My mother and I live together (I support her). Based on an agreement with my step-father, he has paid my mother’s rent for the past 15 years. Unfortunately, due to a family dispute in January, he cut me off and stopped paying the rent, which left me scrambling to cover.
Once my credit cards were late, most jacked up the rates to where I can’t even catch up if I wanted to. The problem is, here and there, my brother attempts to help by covering the rent, but this isn’t a certainty.
With no guarantee of the rent being paid, I’m at a loss, as the rent is a little more than half my take-home pay. Besides working full-time, I’m also in my third year working towards an Accounting degree.
I just received a small amount of money in overage from student loans, and will also be getting a small settlement from a vehicle lawsuit I recently settled. I am so distraught trying to decide what the right course of action is, meanwhile, the creditors call my home and work daily, but won’t work with me on payments or amounts. I’m at my wits end.
Should I file bankruptcy or attempt to work things out with the creditors?
This is really more than one problem.
Loss of income: It is what it is.
Short-Term: You could use incoming funds to tread water, but I don’t think that is wise. See longer-term comments.
Longer-Term: Rather than see how to make it through next week or next month, we need to look ahead to next year. The casual reaction is to sell everything and use all available funds to make it through the days in front of your face. But what next? What happens once you spend every penny, sell every eBay item and then what? A wall.
I think that bankruptcy is a reasonable consideration for the situation. Bankruptcy is a result of the loss of income, that leaves you in a position where you can no longer make ends meet. Wishing it wasn’t so does not change what it is.
There is no reasonable expectation that you will be able to stumble your way out of this situation with squeaking by on uncertain income, jacked up interest rates and delinquent credit cards.
Sure, you could always try a credit counseling program and enter into a monthly payment program that would be about 2% each month of your starting balance. But I have serious concerns that it is a sustainable path for you. If you make twelve payments and then default, the only thing you have done is make twelve payments, you have not eliminated the situation.
Some might say that you could always quit school and get a second job and make more money to service the debt, but is that a reasonable approach? Technically, maybe it is, but realistically, I doubt that it as a sustainable solution either. Few can, most can’t.
If you wanted to try something before going to meet with a local bankruptcy attorney, call your creditors and see what payment plan you can work out.
But even if you could work out a plan, I’d still be worried. With the loss of income from your step-father and uncertain assistance from your brother, any unexpected expense is probably going to create a financial crisis. You have almost no resources to fall back on and no ability to make enough money to pay your bills and save money. Without a savings account you have no safety net for those unexpected expenses.
Please let me know what you decide to do.