My husband and I owe about $50,000 in credit cards, loans, and vehicle debts. We moved back to USA about 4 years ago after living many years out of the country.
We arrived with no money, and 3 kids in tow, so most of our debt was accumulated by just trying to provide the basic needs to our family. We have been paying our bills, never been late, and have pretty good credit scores. Unfortunately, due to the economy my husband is now only workin about 20 hours a week, and that has really thrown us off.
I know we will not be able to make all of our payments regularly, as now I have to look at the bills and decide whether to pay them or buy food at the grocery store….I’m sure you can understand me opting to go to the supermarket as opposed to paying the utilities or credit card bills.
Is there something I can do to prepare for what is to come when I can’t pay my bills any longer? Should I contact someone, and if so, what do I ask them?
Thanks for your help and God Bless!
It is important for you to understand that once you stop paying your credit card bills you will fall into a giant hopper and then just move through a huge sausage factory debt collection process.
Debt collectors will gently begin to contact you at first, the pressure will increase over time and some debt collectors may say some fairly disparaging and nasty things to you. By the time your accounts get six months past due the collection pressure will reach a crescendo and then die off once the account is charged off and sold to a bad debt buyer. After that the collection cycle will begin again and your debt may be sold again and again.
You should absolutely not make any payment arrangement you can’t afford to pay. And if you have no money in savings right now you should consider not sending any more payments to your creditors and save that money instead.
Without a change in the income status, there is no expectation that you will be able to return to making payments to those creditors. In that case you may want to consider bankruptcy to eliminate the debts.
There is nothing that prevents you from repaying those creditors after bankruptcy if you want. At that point you can repay what you can really afford and it will all be at 0% interest. You have no obligation to repay them but you can if you feel strongly as if you should.
You should probably contact a local bankruptcy attorney and schedule a free bankruptcy consultation to go in and talk about your specific situation.
Now, you need to prioritize the bills. Some of the bills that need to be paid first are rent, mortgage, health insurance, car payment, utilities, food, etc.
Next, putting money in savings is the highest medium priority debt, I’d also put a gym membership in the medium category. Going to the gym helps many that are suffering with stress and depression.
Payments for credit cards are the lowest priority debts and can really only be paid if you have any money leftover after all your obligations above.
People are going to try to pressure you and scare you because those work as collection tricks to make people pay. You absolutely don’t need to allow yourself to get sucked in to all of that negativity and nastiness. Kill the collector with kindness, tell them what you plan is and if you do decide to go bankrupt, that will legally stop all collection activity.
The more you just bob along with a friendly attitude with the bill collector, then your account will not get pulled out early for special treatment, like being sued.
Bankruptcy is not an optimal outcome for our financial lives, but neither is only being able to find part time work and barely being able to feed the family. Your situation is not one where you’ve necessarily been reckless but you are just going to have to step-up and address your situation. Don’t ignore it, it does not get better by festering.
Some say that bankruptcy is not a responsible thing to do, but I disagree, especially in your situation. You need to ask yourself if you have a greater responsibility to try to fix the past or fix the future. Your children need you to create an environment where they are safe, warm and fed. You need to take action now to prevent you from getting kicked out of your home or the utilities cut off and with your current income, bankruptcy is probably the only way to do that.
But bankruptcy alone may not be enough to save you. If you have been using credit cards to pay for basic expenses, like food, then once you go bankrupt the cards will be closed and you will not be able to fall back on those anymore. If you find that are struggling to put food on the table after your bankruptcy, you may have to turn to a local food bank or other public benefits for support.