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We Are Making More Money Than Before But Slipping Further Into Debt. – Lynn

“Dear Steve,

My husband and I are making more money than ever before but keep getting further in debt. We used up our savings 2 yrs ago due to being out of work for an illness and had to use credit cards to make ends meet. The balances grew so that when both our jobs became stable again we were in enough trouble that we are living paycheck to paycheck. In the middle of all of this we had a child turn 16 so we had a substantial increase in car insurance and gas prices hit $4.50 per gallon! The spiraling continued. We are going to have to do something and are trying to learn about all options.

My biggest worry is that our child is a senior and has started applying to collleges and what if any impact will a DMP , DSP or bankruptcy have on applying for financial aid. Not being able to apply for any loans or cards for a certain amount of years while our child is off at college concerns us. We need help now but should we wait until everything is finalized for college before we start anything?

Thanks for your honesty and help in advance

Lynn”

The Answer

 

Dear Lynn,

Oh the old college financing panic. I recognize it well. Many have experienced it.

So here is the problem. For whatever reason you are currently living unsafely, paycheck to paycheck. Your savings is drained and before we worry about student loans, do you have any plan on how or if you are going to have any cash available to pay for books and miscellaneous stuff for school?

Fuel prices will go back up again and winter will lead to higher utility bills. How are you going to deal with that, even if you have a child headed to college?

Get Out of Debt Free Hotline

What I generally suggest is if the parent is not in a position for college loans for their child there is nothing that prevents the child from taking out the loans that the parent then repays. The best bet on financing options would be to make an appointment to talk to the financial aid office at the school your child will attend. There are so many options and the financial aid office is motivated to close deals for financing, like a car dealer, and wants to sell the admission slot.

So my priorities are a bit different than your, my biggest worry is you. You are stripped to the bone here as far as financial protection goes. Just one unexpected expense or an accident will break your financial back. Let’s keep in mind that you are just making it from paycheck to paycheck and have nothing to speak of in savings.

A debt management plan or a debt settlement program does not seem like a logical way to tackle the situation. In both a debt management program or a debt settlement program you will need to make monthly payment over a number of years to eliminate your debt. Your situation requires more immediate intervention and like it or not, the honest best answer here is probably going to be to explore bankruptcy.

If you are able to discharge your debt or get a reduced repayment plan based on what you can afford then you can start rebuild your life. Rather than living month-to-month you can begin to start over. Instead of spending years trying to repair the past you can focus on repairing the future.

Before you make one single assumption about bankruptcy you owe it to you and your family to go talk to a local bankruptcy attorney about your situation. Meeting and talking to a bankruptcy attorney does not mean you are going to file, it means you are going to learn.

If I could give you homework I’d assign you a field trip to the local bankruptcy attorney and then have to check back in and report what you learned in the comments below.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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