I Am Barely Scooting By Paying My Bills. – Carla

I owe just under $22,000 in credit card debt. This consists of several cards ranging from $5000 down to $600. I am one month past due on my first mortgage and several months past due on the 2nd (which is an equity line of credit) Right now they are reviewing for modification of the second.

The first mortgage modification has been denied. I pay high interest on most of the cards. with my Chase cards they lowered my interest rate to 6% and automatic payments come out. I pay a total of about $700 to all the credit cards monthly, and the minimum in most cases.

I own (or pay on) a commercial rental that probably has a resell value right now of $125, I have decided that I can sell it but I want to make a profit, so I want to sell it for $170 and see if anyone bites.

The rentals pretty much pay for building. I bought it for $95K in 2004 the year my sixteen year old died in a motorcycle accident. He had money in a trust fund from an accident he was in when he was 5. His dad died in this accident.

I used this money for the down payment, owner will carry at 7.5% . I am not sure which way I want/need to go to remedy my financial situation. I make about $2600 a month take home. the mortgage is $1155 a month. Right now I am current with all credit cards. I have eliminated the house phone, the direct TV and pay the bills before almost eveything, If I have an expense like tires, (which I just did) it throws everything off and I end up being late and paying late fees on a credit card or two.

I am barely scooting by paying my bills and I cannot get the credit cards paid down. I cannot borrow on my 401K because I already have a small loan out. I do not know if I should be doing debt consolidation, bankruptcy or what.

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I feel like I am drowning in debt and cannot get on top of it. I need guidance on how to attack my financial mess. i haven’t done a whole lot of changes as far as not paying up until now because I do not want to make the wrong choice.

I am not sure of the consequences each option will come with. Can I do debt consoidation myself? I have thought of just stop paying my credit cards and saving the money then trying to negotiate on my own behalf but not sure how to go about that and if that is a good idea. Please help with advise. Thank you


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8 thoughts on “I Am Barely Scooting By Paying My Bills. – Carla”

  1. Carla,

    I didn’t understand how you accumulated $22k in credit card debt. Typically, I would assume that you are living quite a bit above your means. If that is true, it won’t do you much good to refinance your house or sell your property or to go on a DMP to erase your credit card debt.

    Your problem is probably that you spend too much. $2600 a month is not a lot of money and implies a modest life style. Your house payment/rent should probably be around $800 a month. I suggest going to HUD.gov and finding a certified housing counselor in your area to work through the loan modification issue, but there is an excellent chance that you cannot afford the home your living in. The counselor should advise you.

    The rental is just a distraction. Since it doesn’t hit your budget it just represents $35,000 of equity that probably is your emergency savings and retirement savings. Don’t sell it until you have a balanced budget or you will probably let that $35k slip away.

    The credit card debt could be addressed through a DMP or you could go straight for bankruptcy. Ask an attorney about your rental before committing to bankruptcy.

    Good Luck!


    • There you go. Much closer to what I was shooting for. Carla needs to do the math and let that dictate her solution. And doing the math has to include building in an allowance for savings and retirement.

      It’s quite possible that holding out for more revenue in the rental property will just lead to less when it all hits the fan and a quick sale is needed.

      Carla, read https://getoutofdebt.org//52478/get-out-of-debt-guy-easy-steps-eliminate-debt-checklist to prioritize your obligations and let’s work the problem from the math forward instead of from the solution back.

      And Mike nailed the issue on the head by observing the credit card debt might actually be the result of routine expenses landing on the cards to make the month balance. In that case Carla is really running negative each month and sinking fast.

      Unless we adjust the income or reduce the expenses, this isn’t going to end well.

      We need to get her life to fit within her income.

  2. Carla

    Sounds all to familiar… 1st stay focused on the secured debt, this must be your first priority (unless you don’t care about loosing them). I hope that the modification works out for – but I would not hold out much hope in that. That is just a way that the mortgage companies can keep you in contact with them (it seems to me anyways). They will just string you along endlessly.

    First, (if you have no already done this) contact a company like Money Management International to setup a DMP. You may need to let your credit card get behind by 1 month or more before they can help. This will allow you to catch up on your mortgage(s). They can get you a pretty good deal on lowering APR and lowering payments. Keep in mind that they basically work for the credit card companies… so while they can get you a good deal they are not totally looking out for your best interest. If their DMP doesn’t leave you with some free cash to save money and allow for emergencies (like new tires!) then I would move on to plan B. (I got into a DMP which left me no room to save or allow for the little surprises that happen – so when I needed to get a car repair I got behind on mortgage because I was too afraid to get behind on DMP. They kick you off of the plan if you get behind for 3mos or more. I could not get caught up on mrtgage without getting kicked off the DMP.)

    Plan B – if DMP doesn’t work out… retain a reputable lawyer. Stop paying on the CC. Save your money each month. Some may sue you, which is why you should have a lawyer before this happens. Eventually they will negociate with you. Also, talk to the lawyer about a chapter 7 (or 13)… you may want to at least consider it.

    • I would disagree. A DMP in this situation would set her up for a much more traumatic future financial failure. The goal here absolutely must be to readjust the financial life not to make the property the first priority but to make emergency fund savings and retirement savings the top priority. See https://getoutofdebt.org//52478/get-out-of-debt-guy-easy-steps-eliminate-debt-checklist

      So far commenters have missed what I consider to be the most critical issue here. Keep looking and post what you think it is.

      • Carla,
        Don’t give up on the mortgage modification, if you want to keep your house, that is. I too have two mortgages, and with perseverance, both were approved for modification and I am now in the trial period of payback with lower monthly payments, one of them the interest was reduced, and my three months of late payments (for both) and fees are gone (tacked on to the back of the loan). My main mortgage was not approved for a Tier 1 modification because the debt to income ratio was not more than 31% (I think that was the percentage), but because of financial hardship, I was approved for a Tier 2. Something you may need to check into to see why they denied you the first time.
        Also, because you have so much unsecured debt in the credit cards, if it were me, I would consider Bankruptcy and make those go away. I do not have credit cards, so all my debt is secured, so I can’t speak from personal experience on that part, but I do know from reading all the great articles that Steve provides here on this site, that it isn’t the nasty word that a lot of people think it is. It may save you. Don’t give up. and so sorry about your son.

      • I wasn’t saying that a DMP was the solution, in fact I thought I was being rather skeptical about a DMP. It was just listed as an option to at least look at. I don’t think we have enough details to know for certain.

        I have been through 2 DMP’s neither worked they just prolonged the inevitable. Neither left us with enough free cash to save any money… I feel the DMP companies knew it would not work for long, but the do it anyways… they get, what 15% of the payments that come through them???

        Anyways it’s all good. Thanks for making that clearer. 🙂

        • I agree in the grand scheme of things a DMP, debt settlement, and bankruptcy are the major solutions to look at when intervention is required.

          My big concern today is exactly what you described. If a DMP takes five years to implement and most leave people without room to save, then does a DMP in that case do more harm than good?

  3. I don’t think your situation is a bleak as you might think! You have property you can selll! Take a deep breath, be patient, sell that property (as quickly, but for as much profit as you can). Use that money to pay off the as much debt as you can. Unless I am missing something—you are not so bad off as you think!


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