Ask The Get Out of Debt Experts How To Get Out Of Debt Reader Questions

What is the best solution to my debt problem? – Jean

HELP! I am going under. What are my options for the following scenario???

Recently Divorced, 57 yrs.
Income:Teacher Annual Salary: $50K

~30K credit card debt
Own Home @ 5.99% on a fixed 20 year note (Bank of America)
Pay Property Taxes separately.(~$5K Annually)
5K balance on “Line of Credit” (B of A)
Not behind on any bills… yet.
I’ve tried to refinance my home at a lower interest rate, but having a Line of Credit prohibits this.
Due to housing decline, I have no equity in my home.
No savings.

Short Term Goals:
Get out of debt asap!!!!
Put money into savings!!!!

Long Term Goal: Pay off home, and keep it as a permeant residence for myself.
Eventually… would like to eventually retire in 10-15 years.

What options… if any, do I have?
Would you recommend NFCC?


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1 Comment

  • Jean,

    Before you make any moves, such as fall behind on payments or anything drastic like that, go speak with a bankruptcy attorney. I’m not saying to run out and file tomorrow, but I am saying that you should find out if you qualify and what it could do for you, before you decide on anything. Bankruptcy could potentially wipe out the $30k cc debt, as well as the $5k equity line, while allowing you to keep the home with just the 5.99% 20 yr loan attached to it. Yes, you would torch your credit for the time being. but you could start those savings right away, at an accelerated pace. By the time you’re ready to retire the Bankruptcy would be way behind you and your home would be almost paid off and you could live happily ever after on your pension.

    If you find that BK is not for you or that you don’t qualify, then it may be worth looking into a credit couseling agency to potentially ease up your monthly obligations on the $30k cc debt. The idea should be to free up some cash flow on the cc’s, in order to accelerate your payments towards the $5k equity line. You should also look to add to that anyway you can with tax refunds, part time job, etc in order to get rid of that equity line as quickly as possible. Once you get rid of it, you could potentially refi into another 20 or even 30 yr mortgage to increase your cash flow even more. Use that extra cash to build your savings and accelerate the payments towards the cc debt to wrap that up as quickly as possible. This process will surely take longer and cost you more than the BK, but could also work with your plans.

    Good Luck!


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