“Dear Steve,
Lots and lots of credit card debt……..I have enrolled myself in a Debt Management Plan to help me eliminate most of my debt… $35,000 of credit card debt…… I have some cards that were rejected in the plan so I need to tackle them on my own. Some of my accounts are current; some are WAY behind – but, luckily, being the DMP has kept collectors off my phone.
I have attached a worksheet that I use to try and understand how I got myself into such a crap hole…
Do I make current those accounts past due or do I pay off the small ones and work my way up. Paying off the small ones will help my debt/credit avail ratio but keeping late accounts will hurt me. What’s the best thing to do? Pay off and eliminate added interest or make current those accounts delinquent and possibly put other accounts past due? Oh, and bankruptcy is not an option – my husband will not go for it – unless we divorce….
Mandy”
Dear Mandy,
Ah yes, the proverbial crap hole. 🙂
Thanks for the worksheet, it’s a big help.
Some things are immediately apparent from the spreadsheet you provided.
- I suspect the expenses are light. I would bet that if you actually tracked all of your spending over a couple of months you’ll find money leaking out that is not accounted for here.
- I’d bet that you’ve struggled for some time now and that you’ve had to use credit cards to make ends meet along the way.
- You’ve previously consolidated your debt but then fell significantly past due on that debt. It looks as if after the consolidation you took on additional debt for some reason or to make ends meet.
- Even though you are in a debt management program you are still $836 a month negative. That’s not going to work out.
- Your credit counseling approach with the DMP is an incomplete solution and will fail.
The only way we can get this situation under control is to get your expenses to fit within your income. This means not just increasing your monthly income by $836 a month, but by about $1,136 a month because the one important obligation you left out here was savings. At $1,136 a month you’d be able to save $300 a month which at least is a start. And when I talk about savings, I’m not talking about a revolving door. I’m talking about putting money in a savings account each month, living within your income and not having to touch it to make it through the month or in case of a real emergency.
Unless you are able to save money at the same time you are digging out of debt the debt management plan will fail. Without that most needed emergency fund it only takes one unintended and unanticipated expense to erode a lot of progress you might have made in reducing your debt. Without that cash cushion to fall back on in an emergency, the obligation will land on credit and you’ll take ten steps backwards. That is if you can find some credit to put it on.
I understand what you are looking to accomplish here but in all honesty, without some consistent monthly addition to your income the chances of this approach working are darn near 0%.
If you were eligible for Chapter 7 bankruptcy then you could discharge all of your debt and that would give you a financial fresh start and the ability to build a good looking emergency fund to protect you and your husband.
Is all this debt in your name alone? If not, which are just his debts and which are joint debts?
Unless we take some action, the debt you can’t manage will wind up in collections, you may be sued and this may split apart your marriage anyway. Let’s not let that happen. Let’s take purposeful action towards a solution which improves your life in the future.
I need to better understand the facts behind your statements about your husband and I sense there are some underlying issues going on here between you and your husband because of this debt. I would suspect this is not the first time you’ve been through this together or some of this debt is the result of hidden spending or a broken promise. Am I close?
So please share, what’s the story behind your impression your husband will divorce you if you file bankruptcy?
Tell us the story behind the story of how you got to where you are today so I can get you headed in the right direction towards a better life.
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