“Dear Steve,
We had a house flood in 2001 and had no insurance, didn’t qualify for any federal help, so took a $25K SBA loan and financed the rest – approx $45K on credit cards. We made ends meet but were struggling.
In 2005 husband was transferred for job and we incurred the expense of moving. Sold the flooded house and made enough profit to pay off SBA loan. Still had credit card debt, plus additional to pay for move. We took a debt consolidation loan for $50K and about a year later the economy tanked.
Credit card companies and debt loan company jacked interest rates from average of 10% to higher than 30%. We tried calling each company to ask them to reconsider – we were never late, always paid more (even if it was $5) and never went over our limits. Not one of them would lower our rate – in fact they told us they did it basically because they could. As wife’s job became in jeopardy of ending (company of 60 people went to a company of 5 people) we sought out our options and decided on debt settlement.
This was OK at first but now, almost two years in, the money is not building fast enough to settle anything and we are getting collection letters. Wife still has job but not sure for how long. The stress is KILLING wife! We started with $90K in debt to be settled and are now at about $65K.
We don’t know which way to turn. Bankruptcy? Call creditors and work something out? Continue with debt settlement company (Freedom Debt Relief)? Any advice you could give would be greatly appreciated. Thank you for your time.
Donna”
Dear Donna,
I think the answer is made for you based on the current circumstances.
You appear to be concerned over the current job and since there is not enough money saved to settle the remaining debts the question then becomes one of reasonable expectations. Is it reasonable to expect your current path is going to resolve your debt?
The ultimate question is if it is more logical and reasonable to go for a financial second chance now and proceed with bankruptcy to discharge your remaining debt. You would then be able to save money in anticipation of an involuntary job loss.
A bankruptcy now would also end the stress of the debt hanging over you. If you are eligible for a Chapter 7 bankruptcy, as 70%+ people are, it would cost less than $2,000 and clear your debt in less than three months.
But before you jump at anything or make a rash decision you should talk to a local bankruptcy attorney and learn what bankruptcy would mean for you. You can click here to find a local bankruptcy attorney.
The alternative is for you to stay on your current path, which I bet does not allow you to build a big emergency fund, and hope that you can settle the remaining debt and save up some cash before the job is lost.
Which approach seems more reasonable based on your situation?
Please post your responses and follow-up messages to me on this in the comments section below.
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