I’m almost 30 years old, have a law degree from one of the top law schools in the country, and was laid off in December after working only a few months.
In any other economy, I’d be easily employable. Sadly, the world is not looking for junior lawyers with little experience right now. I’ll probably get a job in the next six months, but at that point I may be looking at as much as a year of zero income.
That, of course, follows THREE years of law school with zero income and FOUR years of college with zero income, which allowed me to rack up quite a bit of student loan and credit card debt.
The student loan debt is about $100,000. I’m not AS concerned about it, because it is very low interest, and the payments are pretty manageable. The credit card debt, about $25,000, however, is not.
My interest rates range from 10 to 20%, and my monthly unemployment payment of about $1,200 plus another $1,000 in financial assistance from my parents (which I am embarrassed to take at this point, but I must) JUST covers my rent and the minimum payments on all my bills.
I have yet to miss a payment, but I am completely out of cash, and now putting groceries, prescriptions, healthcare, etc. on credit cards — worsening the debt burden. My healthcare costs alone are about $500 a month between insurance and treating a chronic (but not life-threatening in any way) condition.
I feel guilty every time that I open my wallet, I wake up every morning thinking about this mounting debt. I want to get out. A job — which hopefully will come soon — will help, but even then it will be tough.
I can float like this for another three months or so, but then I will start falling behind. Even if I get a job tomorrow, I will still have to put virtually ALL of my income towards debt repayment. Where should I start?
My guess is that the chronic condition you suffer from is student loanitis. Right?
Seriously, as counter-intuitive as this sounds I suggest that you stop using the credit cards and stop making payments to them. Sure, it will lead to collections and screw your credit a bit but stay with me here. In the hurry to find intervention and solutions people almost always overlook the option of doing nothing.
Right now your choices are to smack your debt with bankruptcy or buy yourself a bit more time to land that elusive job. If you stop making payments you can’t afford, that will give you about six months time to land a job and start making money. At that point you can pick up the pieces and move on.
Whatever you do, keep the student loans current. After July 1, 2009 there are going to be some awesome interest rates available for you to consolidate those loans down to a stupidly low rate.
Now this situation is going to eat at your ego. Here you are, a well trained lawyer from a top law school, and you can’t pay your bills and will probably be in collections. Let me share with you the ultimate wisdom about these types of situations, “Dude, shit happens.” This isn’t about you, it’s more about a series of situations and occurrences that you have no control over that aligned to make your life hell.
In the meantime, go register with a temp company and do something, anything to make money in the interim. Many of us have had to do that in our life. Read You May be Down and Unemployed But You Are Still a Hero to Me. I’ve had to do it myself. It sucks, but it is what it is.
So what happens if you follow this approach and you can’t land a job in six months? Bankruptcy. But there is no need to fire a cannon to kill what is an annoying gnat right now.
If you do land a job and are able to start paying your bills again, the collections mess can be dealt with and with some time and repayment your credit can be healthy and strong again.