“Dear Steve,
I was self/unemployed after a layoff for about 3 years, until about a year ago. I had about $60K of home equity, but accumulated about $80K in credit card debt (I had no debt going into the period). We live very frugally, with hand me downs, Goodwil,l and 200K+ mile minivans. In the current economy my home equity is probably only 40K and it does nothing to help me make my credit card payments. I have not accumulated any debt since getting a job about a year ago, and in fact paid down several thousand $. I negotiated min payments with BOA that accounts for about 60k of my debt with low interest rates, but it is still more than I can handle. I have not been about to negotiate with the other card companies yet and they are charging me 25%+ interest.
Add to all that, my company had an across the board 10% pay cut about 6 months ago and that costs me about 500/mo.
I dont even know where to begin. Also, because my job requires travleing and they do not give company cc’s, I must keep 1 card active to cover expenses for my trips. $500 is probably enough and I always pay 100% off each month.
Where do I even begin? Did I mention that I am married with 5 children?
I don’t want to declare backruptcy. I may be open to writing down some debt as BOA has already offered to do, but I have no cash to do it with until I can sell my home. What are my options?
Ken”
Dear Ken,
Let me be brutally honest here. Continuing on the current path you are on does not provide you with a solution.
Unless you had some sort of repayment plan in place that would address the needs of all creditors then you run the risk of simply living month-to-month for years and if just one thing happens to your income or one of your other creditors does not agree to your repayment approach, you are going to be toast.
It might just be that you are adverse to bankruptcy because you feel a moral obligation to honor your promises to repay. That is admirable but their is a safer way to proceed.
As the father of a large family, you have a moral duty to properly care for your family with a safe environment, nutritional food and proper medical care. I don’t get the sense that you are meeting those obligations in your goal to pay Bank of America the minimum payments they want.
The payments with Bank of America, by your own admission, are more than you can handle. An appropriate repayment amount at this time would actually be one that you could reasonably afford, not what they wanted.
And even at a time of getting out of debt, you also need to be focused on saving money at the same time. You need an emergency fund with five kids running around. I doubt you have that.
My personal opinion is that you need to go bankrupt. You can then save $500 and put that on a prepaid debit card that you can use for travel. The best deal I’ve seen recently is the debit card offered by Walmart MoneyCard.
Beginning today, Walmart will offer the Walmart MoneyCard, a reloadable, pre-paid Visa debit card, for only $3. The new $3 purchase price will provide the more than 35 million American families underserved by traditional financial institutions many of the advantages of a checking account, including depositing their paychecks on a safe and secure card, checking their balances, paying bills and shopping anywhere Visa debit is accepted. The Walmart MoneyCard is now expected to save customers $50 million annually compared to similar cards. In addition, the card has no overdraft fees.
“Customers who use the Walmart MoneyCard tell us that we’re making a difference in their lives and helping them get their finances under control. The reduced fees on the Walmart MoneyCard will save our customers millions of dollars,” said Jane Thompson, president, Walmart Financial Services. “We will continue to lower prices on the money services that we
know our customers need.”
Do you see the double-edge sword here? You won’t be able to save the money to deposit on the card as long as you are repaying your debts. And you can’t stop paying your debts unless you go bankrupt. And you need a card to travel to keep your job.
You might not want to go bankrupt Ken but you do have a duty to travel for work and care for your family. Please go get a free bankruptcy consultation from a local bankruptcy attorney. You need to seriously consider bankruptcy.
Does that make sense?
Steve
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