I’m on a Debt Management Plan But Still Struggling. – John

“Dear Steve,

I am well educated, have a good job & make decent money.

About 5 years ago we purchased a house, which in 1 year rose in market value from $109K to $249K, we figured we were sitting on a gold mine, so we borrowed against it to pay off my wife’s legal bills in getting sole custody of her daughter. In the span of 3 years, we had a series of expensive home repairs (=>$42K), medical emergencies (=>$26K), etc. which we all paid by credit cards, putting us in substantial unsecured debt, but as our house value rose, we figured it was ok as we planned to sell the house & pay off all that debt easily. In 2010, our house flooded (we had no flood insurance), our daughter had a dental emergency, we lost $22K in a bad investment, got divorced, house value plummeted & I was forced to short sell after I couldn’t pay the mort ($1,600/month) on my own, & we had a Interest Only Balloon Mort & no one would refi me. This all left me with approx $40K of unsecured (Credit cards), & $15K of secured (HE LOC) debt.

Looking over the background info, I have sold almost everything I owned of value, I traded in my truck for a small car (less monthly payment, less fuel costs, less insurance), I moved into a small apt (less monthly cost), I entered into a debt consolidation plan through ACCC which shut down all my credit cards, negotiated a lower APR & automatically pays them all w/one monthly payment, etc.

I’ve tried everything from bringing my lunch to finding the cheapest fuel, stopped all my old expensive vices (smoking.drinking, going out to dinner, etc) but no matter what I do, every month Im barely squeaking by ahead of my next paycheck, and if anything out of the ordinary happens (e.g.: car repair, co-pay for med appt, buying a gift, etc) I have to borrow money from friends & family, which is now growing as I can never seem to pay them back. I make approx $3500/month, & paying all my bills (nothing outside of necessities, leaves me w/a pprox $72/month left over)

I’m out of (what I call) “Wiggle Room” & outside of winning the lottery, or telling a creditor I cant & wont pay them, Im stuck.

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I need advice on what my options are.

Some of my family/friends are saying I should consider bankruptcy, but Im hoping there may be other solutions, if not, what are the repercussions? What could happen if I tell my HELOC creditor that I wont be paying them versus telling all my creditors that I won’t?

It seems like there’s help out there, but its usually targeting either debt consolidation, or bankruptcy and not much in-between.

I sincerely appreciate this site and the help you give to the millions of people suffering through this debt enslavement and I hope to hear from you back regarding advice in my situation soon. Thanks again!


Dear John,

Let me be honest with you, it looks like the path you are on is a dead-end road. If ACCC put you on a DMP knowing that you were unable to save money each month and hanging on by your finger tips, well then shame on them.

You exhibit the classic signs of bankruptcy aversion because of assumptions and fears, not facts. If we were standing in a room together, talking, I could make a very convincing argument that bankruptcy is the most logical, safest, and most responsible path to follow in this situation. Wether you’d hear me or not is a different matter. You can lead a horse to water…

Stop thinking about what bankruptcy “might” do to you and start thinking about what is the safest and fastest path out of this damn (I wanted to say fucking, but I was being discrete) mess.

Seriously John, you’ve got to pull your head out of the hole for a just one day and take a good honest look around about what your options are.

Your friends and family obviously love you and care about you, but their enabling you with borrowed money is stupid.

They aren’t actually helping you, just pushing you further down a dark tunnel of never ending brown bag lunches, basic cable channels, and not being able to save to protect yourself. It’s a bit like lending drugs to a drug addict that isn’t ready for the intervention.

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Based on your description of your current life you live in a small apartment, eat small lunches, have small fun, and become more and more indebted to family and friends. It’s time for you to pull on a different set of pants, face the issue, take decisive action, and start rebuilding a new financial life based on what you’ve learned from this experience.

Dude, snap out of it or I will personally come and kick your ass.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

I’d suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction.

Then use the free How to Get Out of Debt Calculator to review your options.

Once you’ve identified a company you want to work with, then follow my step-by-step guide on how to check out a debt relief company.

I was feeling like it was tough love time. Please forgive me for speaking directly if it offended you.

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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