I have credit card debt of $95000, 2nd mortgage of $40000, 1st mortgage of $140000. My house is worth perhaps $300000. I make $115000 annually plus bonus in good years of 15%. This wasn’t a good year, so there was none.
My stock options are now under water (worth zero). I’m using my IRA to fund my daughter’s college tuition (cheap state school). Current mortgage is at 6%. Monthly credit card interest is $760.
Next year I will have two kids in college (then only 1 the following year). I do not qualify for any scholarships since my income is high and they don’t factor in debt. (Also, I cashed in options the year before to fund some college and that counts as income, so the FAFSA forms think I’m loaded). No college financial aid for me.
Should I go to the debt settlement companies? Negotiate a debt settlement on my own? Start falling behind on CC payments in order to start that process? Wait for the grandmother to die?
That inheritance will be $500k plus unless she hangs on in an expensive nursing home for years. Or should I be austere and cut out luxeries and try to pay it down. It seems pointless to pay it down, cause it’s too big to ever go away. Or should i do bankruptcy (seems harsh since I have an estimated FICO of 720).
I am sure you are a wonderful guy, have great children and are enjoying an otherwise pleasant life. But Jack, dude, isn’t that a bit harsh to hope from your grandmother to die soon so you get the dough?
Sadly that is not the first time I’ve heard that statement but it always sends a chill down my spine when I do. If grandma has $500,000 to her name, that’s for her to use while she is living. If she needs it to care for her until her long and lingering demise, then that is the way it is. That is not your money to count on and use. An inheritance is a gift.
Your plan to get out of debt can’t be to hope grandma kicks the bucket. We need a better plan here so let’s create one.
Why don’t you let the kids apply for financial aid in their own name and you make the payments?
By your figures you owe $180,000 on a $300,000 house. With that amount of equity you might be able to get an equity loan or refinance to take cash out to settle your debt. But is that the right way to go?
You said, “Or should I be austere and cut out luxeries and try to pay it down. It seems pointless to pay it down, cause it’s too big to ever go away.”, the answer is yes.
Jack, you ran up $95,000 worth of credit card debt by living a life that was larger than your income. It wasn’t to big to run up and I don’t get the sense here that its was created by exceptional events. The way you dig your way out of that is by cutting back, making modifications and reasonable adjustments.
Bankruptcy is not out of the question because of your credit score of 720, bankruptcy is a tool determined by the situation not how wonderful your credit score is. Plenty of people who are current on their bills go bankrupt because they can’t take one more step forward. It just seems like that is not the situation in your case.
You didn’t get in debt overnight, you are not going to get out overnight. Jack, get your lifestyle back inside your income and start paying down the debt using the debt snowball approach. I don’t think the debt settlement route is right for you since it would result in a large tax bill for you on the forgiven debt.
An online tool that can really help you get the expenses under control is Mvelopes. I think it is a very helpful budget tool that can give you clarity on where your money is going and where you can make cutbacks to save money without living like a pauper.
If anyone deserved a big hug Jack, it’s you. Here is a really big hug to help you find peace and move forward.
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