I Have Muscular Dystrophy and Overspent to Give My Kids a Good Life. – Stephanie

“Dear Steve,

I bought a house 2 yrs ago for $168,470 and I owe $130,416.53 with an interest rate of 4.625%. My LTV is about 73%, based on a comparable home that sold for $178,000 a year ago in my subdivision. My home is new construction in an university town, where the market value is doing well.

Here are the stats:

Combined debt with husband : unsecured debt on six credit cards totaling (roughly) $22,000, two auto loans, $8888 and $17,500 both with low interest, one of the credit cards is from my credit union with a balance of $ 9800 at 8.9%( the $8888 car loan is also with my credit union.) total combined gross yearly income is $60,000 with 2 dependents. I am 41 years old and my husband is 36. My credit score is 712 and my husbands is about 730. The home is in my name. I make all the minimum payments and are never late, we have a little extra to do a debt snowball.

I was almost debt free after we bought the house, but because I am disabled and unable to work . I started to use credit cards as a way to feel that I could provide my daughters with a life that they deserve , because of my own feelings around my disease ( I am a Jerry’s kid, I have MD). I realize now that , it is an addiction and I realize now that I want to live a happy life debt free and not succumb to the forces of capitalism.

My mortgage holder Chase denied me for a home equity loan, (this was based on only my income) because of my debt to income ratio and because they said that the would only go to a LTV of 73% , They are now (per their website) saying that the market value of my home is worth $191,000. Should I reapply to pay off the credit card debt and make only one payment, or should try and get a peer to peer lender? My other question is if I file Chapter 7 how do I avoid my home and cars being part of the proceedings? I don’t feel that losing my home is an option as it is has been built for all of my disability needs. Also, are social security Benefits(SSRDI) subject to garnishment by debtors?



Dear Stephanie,

I was going to suggest you read my book The Path to Happiness and Wealth but it looks like you’ve already reached that teachable moment why you were overcompensating with the spending. Good For You! By becoming self-aware about that fact you will now be able to spot the triggers for that unconscious spending.

The car loan and credit card from the same credit union create an issue. The kinder and friendlier credit unions have this little nasty surprise called cross-collateralization. Typically they won’t give you the title to you car if you wanted to sell it unless your credit card was paid off as well.

Generally social security benefits are off-limits, unless you owe the federal government some sort of debt, like government backed student loans.

While bankruptcy is always a legal option you might be able to try a different approach first to see if it might reduce your financial stress. However, you can click here to find a local bankruptcy attorney ti discuss your situation with. I encourage full investigation and awareness.

I’m a huge fan of LendingClub.com, a peer-to-peer lending network. For people that get loans through this site I help to use the referral fee they pay to fund the loans.

If you were to get an unsecured debt consolidation loan, which I favor, you could pay off the credit cards. This might lower your monthly payment enough to give you the breathing room you are looking for. However, once the cards are paid off I would suggest you NOT close your three oldest cards. Keep them open so they continue to help build your credit.

The LendingClub.com loan will be reported to the credit bureaus so that will help to build your credit as well.

If you are approved for the loan and pay off those cards, I would suggest you investigate the free service at ReadyForZero.com to help you prioritize and payoff your debt in the fastest possible way.

Let’s mull that plan over for a day or so and then let me know what you think about the logic and strategy of doing that. Post your feedback below. One advantage of this plan is that if the credit union card is paid off it then gives you some flexibility if you want to sell that car secured with the credit union loan.

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


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
Damon Day - Pro Debt Coach

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