I Am On Active Duty in the Army in Iraq and Have a Lot of Debt Back Home. – Henry

“Dear Steve,

Im a home owner, a land owner, two cars, two credit cards(both maxed out), and some other credit through the Army I am paying on. I am an active duty soldier in iraq at the moment. I total my debt at close to 120,000 dollars or so. The house is with gmac, land with a bank in missouri, cars with two different banks, credit cards one usaa one capital one. I am up on my payments so far. But I know when I return home I will fall behind on one or more of these loans.

How do I combine them all into one easy loan? Is it possible cause I have asked banks and lenders to just combine the cars and credit cards and no one will do that due to my debt income ratio for new loan. How do I accomplish getting rid of the bad debt without falling behind? Thank you for your time.


Dear Henry,

Thank you for your service in the Army and putting your life on the line to help protect people.

While you are on active duty there are laws (Servicemembers Civil Relief Act) that lower your interest rates and protect you from foreclosure. But it sounds like the issue is you are just making it paycheck to paycheck now and once you return your income will drop and then it will be impossible to make it.

I don’t know of any outfit that will consolidate that much debt. It would have to be a Main Street lender and with your debt they will probably not approve you.

But the real issue is what to do once you return home and this blows up. We need to come up with a battle plan on how to deal with it.

Based on the reduction in income you may experience from the active duty battle area bump or going off active duty there is a likely expectation you just won’t be able to make ends meet. If, for whatever reason, you are unable to earn extra money or don’t think it will be possible to make up the difference we need to look at an alternative plan.

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Basically, if you are resigned that it will not be possible to make ends meet when you get home then you may want to consider stopping payment on the credit cards and giving one of the cars back to the bank. You may also consider giving the land up as well if there is no value in it.

While this plan would free up some income you could then use that to stay current on your other debts. When you get home you could then file bankruptcy to discharge the debt you stopped paying on and you would be able to keep the house even if you did go through bankruptcy.

This approach will hurt your credit but facing a situation where we already know you won’t be able to make ends meet when you get home it makes logical sense if you are mentally prepared to file bankruptcy to end that debt when you return.

Please update me on your progress by

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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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