I've been debating with myself as to whether or not I want to blog about my debt. There is embarrassment and shame associated with having $133,000 in credit card debt, but I'm hoping that maybe writing about this situation and trying to resolve it will make me somehow feel better and that it may help others in this situation.
How I got to this point comes from at least nine years of being a single parent, making a good income and thinking that I could just keep spending. I put two kids through college, bailed out a failing business and have helped numerous friends and family members through some financial problems. I've been more than generous with my children and have charged on my credit cards like there is no tomorrow, thinking there would be no problem paying it back. Then the inevitable, the housing market slowed to a crawl and my income is commission and it is connected to the housing market and real estate. This year alone my income dropped about 45%, when you have two houses with mortgages to the tune of $280,000 and $133,000 in credit card debt, something has to give.
I have charged my credit cards to the max in 2007. I've been unable to keep up with my expenses without borrowing from my cards. Both of my cars broke down with repairs of $6,000, and one was involved in an accident, another $4,000, my house needed some serious repairs to the septic system and I needed to paint it to get it ready for sale, and my income declined. So here I am, I've maxed out my credit cards, I don't have enough money coming in from my job to pay all my monthly bills and I have to find an alternative to bankruptcy, before I cash in all my assets just to make monthly payments. I don't know when this market will turn around and my income will be more stable, but is commission ever stable?
I've researched it all and I've decided that debt settlement will be the best option for me. I've talked to three debt settlement companies and with their fees, it will take me longer to get out of debt. Also, I really think creditors want to talk to their consumers and I can do anything a debt negotiator can do. However, they do have more experience and they settle large amounts at once, which probably makes them more of an expert, but I need to do this myself because, as it is, I don't have all the money I need to be swift and successful with this and with a debt negotiator it would take me longer to settle and the longer it takes, the more chance I have of being sued. Although I want to avoid being sued, there are worse things in life, but publically it would be very embarrassing.
I have consulted with a bankruptcy attorney and I could file Chapter 13, but that process would take five years and I really want this over in one year and I don't want to live with that on my public record for the next 10 years. It could affect my future employment opportunites because I believe that if you have had a bankruptcy you can never get bonded?
How do I plan on taking care of this in one year? Right now I'm thinking I will have to borrow against my 401k - I think I will have about $19,000 available by June in a loan and a $3,300 hardship withdrawal. I've been able to borrow $22,000 and I am going to try to sell my second car and some personal belongings for about $7,000 in the spring. I'm thinking I will get a tax refund of about $3,000. That still isn't enough money, I'm figuring I'll need about $65,000. I'll have to try to save an additional $5,000 by June. I tried to get a home equity but was denied because of a low appraisal. I figure waiting and negotiating will take a total of six to eight months so I have some time to do the things I need to do and hopefully the car will sell and etc. It's pretty much up in the air right now. My goal is to have this credit card debt behind me by the end of 2008.
Regarding the houses, I've been able to rent one house and that pretty much covers the mortgage payment, taxes and insurance. The house I'm currently living in is going up for sale after June. If the housing market doesn't turn around, I will not be able to sell it and I will have to live here another year. My mortgage is an adjustable rate mortgage, interest only and that scares me. I took out a five year ARM about a year ago thinking I was selling the property and needed some breathing room until it sold, but with the housing market falling, I can't get what I need to get right now, if worse comes to worse I may have to "take my bath while the water is warm" and sell for what I owe on it, we'll see.
So who are my creditors with the credit card debt; BOA, Chase, Citi, Discover and Sears, five creditors with eight credit cards. I figure by the time I am ready to settle these cards they will be at $150,000 to $160,000 with overlimit fees and late fees and their famous 30% interest. They really try to help you out once you go delinquent! By the way, I haven't had a late payment on anything in over 20 years; I'm really nervous about this whole thing.
I hope I am able to get through this without getting sued or ending up in bankruptcy. If I end up in bankruptcy the creditors will get a lot less. There are some concerns regarding my tax implications. I'm currently about $70,000 insolvent so my first $70,000 in debt cancellation will be tax exempt. I still have research to do on if fees can be deducted from the cancelled debt; a good question I intend to ask the IRS and will update later.
Am I proud of my situation? I am not, but hopefully others will learn from my experience and have the courage to take care of their own debt without the expense of a debt settlement company. However, if this doesn't work well for me, they may decide to hire a debt settlement company. Time will tell.
My Story
January 17th, 2008 at 08:32 pm
January 17th, 2008 at 09:10 pm 1200604203
I don't know if this will make you feel any better but... I think I can relate somewhat. Towards the end of my marriage, me ex and I had a debt totalling -330k! It was a combination of student loans and a newly purchased house. But to put this into perspective, our combined income at that time (because we were still students) didn't top 40k gross!
Needless to say, I became quite frightened. Today, although I am divorced, I am trying my best to turn my financial ship around, but what I find unsettling is that my ex is still doing what she does with money.... Normally, I don't care about that, but it also affects our children, and that I am concerned about.
Anyway, I too had reservations when I started blogging here. However, due to my impending divorce, I thought it would be wise to write it down somewhere, if only so I can keep all the facts straight. I didn't think anyone care about it really.
It turns that I couldn't be more wrong. The out-pouring of support and sympathy was tremendous. And to this day, I am still both amazed and very grateful for having that support. It has gotten me through some of the loneliest and most uncertain days in my life.
I am glad that you have decided to join us. I hope that you too will find solace here as I have. Clearly, you have both the drive and the plan to turn things around. I wish you the best of luck, and I wish there was some way you can talk to my ex.
January 17th, 2008 at 09:12 pm 1200604375
January 17th, 2008 at 09:20 pm 1200604804
January 17th, 2008 at 09:52 pm 1200606750
Call the credit card company and the mortgage lenders and explain you're in a bind. See if they'll work with you.
Are your children or those you've helped able to assist you? I know there are others out there w/more ideas.
And lastly,don't be so hard on yourself.
January 18th, 2008 at 12:32 am 1200616321
Have you tried to get a "hardship month" where the mortgage co or credit cards let you skip a month? I got to do that once when I was off work for 6 weeks due to a child in the hospital. I really didn't see where it effected by credit.
January 18th, 2008 at 01:20 am 1200619234
As a child I grew up as a farmers daughter and we were not rich by any means. Now that I'm in this mess I know how to down gear, cut back on expenses, save on groceries and turn hamburger into a gourmet meal. I am saving everything I can for debt settlement. Hardship programs will only be a bandaid to a more serious problem that needs to be settled. The money I could use in hardship programs will be saved to settle my debts because it is the only way out of this mess besides bankruptcy (which I will not do). The faster I settle this matter, the less likely I will be sued. With all of the tax implications of debt cancellation, it may have been a smarter decision to go bankrupt, but ethically I cannot do it.
My children are just starting out their lifes and have offered to let me use their credit and etc., but I have paid to educate them and I want them to start their lifes off the right way, with just the limited debt they have. I have however, counseled them on their credit card usuage.
Broken Arrow, thank you for your response. I've read some of your blogs and I wish you the best in your new life. I was divorced for nine years here, but married the later part of 2007. Being single has it's good points, it's joys and I know that it can be lonely too. I enjoyed being single and the independence it offered and being able to raise my children on my terms, so when I was asked if I wanted to marry late last year, it was something I had to think about. It becomes that good being single, so enjoy your independence, when the right one comes along you will know it and be ready. Time does heal all wounds.
January 18th, 2008 at 02:01 am 1200621678
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January 18th, 2008 at 06:24 am 1200637467
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January 18th, 2008 at 12:52 pm 1200660752
http://www.cheapskatemonthly.com/mary_mystory.asp
Good Luck to you and keep us posted on your awesome progress towards being debt free.
January 18th, 2008 at 01:30 pm 1200663039
January 20th, 2008 at 11:03 pm 1200870229
I think there may have been a typo in your post, but i think now you're saying you're NOT going to use a debt settlement company, right?
I think you can try to negotiate with your creditors yourself and make a strong case for 1) restoring your interest rates to REASOANABLE rates and 2) immediately stop incurring further late fees and penalty charges. If they want you to pay them, they've got to be reasonable!
I'm glad you're working with an attorney; hopefully he/she can take a holistic approach and give you guidance on all aspects of your financial situation.
the others are right, you've been very courageous in baring your soul here.
It's happened to others. You'll get through this. I understand your need for closure. Hang in there.
January 22nd, 2008 at 01:19 am 1200964749
it sounds like you have a good knowledge of your options and are making the right one for your family.
How is your new husband handling this? is he supporting you in this venture? And yoru children? Are they old enough to know where you are and what you are facing? being honest with them will help the situation and your stress level.
i know that this site will provide you with a lot of ideas, conversation and strength in the coming months. everyone here only wants what is best for you and your family, try to remember that! and even though you are fighting this fight and feel the way you do, remember to ake comments to peoples blogs and post often! it will help keep you on track and you may learn or teach something to the members here.
we welcome you and will support you to the best of our ability. never hesitate to as questions as people are always having suggestions and idea. take what works and discard the rest. Best of lukc to you and your family!! --Kris
January 22nd, 2008 at 04:10 pm 1201018220
This whole society's notions about money are warped, so don't blame yourself, but rather congratulate yourself for having stepped out of the matrix. You'll fix this, and you'll come out on the other side much, much wiser than most people about money.