Krystle Was 19 Years Old And Had a Mortgage and is Now Slipping Deep in Debt


“Dear Steve,

I’m 21 years old, and live in California. I purchased my first home at the age of 19 and while that gives me a great sense of pride what does not leave me feeling good is my excessive credit card debt. I began snowballing the debt right after I bought the house. The engine in my 14 year old car seized up. If I lived in a bigger city with better public transportation I would NOT have fixed the car but since it’s my only reliable way to work I chose to fix it. I took on some more debt when the carpet in my house was destroyed and I had to replace it. More accumulated when I had some more car repair troubles and gas in my city held strong at $5 for a few months. I live in a pretty remote area of California which is why it was so high for so long.

I’m looking at about $8000 in credit debt right now. My mortgage is $1150 and my income right now is about $2000. That’s my take home pay after taxes, my health insurance and 401k contributions.

I know my first problem is my mortgage payment is way too high for my income. Though it has a good fixed rate of 6.25% it’s a big chunk of my income that I shouldn’t have agreed to let go each month but what can I say I was a kid who was razzle dazzled by the thought of owning a home. The only other bills I am responsible for is one cellphone bill ($60), electricity ($30), television ($40), propane($50), insurance for the house and car ($70) and health insurance for my dog ($25). I also spend $100 a month to pay off some money a friend gave me for an urgent medical expense which I’m so glad I didn’t put onto a credit card as well.

My two cards have a minimum payment of $100 each. One is an American Express and one is a Visa from a credit union. The AMEX has an interest rate of 16 or 17% and the Visa has an interest rate of 10%.

It should be known that my house is deed restricted and cannot be refinanced for cash out and the way my obligations are now, I doubt anyone would refinance me just for a lower interest rate.

My specific question is what the heck should I do? I’ll be the 1st to admit I didn’t help my debt by putting stupid stuff on the cards that I bought because I was depressed that I never have any money (dumb girl logic I guess.) $250 a month to live on is way harder than I thought it would be. What I want most is to actually see this debt go away each month and to be able to have a savings for emergencies (like unexpected car repairs.) I have no savings and it scares me to death. Should I seek the help of a credit agency? Should I write a letter to my card companies and see if they would lower my rate or perhaps see if my mortgage company would lower my rate so I’d have a little bit more money each month?

I am toying with the idea of filing bankruptcy. I’ve had a score of 715 for all my credit life but I know it’s getting eaten away at and I hate the idea of having that bankruptcy on my report forever but I don’t know what else to do.

Appreciate your help!


Dear Krystle,

It is pretty clear that the amount of your income that you spend on just your mortgage is pretty severe. Wow, I’m sadly disgusted that you got qualified for that unmanageable payment to begin with.

Now a payment that sizable doesn’t necessarily sink you if you don’t have other obligations and you can spend a lot of your income to service that debt. But that’s not your situation. It is easy to see how the high gas prices and needed car repairs sent you in a downward spiral and then on top of that you can add in the distraction shopping debt.

I’m not certain that entering into a debt management plan or a credit counseling plan makes much sense for you at all. Your financial situation is so tenuous that promising to make years of payments without falling into trouble seems just unlikely.

What would happen if gas went way back up again a year or so after you stated making debt repayments? I would guarantee you that without any increase in your income that your debt management plan would fail.

I’m also not convinced that going bankrupt is going to make your situation much better. Going bankrupt would only really tackle your credit card debt and in the grand scheme of things, that is not that large. The best way to tackle this situation would be to downsize your housing expenses. That would probably mean selling your home and then renting for a lot less.

By changing your housing situation you would also trim your housing related expenses as well. Now changing your housing situation is probably a difficult move for you to make after you’ve invested so much emotionally into being a homeowner at only 19. Not may people can say that.

But I think that we can be confident tat the price of gas will go back up, the cost of utilities and insurance will be more expensive and without a large increase in your income, I’m sorry to say, tomorrow stands to be more difficult than today as long as you try to service your debt on your income.

The two areas that you could look at are to eliminate any 401K contributions and increase your tax withholdings if you get money back on your taxes at the end of the year. If you typically do get money back than all you are doing is giving some money to the government for free that you need to use each month.

If your job provides you with some level of matching contribution on your 401k then cutting back on your 401k contribution would mean losing the free money the company gives you in their matching contribution. With your age you would get more long term benefit from keeping up with the 401k contributions now. That would give them more years to percolate and earn a larger return for you in your golden years.


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.
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