I’m Stuck In The Middle Of My Debt And Don’t Know Where to Turn. – Susan

“Dear Steve,

I am a working, single parent who owns a home (well, me and the bank). I am not behind in anything YET. I owe $147k on the home, it’s currently worth about $110k, so, no equity. A few months ago my company downsized. I kept my job by accepting a 10% pay reduction and taking on more responsibility from positions that were vacated and not re-filled. Total debt on cards is now up to $38k. I used to use the cards for extras but now I use them for the extras (like school supplies & uniforms, car or home maintenance & repairs, gifts for birthdays, weddings,etc., clothing & shoes for the kids…) and, at least once a month, for gas and groceries since the pay cut. I finally woke up one day and really saw where I am headed financially (I admit I had my head in the sand for a while). I am trying to put the brakes on the extras, budget better for groceries, gas, and everything else and not use the cards (I took them out of my wallet and it helps). I now make just enough to pay the bills for our monthly expenses, mortgage, and to cover the payments for the cards.

I get stuff in the mail all the time about refinancing my mortgage, debt consolidation, debt settlement, debt management, bankruptcy. I’ve checked into some of them. Once you get on the phone with banks and mortgage companies and they look you up the answer to refinancing the house is either “no” or they don’t have anything available that would reduce my house payment but would actually increase what I pay monthly (the benefit would be in the long term by reducing my interest rate over all but would not help me right now). Lending Club was a negative also. My income to debt ratio is the problem there. So, debt consolidation seems unlikely. I know the best way to do it would be to pay minimums on the lowest rate cards and put extra money toward the highest rate card and pay it down faster, but, there is no extra money to be able to do this. I know for debt settlement you actually have to be behind in your payments but I really don’t want t o go there. In essence, I am just really frightened of the downward spiral I’m in and I want to stop it and try to start working my way out. Do you have any advice for me?

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Dear Susan,

When you said you’ve had to use the cards to make ends meet, that tells me you have already tipped over the edge and unless you get a sudden increase in income it’s probably too late for a conventional solution like a LendingClub.com debt consolidation loan or a credit counseling program.

The problem is that right now your reality and your desires just are not going to match up. The current situation is not one people generally can pay their way out of. While you want to find a real way to dig yourself out of this hole, there really isn’t one with as tight as the budget is now.

It’s like this, while you might want to try to fix the past, that’s not as important as trying to fix tomorrow.

I suggest you face the reality of the situation head-on, accept it for what it is, learn from it, click here to find a local bankruptcy attorney, and go talk to them.

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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