“Dear Steve,
It’s a hard thing to admit but my debt is beyond my control.
2000 was the year of me loosing my job, the birth of a son and the beginning of the debt snowball. Over three years of job searching, accepting and leaving a number of positions (I accepted positions with companies I normally would not have. Desperation spoke louder than my gut.), a second son, moves….the snowball has become an avalanche.
I’ve been in my current position for over 3 years, no problems there but the debt we generated by living on credit cards has us living in the hole. Cards total $70k and average 25% interest.
We met with a Crown Financial counselor last night but our situation is over his head. He’s a bank loan officer but is more used to helping people plan a budget than clime out or a debt hole. He did point out that we are paying about $17k in interest each year on the cards. OMG!! I hadn’t looked at that fact.
To cut to the chase…..HELP!
My wife wants to file for chapter 13 (we’re in PA) I am vehemently against that option but only because it has a stigma in my head. I wasn’t raised to think like that.
I am looking into credit counselors but have heard that many/most are horrible and can mess your life up more than it already is.
The guy last night mentioned that if we just didn’t pay the card companies they would write them off in three months. The balances range from $2k – $12k and those small amounts would cost more to pursue than writing them off. Sounds simplistic to me.
Any suggestions on bankruptcy, credit counselors and ignoring the debt? The best solution is to pay them all off in full, the moral issue of not paying my dept is in my mind although I can rationalize not doing so with the belief that I’ve paid far more than I’ve charged over the years and most if not all of what is left is interest.
Additional info:
– We purchased a modest home last year and have little equity.
– Both cars are paid for and we have no other debt.
– I gross in the low $60’s, my wife works from home as a marketing consultant and makes enough to cover the kids school/pre-school expenses.Any suggestions on bankruptcy, credit counselors and ignoring the credit card debt? The best solution is to pay them all off in full, the moral issue of not paying my dept is in my mind although I can rationalize not doing so with the belief that I’ve paid far more than I’ve charged over the years and most if not all of what is left is interest.
Jeff”
Dear Jeff,
Thank you so much for your question and reaching out to me for advice. I’m glad to see that you met with a Crown Financial Ministries counselor to help you to try to find a solution that aligns itself with your religious and financial beliefs. Crown Financial Ministries was co-founded by Larry Burket in an effort to help teach the biblical principles of handling money. I didn’t always agree with Larry’s point of view but respected him for his efforts, books and work. Larry passed away in 2003.
Anyway, I digress. Let’s get back to your situation.
I understand from what you’ve shared that your religion and beliefs play an important part in your life. You are currently looking at bankruptcy as almost a sin due to the emotional and social attachments you place on it.
Let’s get one thing straight right now, the fact that you have paid far more than you’ve charged is not an excuse to just walk away from your debt with bankruptcy. That reality is the direct result of the terms and conditions that you pledged and promised to uphold so that lenders would give you money. You became a willing borrower.
Being true to your beliefs in times of financial crisis really separates those that have strong beliefs from those that have convenient beliefs.
Not all that long ago I wrote “Is Most Christian Debt Advice Bogus? Here’s What Jesus Would Really Do.” You should read that article.
The advice that the counselor gave you last night is just plain wrong. While a bank may write off your account after six months (not three), that is an accounting process and does not relieve or absolve you of your continued liability for the debt. The lender will probably sell your account to another company or collection agency and then they will pick up the baton and go after you.
You are left with three primary solutions to help you address this situation.
- Do what you can.
- Bankruptcy.
- Credit counseling.
Do What You Can
This is really the focus of what I covered in “Is Most Christian Debt Advice Bogus? Here’s What Jesus Would Really Do.”
Bankruptcy
Here is where most people make the wrong choice about bankruptcy. They believe so strongly in the stigma that goes along with bankruptcy, and it does for many, that they discount bankruptcy as a solution. That would be the wrong thing to do.
Bankruptcy is a legal tool that allows you to get a fresh start and put an end to collection pressure, collection calls and continued negative credit report items. It allow you to get protection from creditors and move forward with your life. The moral hurdle is that most view bankruptcy as walking away from their debts and not honoring promises they made.
But why can’t bankruptcy be used as a way to allow you to end collection pressure, stop the bad credit from moving forward and allow you to repay what you can afford so that you can honor your obligations? There is nothing that would prevent you from going bankrupt, seeking legal protection for your debts and then paying back your debts, as you can afford to, after bankruptcy.
Using bankruptcy in that way allows you to both honor your debts and get legal protection at the same time.
Credit Counseling
A credit counseling or debt management program is a possible solution as well but you’ll need to remember that a credit counseling program does not negotiate a repayment program that makes the best sense for you, they tell you what the terms are that your creditors will accept. These special terms may include the reduction or elimination of interest but your monthly payment may remain at or above what it is right now. If you are already struggling to make your monthly payment, that would be a problem and probably a solution that is not sustainable through your entire debt repayment period which is probably going to be five to seven years.
Summary
To better evaluate which solution works best for you I would strongly suggest that you get specific information from a debt management provider, click here, and that you make a free appointment and speak to a bankruptcy lawyer about your situation. Talking to a bankruptcy lawyer does not mean you are filing bankruptcy. It just means that you are wisely educating yourself about all the options.
With your level of debt, your responsibility to create a safe future for your family, and your desire to repay your debts, I think that the modified bankruptcy approach I outlined makes the best sense for you, but I’ll let you be the judge.
Let me know what path you decide to choose and keep me posted on your progress.
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.
Do you have a question you'd like to ask me for free? Go ahead and click here.
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