt you can owe and they can garnish your wages without taking you to court. I realize the amount of your credit card debt isn’t much but for about $1,500 for a Chapter 7 bankruptcy, if you qualify, you could eliminate $600 in debt payments. Bankruptcy would impact your credit. If you don’t know of one, you can click here to find a local bankruptcy attorney.
  2. You could contact Damon Day, he’s a debt coach who can spend a lot of time helping you through this. Damon could further review your situation and/or help educate you on how to try to settle your own debts with the $4,000 on hand, if that’s what you decide to do. Debt settlement will result in bad credit as well.

There is no absolutely right answer in this situation. Ultimately it is going to come down to selecting which of the two logical solutions feels right for you.

But you are going to have to do something. Living on the edge is not financially safe and you can rebuild your credit back after either solution.

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.

Steve Rhode

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