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Schizoaffective with Bipolar Disorder on DMP with Money Management International. – Jarrett

“Dear Steve,

Last night I had vivid nightmares about my debt. I woke up and my first thought was to post here because I can’t handle this anymore.

I am tired of the pressure of being in debt. Truthfully, I only have $8,500 in debt, am 26 years old, and am unemployed. I have a legitimate disability, am schizoaffective with bipolar disorder, and am trying to get on SSI so that I can live because finding a job is proving to be impossible. I have an interview with them this Tuesday.

I am on a debt management plan through Money Management International and they have done a fantastic job in taking care of me. My 23.24% interest card they reduced to 0% (HSBC, $5000 debt). My 11% interest card (Discover) they reduced to 7 or 9%. I now pay around $20 a month interest as opposed to $200 (there is $3,500 on this card). I don’t want to default on my debt, there is no peace for me in that solution, but there is also no peace in this predicament I am in. Bankruptcy is a foolish option for me because my debt is so little, and my money problems are such that I will only get in more debt if I am ever forgiven the debt I am in. I need help on how to manage my life financially.

I would like to keep the debt management plan I am on and pay off my debt as quickly as possible. Realistically, I need a plan to get and stay out of debt. MMI has helped me a lot but I need help beyond what they can offer.

My disability is pretty grave. My ability to work is impeded. What should I do? Should I negotiate with my creditors and start telling them that I don’t have the ability to pay? My last three payments were made from my savings but now the money is gone and all I can do is continue to borrow from my father or grandmother. I am faced with all kinds of decisions that are not appealing. I just want peace. Peace would be paying off the debt or just getting rid of it. It’s terrifying me.

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Discover Card – $3,500 in debt
HSBC – $5,000 in debt

Should I negotiate with my creditors and tell them that I just don’t have the money to pay them anymore? Should I let the payments go and just try to settle with them in six months? Should I file for bankruptcy, even though the debt is relatively small and I know that my money problems will continue after filing?

Jarrett”

Dear Jarrett,

The most alarming issue for me is the fact your payment is already so low and you can’t afford even that. It seems that the payment plan is simply not sustainable for you based on your situation.

On top of that we have to consider your mental state and how that impacts your ability to both cope with the current situation and impact you moving forward.

Your schizoaffective with bipolar disorder leaves you predisposed for future financial troubles unless you can get the underlying mental health issues under control with therapy and medication. The problem areas are the periods of mania and the possible disorganized thinking.

Over the years I’ve just seen so many bipolar people fall deep into debt during those manic periods when they are feeling on top of the world.

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The anxiety component of your illness will be difficult to deal with as you move through your debt situation unless we bring your therapist into the loop here on what is going on.

I would suggest the following plan of action:

  1. Since you are unable to continue making your payments I would urge you to contact Money Management International and let them know what is going on and that you will be stopping your payments.
  2. About 30 to 45 days after you miss your first payment you will start to get collection calls. You MUST let your therapist know in advance this will happen and you are expecting them. We need for you to have an adequate anxiety management plan in place to face those calls. I don’t want them to push you towards a depressive state.
  3. Since it appears you have little money and assets there is nothing you can promise the creditor when they call. There is also nothing they can take from you.
  4. A creditor may later decide to sue you and this is normal. But remember, there is nothing you can promise to pay since you don’t have any assets or income.
  5. As long as you are living on SSI or some other public benefit program you are considered judgment proof. Ironically that does not mean a creditor can’t get a judgment against you. It means they could not collect on it.
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The best course of action moving forward would be for you to live on a cash basis only until you and your therapist feel your mental illness has stabilized and is under control. At that time we can explore getting you back into the credit world, but not until then.

Since I think we can deal with all of this without asking your father or grandfather for money, that seems like a reasonable approach for now.

Do you agree?

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

Damon Day - Pro Debt Coach

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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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