My wife and I gross $93K. We owe $38K in credit cards, $1290 mortgage and two kids in private HS @$15K/year. Take home is approx. $3200/mo. We are upsdie down on our house by at least $20K. Our current credit scores are – me 690’s, wife low 700’s. We make all our payments on time but emergencies like car repairs, root canals, etc put us on more CC debt. Have been working on a budget all year, but unknowns kill us. Thanks for the ear and advice!!!
We seem to be getting nowhere with the CC debt and wondered if we are good candidates for bankruptcy or what?
Matt & Patti”
Dear Matt & Patti,
On the surface the first area others are going to target in on is the private school. It’s a situation I’ve seen over and over again. My experience has been that parents in similar situations have felt the need for the private school education was more important than almost anything else.
If that sounds like your situation then we’d need to look at intervening on the debt to allow you to continue to pay the tuition.
If you feel the kids can come out of the private school then the reduction in tuition would probably get you back to a point where you could easily pay down your debt faster.
Your score might allow you to get a fixed rate debt consolidation loan through LendingClub.com and that might be the breathing room you are looking for to reduce your card payments.
But a bigger underlying issue is brewing. Your current budget might need more breathing room than a debt consolidation loan can give you. When people tell me that they have no savings account or emergency fund to pay for those life surprises that get us all, I worry.
You should have several thousand dollars at least in such an account and if you can’t manage to save on your current income and expenses then bankruptcy might be the smart play here. A bankruptcy would allow you to trim expenses and put you back in a position to save to better protect yourself financially.
I’m going to give you some homework. Check out what the payment would be with a LendingClub.com debt consolidation loan and also click here to talk to a local bankruptcy attorney.
After hearing from both then I want you to come back and post an update in the comments below so we can figure out what the next logical step is. Sound reasonable?
By the way, the reason the budget is not working out for you is because you are probably doing it backwards. Before you can build your budget you need to first track your expenses for several months to find out where your money is really going. Otherwise the budget you will draw up will be just a page of lies and not based on fact.
Follow the budgeting process in my free book you can download, “Eliminate Your Debt Like a Pro.”Big Hug!