So, here’s the situation. I’m 25 years old and currently $48k in debt. Here’s how it breaks down: $21k is from my car, a 2021 Subaru CrossTrek, $14k is from a failed business, and I transferred that debt from my business credit card to my personal. The last $13k is all credit card debt, most of which I racked up from poor spending choices, though some was from unexpected expenses. I pay about $700 a month on minimum payments, plus $500 for the car payment. I make $102k annually and just moved in with my in-laws to start tackling this debt. I’m thinking about bankruptcy as an option, but I’m not 100% sure yet. Any advice would be appreciated. Thanks for reading!
How are you making $102k and just moved in with your in-laws, but still considering bankruptcy? What’s your net income each month? It seems like you could easily pay more than $700 a month towards your debt.
@Kei
Yeah, bankruptcy feels dramatic, but the number is just overwhelming and I feel stuck. I only just moved in with my in-laws, so I’m hoping to make a big dent in this debt soon.
Fraser said:
@Kei
Yeah, bankruptcy feels dramatic, but the number is just overwhelming and I feel stuck. I only just moved in with my in-laws, so I’m hoping to make a big dent in this debt soon.
I net about $5k a month. The problem was I was living beyond my means while renting an apartment for the past year, so a big chunk of my income was going to rent. That’s changed now that I’m living with my in-laws.
@Fraser
If you’re netting $5k a month with a $500 car payment and no rent, you should be able to put $2-3k a month towards your debt. If you buckle down, you’ll get out of credit card debt in a year or less. Owing $21k on a reliable car with a good income isn’t a huge problem. If you stop overspending, you’ll be debt-free pretty soon!
@Bela
Thanks! That’s really encouraging. I appreciate the advice!
Fraser said:
@Bela
Thanks! That’s really encouraging. I appreciate the advice!
Focus on the high-interest debt first. Don’t go for the smallest balance. Those credit cards are probably at around 25% interest, right? Minimum payments won’t make much of a difference, you need to pay them off faster. What are the interest rates on all your debts?
You’re making $102k and not paying rent, but still considering bankruptcy? What’s going on?
This isn’t that bad. Make the regular car payments, and then put $2-3k a month towards the debt. Don’t add to it. You could be done with this in about a year, maybe less. Look up Dave Ramsey’s snowball method if you have multiple credit cards.
@Murphy
Thanks! I’ll check back in six months with an update.
Fraser said:
@Murphy
Thanks! I’ll check back in six months with an update.
You’ve got this! Just don’t file for bankruptcy. You’ll regret it later.
You’re making six figures and living with your in-laws. Stop spending money on unnecessary stuff and pay down your debt. That’s the way to fix it.
Phoenix said:
You’re making six figures and living with your in-laws. Stop spending money on unnecessary stuff and pay down your debt. That’s the way to fix it.
Thank you!
So, almost half of that debt is from your car. If it were me, I’d consider selling it and downsizing. You’re doing well with the income and no rent, though. Make sure to apply all the money you saved from moving back in with your parents towards the debt.
@Ellis
Thanks! I’ll think about that. I appreciate the advice!
Stop spending money on things you just want. Think about every purchase. For example, you’re making $102k, so every time you buy something, think about how much of your time it takes to afford it. If something costs $10, that’s about 15 minutes of work. You’ll see how much that stuff adds up.
@Zane
Thank you! That’s a great way to look at things.
Fraser said:
@Zane
Thank you! That’s a great way to look at things.
A lot of our debt comes from impulse purchases. If you shop online, try waiting 24-48 hours before buying anything, or freeze your cards in ice to delay your purchase and think about whether you really need it.
If you’re in the USA, your eligibility for bankruptcy will depend on your state. But you likely make too much to file for Chapter 7. Chapter 13 might be an option if you want to protect big assets, but it doesn’t sound like you have much besides your car. I’d suggest just focusing on paying down the debt.
@Parker
Thanks for the info!