Need some advice please!

[SAHMom]

I have gone through and read a lot of the posts about debt settlement and am convinced my husband and I can do this on our own. Just need some advice on approach and when to do it.

Here's a list of the CCs in question with approx. balances and interest rates:

Capital One $2200 1.99%
Citi #1 $3500 31.74%
Citi #2 $16,100 15.75%
Citi #3 $4900 17.74%
Discover $9300 22.74%
MBNA $15,800 21.74%

We are just now getting to the 30 days past due point and have tried talking to Discover but of course, they won't "help."

The situation is this: I ended up quitting work at the end of Oct. '05 to stay home and homeschool my 12-year-old son. Knew we would be facing this but figured we would handle it when the stuff hit the fan. So now it has and we need some help in knowing how to do this. It is NOT an option for me to go back to work as my son (and 3-year-old daughter) need mom at home. We feel VERY strongly about this. My husband already works his butt off at work so a second job is not the answer either. We know how we got here...know how not to do it again, just need to get out of where we are right now. Any experts out there up for the challenge??? I would really appreciate all input!!!

Thanks!!!! :D

[jeffr]

Wow! You've got a lot of cc debt. I've totaled about $51,800. You could see if you could get on their hardship program, but, they do have drawbacks, and their only temporary. (You may not qualify, you're not seriously past due, yet!)

As much as I hate to say this, (Maybe LadynRed might agree with me!), I'd head for the Bankruptcy courts, and file a Chapter 13.

You could go the debt settlement route, but, that has drawbacks also. Any amounts "forgiven" by your creditors will be taxable income according to the IRS and you will receive a 1099 at the end of the year. I also don't think debt settlement is an option for you right now as your accounts are fairly current. Most creditors won't "negotiate" until your accounts are charged off. The longer their not paid, the better for you. If you decide to go this route, you'd just stop paying, period. You'll get phone calls from your creditors, then, once it becomes uncollectable by your creditors, they will usually turn it over to a CA (Collection Agency). You could then DV which of course will buy you more time. The idea here is to save some of the money (if not all!) that you're paying your creditors monthly to pay towards your future settlements. Most creditors prefer "lump" sum payments to settle your account. Interest and charges will still accrue during the time that their not paid. (Some creditors may become impatient, and could file suit against you, this is another pitfall of debt settlement!)

If you have a balance of, say, $7,000, it could easily climb to maybe $9-$10,000. Then you would try and negotiate for so much on the balance, say 50-80%. So say a $9,000 current balance, you hope you could get down to, say, $4500.00. Each creditor is different. (Keep that in mind!)

Debt settlement can be done. Don't hire anyone else to do it for you. You can learn how to do it right off this site. I believe they have a debt settlement guide you can purchase for $10 or so...It's going to take a LOT of patience though...You can do it!

With a balance this high though, I'd say a BK13 is the better choice. :roll:

I'd like to see what LadynRed thinks on this also...

[elyse449]

Hi there,

I want to say that I admire your decision. It's a big step. I'm sure you had some valid reasons to do it. Also, regardless of whatever we parents choose it seems there's going to be some level of "hardship" involved, be it emotionally or financially.

That being said, that is why we do not make debts that exceed my hubbys income, or a percentage thereof actually. In other words, if you're borrowing monies that are based in whole, or in part, on the combined household incomes of you AND your spouse than you're obligated to continue paying it.

Don't get me wrong, I do firmly believe in family first and I'm sure you have a very valid reason for your decision you made, but if it were me I would've helped pay off some of that CC debt FIRST and FOREMOST, especially if I helped charge it up. JMHO. I hope I don't offend anyone. Allow me to add, it's tough to see too far ahead into the future sometimes about where we'll be or what we'll need to do...than again, that is my whole point about learning to budget along with repairing my credit. It seems to be our ideas about money that get us into trouble.

I don't think there's a whole lot to do. Could you maybe take out an equity loan or line of credit on your house to pay some of the debt up?

Good luck.

E~

[BigLaw]

I think you have a few choices.

1. File BK and move on with your life. You'll still have to pay a lot of debt back and it will make getting credit difficult, but you'll get as much of a fresh start as the law allows.

2. Allow the debts to charge off and negotiate. I think BK is cleaner and will be a lot less hassle for you in the long run than a bunch of CA's hounding you and lawsuits being filed against you.

3. Make some hard choices and change your attitude towards debt. I hate to sound like Suze Orman or Bruce Williams but, to the extent you have not done so yet, you need to pare back your lifestyle somewhat. Move to a smaller or less expensive home. Get cheaper automobiles. Drop to only one automobile until you get back on track. Divest yourself of some assets. Cancel your cable bill. Don't eat at restaurants any more. Maybe consider getting a job for a couple of nights a week. Borrow some money from a friend or family member at a lower interest rate. Does your church have an emergency loan program?

Its hard to say what you need to do because I don't know your financial or personal situation and what exactly caused you to get into this situation.

I am also not trying to moralize, because I am sure you and your husband feel bad enough about this situation, but cases like this are the reason that the BK laws have now changed to become less debtor friendly and why CC companies can get away with usurious interest rates.

I think its great that you want to home school your kids and be a stay at home mom and that your husband works hard. The problem is that your lifestyle apparently can't afford it, for whatever reason. Lots of parents do not home school. Mine didn't. I doubt yours did either. Do your kids have special needs that require home schooling? How much could you clear after taxes and daycare expenses. If its $20K or $15K that would go a long way towards paying down your debt.

I'm not trying to be a jerk. I'm just playing "Devil's Advocate". When you try to explain your problem to the CC companies or a Judge these are the same questions you are going to get. Essentially, they will ask "Why should we help you?" and "What have you done to help yourself?" People don't generally want to help others out of this type of jam unless they know you are the ones doing the heavy lifting.

Good luck in going forward. I know what its like to be in financial difficulty. It sounds like you and your husband want to work together to get this resolved and thats the first step. There is a lot to learn here, but your problem is a bit different than most here.

[nascar]

As an active homeschool and single income family, I'll tell you that we're all faced with those decisions. Get involved in your local homeschool network. You'll find great support out there. There are hundreds of thousands of families out there just like yours who have decided not to subject their children to today's public school system. Don't let the debt affect your decision. Your children are worth far more than your credit card debt.

I'm not affilitated with this group, and I hope I'm not breaking any rules, but you might want to look at www.crown.org/. I think you might find some excellent suggestions on handling your current situation.

[BigLaw]

Nascar & SAHMOM-

I have nothing against homeschooling. Its your choice. The only issue is whether it is responsible to homeschool instead of work when you can't pay your debts. I submit that following that course is the height of irresponsibility and the wrong thing to teach your kids. Unfortunately, the kids wil alsol suffer when the family can't pay its bills.

If you do the simple math, they owe over $50K in CC debt at an average rate of about 20%. Thats $10K per year in interest. In other words, every year, they are spending more than 1 yrs college tuition (at a state university like U of FL) for each child, for absolutely nothing.

If you want to make the sacrifices to homeschool your child and you can afford it, that is wonderful. If you can't make ends meet and are on the precipice of financal ruination for your family, then something's gotta give.

I'm sorry for the rant, but the answer seems pretty simple in this case, unless there is some special reason why the children have to be homeschooled or she can't work. Take personal responsibility for your finances or pay the price. Delay homeschooling for a year or two, work with your creditors, and put yourself back on track. You and your kids will be much better for it. It'll be hard work, but you will have kept yourself from making a 10 year mistake.

[tufftub]

We do not home school our children, but my wife and I have taken turns being an at-home parent since the day our children were born. Our oldest child is a special needs child who benefits from having a social group at school. We both feel more comfortable having the children come to our house from school, rather than going to a daycare at the end of the day.

That being said -- we have given up a lot to make this happen. Are there expenses you can cut out in order to pay down your debt?

Here are some of the ways we saved when things were tight -- no cable, no car payments (older vehicles that we paid cash for and even dropped to just one car at one point), only cellphones (got rid of house phone so we only had one bill), library membership for movies and books, babysitters co-op (watch each others kids for free), coupon clipping and learning how to cook on the cheap, did not go out to eat (picnicked in the park if we wanted to go out), and purchased all clothing at the local thrift stores (you'd be surprised what you can find).

It sounds tough, but you get used to it. Now we can afford some small luxuries, but it is funny how we got used to our penny-pinching.