Quick Answer: A single mother with a $22,000 car worth only $12,500 should consider voluntary surrender or bankruptcy since her $260 weekly unemployment cannot cover the $368 monthly payment plus living expenses. The $10,500 negative equity makes selling the vehicle financially devastating without debt relief options.
“Dear Steve,
I am asking the question for someone else. I help people with setting up budgets and I do not know how to answer this question for this woman that I am helping. She is a single mom with a 18 yr old daughter that does not drive. She lost her job in Oct 2010, has over 15,000. in credit card debt, smokes, has a predigree dog, and a 2010 Chev HHR that she purchased in September 2010 for $22,000. The Kelly Blue Book value for private sale is $12,500. if it is in perfect condition. So even if she sold it she would be left with an $10,500. bank loan. She is suffering with depression and finds it difficult to do simple tasks. She knows she is in trouble and has asked for help. I want to help her but quite honestly I do not know if she is willing to do what it takes.
From my explaination above regarding the car what can she do about the car payments. They are $368. per month not to mention the insurance and gas that she told me she spends each week to bring her daughter back and forth to college 3 days a week. Her daughter does not work and does not drive. I have mentioned that she needs to do both or find alternate transportation to get to college. My question is mainly about the car. She wants to keep her end of the contract to pay for this vehicle but I do not see that as a possibility. Her weekly unemployment check is $260.00. If you need additional info please e-mail me.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Oct 8): A parent's nursing home bill can become yours
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
Vivian”
The Daily Money Brief — Free, at 10 AM
Money you may be owed, scams to dodge, and the fine print decoded — the consumer money news that affects your wallet, every weekday.
Dear Vivian,
Inside the debt world we have a special phrase for this situation, ready for it, “she’s screwed.”
The issue here is not the debt, but the lack of income. Nobody is going to refinance the car and get her payment down. The answer is either to increase income or lose debt.
Probably the best path at this point is probably bankruptcy. And here’s why.
- This situation is not going to improve in it’s own. With her depression and negative emotional health right now that makes it many times tougher for her to deal with the finances. Depression equals the inability to make a plan, take action, and stick to it. However, if we can kill the debt problem that will get her on the road to recovery if you can help her to see she is NOT a failure.
- Unless she rids herself of this debt she stands little chance of pulling herself up and out. Without being able to do that there is little chance she will find the emotional fortitude to find a job and hold on to it.
- I suggest you read The Honest and Unvarnished Truth About How to Get Out of Debt and help her to see the light.
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
She would hand the car back in the bankruptcy, avoid the massive deficiency they would otherwise come after her for, and start over. For the time being she can by a local beater at the buy here pay here lot until you can guide her to rebuild her credit using this process.
Give her a big hug from me and let her know this isn’t the end of the world, it just feels like it. Better days are ahead if you help her to take action. She’s lucky to have you helping her.
Please post your responses and follow-up messages to me on this in the comments section below.
Big hug for you as well.
Facing a Similar Situation? You’re not alone — and you have more options than you think. Start with the all your debt relief options page to see what’s realistic, or take the 2-minute bankruptcy quiz if the debt feels unmanageable. Federal Reserve research shows filers recover faster than those who don’t file. If a company is involved, run them through the Scam-O-Meter first.
Sometimes the magic wand is necessary not to make it all better but to help the person take action to break the cycle. Good luck and know I’m here for you.
Dear Steve,
Thank you for the advice. It confirms what I already knew or thought she should do. I will be talking with her today and will try to make her understand, unless she gets a job or has some other source of income that bankruptcy is her only choice.
Vivian
Dear Steve,
Thank you for the advice. It confirms what I already knew or thought she should do. I will be talking with her today and will try to make her understand, unless she gets a job or has some other source of income that bankruptcy is her only choice.
Vivian
Sometimes the magic wand is necessary not to make it all better but to help the person take action to break the cycle. Good luck and know I’m here for you.