I’m self-employed and have been so since graduating college back in 1997. I operate an online business, selling ads on websites that I build. Some years ago I was making good money, but the past few years have been really quite difficult to say the least. Living on borrowed money and living beyond my means to some extent has resulted in my having a credit card balance of $93,000. Two years ago my balance was $87,000. I was chipping away at my debt for a while, but the economic crisis handed me significantly increased interest rates despite the fact that I have so far never been late a single time on paying my cards in 14 years or so. Two years ago I was paying roughly $1600 per month. This month the payment is $2100. In the past two years I have probably made $40-45k in payments and have basically gotten nowhere with this debt. For a while now I have been living basically “paycheck to paycheck” and last month (November) was the first time ever that I attributed paying my bills to luck (I made a last minute ad sale which gave me enough money to pay). If not for the willingness of my in-laws to let us live with them at minimal cost (almost nothing), this ship may have already sank 6 months ago. I know I’m in quite deep at $93,000 of credit card debt.
I’ve researched the various options and have done a lot of reading on your website. I’m thinking that debt settlement may be the best option for me and for the creditors.
For debt settlement I would borrow money from my Dad which would be used to settle my debt with the credit card companies. But this depends on the amount that would be necessary to settle the $93k.
Worst case, I go bankrupt – maybe I lose the websites that I have built over the years and the creditors likely get little to nothing at all anyhow. I would much rather find a way to settle or even some type of forbearance of the debt.
Steve, do you think that debt settlement is a viable option for my situation? What amount would I likely need to have in cash in order to settle $93k of credit card debt?
Thank you for taking the tie to write me for assistance.
The first issue is we need to address the underlying problem of not earning enough to get by. Let’s say this debt did vanish, would your current income be able to carry you without putting you further behind? If not, then we’ll need to explore that situation first. It doesn’t do any good to address the debt only to have you wind right back up in the same spot in a few months.
Debt Settlement might be a valid option for you as long as you understand there are some serious consequences to settling the debt.
- Your father would have to give you around $40,000 to take care of the debt, and that’s just an estimate. This essentially transfers part of your responsibility onto the assets of your father.
- In settling your debt you will fall behind on your payments to creditors, they may sue you, and it will negatively impact your credit.
I was struck that you were looking for a best option for “you and your creditors.” While I applaud the sentiment, my concern is focused solely on what is best for you. You see, creditors are not logical beasts. They are giant process and policy driven organizations that don’t always operate logically.
If your creditors were interested in doing what was best for you they would have lowered your interest rates and given you a flexible plan to repay your debt in these tough times.
If I look at the situation as what is best for you and those you care about, frankly I think bankruptcy makes the most sense. In bankruptcy it is unlikely you would lose your websites but you would shed the debt. Most importantly you would allow your father to keep $40,000 in his pocket.
I’m going to assign you some homework and then come back and post an update in the comments section. I want you to find a local bankruptcy attorney and talk to them about your situation, first. Then let me know what you think about that option.
If you eventually want to pursue debt settlement, I can steer you in the right direction. But I don’t want you to lurch towards debt settlement unless it is the best solution for you and those around you.
You can click here to find a local bankruptcy attorney and if you’d like a second opinion about your situation or a personal consultation by another debt coach, please feel free to contact
Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.
Get Out of Debt Guy - Twitter , G+ , Facebook
If you have a credit or debt question you'd like to ask just use the online form .