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My Husband and I Have a Crushing Amount of Debt Due to Mismanagement and Poor Budgeting. – Lisa

“Dear Steve,

I posted this to the forum for Damon Day and he said we should set up a telephone consultation. Since we are having financial difficulties, we are a little hesitant to pay the fee.

My husband and I, through general mismanagement of funds and lack of budgeting, have found ourselves with a crushing amount of credit card debt.

Here is what we owe:
Nebraska Furniture Mart: $1,611
Bank of America: $9,916
US Bancorp: $9,855
Gapcard/MCCBG: $5,776
First Bankcard: $4,491
Menards/HSBC: $2,696
Sears-Citi: $577
Target Visa: $2,150
And the one that is really killing us, Citibank Mastercard: $24,707

The Citi card is especially troubling, not just because of the huge amount on it, but because it is actually my husband’s 81-year-old mother’s card, of which my husband is an authorized user.

Our monthly expenses are about $5,777. We have no equity in our home and our cars are leased.

Our net income per month is currently about $5,466 (my husband is hourly, so his income varies week to week).

Between tax returns, bonuses and charging all our expenses, we have been able to pay all of our bills up to this point. We have now hit the wall and can’t afford to pay our bills.

We met with two credit consulting companies, the first told us to file bankruptcy and the second gave us a debt management plan that we can’t afford.

When I told my boss that I would have to start looking for another job, he offered to give me a $10,000 annual raise and said he could help in other ways (perhaps an advance bonus) if necessary to keep me on board.

My husband took a loan out against his 401k for $10,000 and we will receive that in about 7 business days. They are withholding $200 per month from his pay to pay it back over the next five years.

We would like to avoid bankruptcy if at all possible, the idea of it is just scary and unknown, but if that is our best option, we are open to it.

Could you help us? Our heads are just spinning right now and we need a plan. I have read through your website and “Eliminate Debt Like a Pro.”

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Lisa”

Dear Lisa,

I realize this is entirely scary and disturbing. When you are living in the bowels of debt you don’t know who to trust and what to do. I’ve been there and I’ve never forgotten how bad and scary that felt.

There are no words I can offer that will make the natural emotions of the moments you are dealing with suddenly become rosy. But this is why I end all my answers with a big hug. Because if I could I’d reach out to both of you and give you a big hug and tell you, if you take action, this will be better. I promise.

I wrote something a while back titled The Honest and Unvarnished Truth About How to Get Out of Debt. That article seems to fit your situation.

A mistake many make at a time like this is they attempt to bargain with fate instead of reading the tea leaves and taking appropriate action to make things better.

Here is what the tea leaves of your income and expenses tell me. You like VW cars and you’ve been using your credit cards to help make ends meet for some time.

The time has come for you to honestly ask yourselves, is it time to focus on the next five years struggling to try and repair the past or to take action right now and fix the future to make it financially safer and better?

I really don’t see much of an opportunity for success by taking money from the 401K and trimming cable expenses. This hole is most likely too deep to dig out of like that. It’s a three foot ladder in a twenty foot hole..

I realize the big card is in the name of Mom and that’s somewhat of a good news story there. Since your husband is an authorized user of the card he can’t include it in your bankruptcy. If you do go down the bankruptcy route, which you should strongly consider, you can discharge your other debt and focus on repaying that one card.

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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 Damon Day. Damon is a great guy and can help guide you through the process. Consultations with him are money well spent. Heck, he even offers a 110% money back guarantee. If you feel like he didn’t help you, ask for a refund, you’ll make money on the deal.

The way it looks right now I’d take the increase in income, thank your boss and stay at the one job, consider bankruptcy on the massive amount of credit card debt, keep making payments on Mom’s card, put the 401K loan back in the 401K, and focus on doing better moving forward.

The bankruptcy attorney will probably tell you you can keep the cars and your home is safe. The only hurdle holding you back at this point is the emotional pain and shame from doing what will be the right thing. There is no reason why you can’t repay your creditors after you go bankrupt if you want to honor those promises. Bankruptcy just gives you legal protections from debts that are way out of control.

Just remember, as bad as this all feels right now, it could be worse. I always say to myself in trying moments, “At least I’m not on fire.” And the same holds true for you. This is an unfortunate time but you have your love, your family, your life and at least you are not on fire. Even now there are thing to be grateful for, don’t let this situation blind you to that.

Please post your responses and follow-up messages to me on this in the comments section below.

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About the author

Steve Rhode

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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