Quick Answer: Bankruptcy should be considered early rather than as a last resort when debt overwhelms income, as shown by Sarah’s case with $35,000 credit card debt on $24,000 annual income. Filing bankruptcy could immediately clear enough debt to cover the additional $1,000 monthly childcare costs her growing family faces.
“Dear Steve,
35,000 credit card debt spread across 7 cards with APRs ranging from 4% to 17%, $750 month mortgage payment, $800 month cc payment, $60,000 student loans on low-income repayment with $0 payment. Adjusted gross income $24,000, monthly take-home fluctuates between $2000 and $4000 , but usually on the lower range. My husband is self-employed.
My husband and I are expecting our first baby and we are living paycheck to paycheck and often in the red. Our income is barely sufficient to cover our expenses and we can’t make progress on our debt, and yet we do not qualify for government assistance, we aren’t quite in need of debt relief agencies as far as I can tell, and bankruptcy is only a last resort.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Sep 11): You drive to the dealership to pick up the car. There is no car. There was never a car.
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
We are using YNAB (budget program) and tracking our spending carefully. I am applying for jobs with higher earnings but there are no guarantees. What else could/should we be doing? We also now need an extra $1000 a month for child care and insurance when baby arrives. We are very stressed by this situation and we don’t see a way out. Any advice is appreciated!
The Daily Money Brief — Free, at 10 AM
Money you may be owed, scams to dodge, and the fine print decoded — the consumer money news that affects your wallet, every weekday.
Thanks,
Sarah”
Dear Sarah,
Bankruptcy should not be your last resort, it should be your first resort.
You need to take rapid action here to make changes that will provide a safe home for your baby to come to. That might mean reordering your priorities.
Filing bankruptcy will clear away almost enough with that one move to meet you new child care obligations.
You should also check Benefits.gov to determine what benefits you might be eligible for to help make ends meet.
I suggest you read How Do I Get Out of Debt Quickly? Change Your Mindset and then talk to a bankruptcy attorney as soon as possible.
You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.
Please post your responses and follow-up messages to me on this in the comments section below.
Before You Sign Anything: Run any debt relief contract through the free Contract Decoder to spot hidden fees and unfair terms. Check the company’s complaint history with the Scam-O-Meter.
Compare Your Real Options: Most debt relief companies won’t tell you about all your options — especially the ones they can’t profit from. Credit counseling has a 21-27% completion rate. Settlement resolves about 1% of enrolled debts fully. Bankruptcy has a 95% discharge rate — and protects your retirement. Take the Find Your Path quiz for a recommendation based on your actual numbers.
