I’m a 28-year-old homeowner seeking advice or resources that could help with my current situation. I earn about $75k a year and have approximately $31k in credit card debt:
- $12k with Discover (7 years)
- $14k with Chase (JP Morgan, 4 years)
- $4k with PayPal (2 years)
I bought my car in cash and work from home, so I don’t use the car much, which means buying a new one isn’t a concern. My mortgage is around $1.7k a month, and my individual debts total about $1k a month. Most of my remaining paycheck goes toward groceries, my spouse’s debts, medical bills, and a loan we had to take out due to an emergency.
I’m not overly worried about our other debts, but the $31k in credit card debt is becoming a significant issue in our monthly finances, and we’re often living paycheck to paycheck, making it hard to make real progress on any debts. While I would love to pay off this debt myself, it has been incredibly difficult to do so over the past year.
Since we own our home and I’m not looking for a new car, should I consider bankruptcy or credit settlement as my best options? Eliminating this extra debt would be life-changing for us.
I want to ensure I’m not overlooking anything by choosing this path. I know it will affect my credit, but considering my situation and my spouse’s good credit, is the impact worth an additional thousand dollars a month?
I think there are free credit counselors available who can help you without any cost. It’s important to cut up your credit cards to avoid ending up in the same situation again. Declaring bankruptcy isn’t as straightforward as it used to be, and you won’t get a fresh start as easily.
In the future, focus on paying off other credit card debt before tackling depreciating assets. You’ve paid off a car that you rarely use, yet almost half of your gross income is tied up in debt.
I’ve been in a similar situation and managed to get out of significant debt by using a work bonus to pay it down and cashing in a whole life policy (since I don’t have family to leave it to). This allowed me to reduce my debt to nearly zero.
You can do this stay focused, and good luck!
forced me to investigate further to check if I had a life insurance policy. Though I can’t seem to locate it, I thought I did. Still, that’s interesting to know. My spouse and I have no plans to start a family.
My intention was to give the earnings to my friend’s grown daughter, who is similar to my niece. Later on, term life insurance will always be far less expensive for you and your wife.
Meanwhile, you might wish to limit your 401(k) participation to what is necessary to qualify for corporate match. Once they are debt-free, their homes rise.
Bankruptcy is a permanent fix for a temporary issue. You owe less than half of your annual income, so it’s definitely possible to get out of this situation on your own. Start tuning into personal finance shows and podcasts focused on debt repayment; you’ll likely resonate with the callers and guests, which can help you create a plan. If you choose bankruptcy, you’ll always carry that label and will have to check that box in the future. Most likely, you’ll qualify for Chapter 13, which means you’ll still have to repay all your debts, just on a longer timeline, plus you’ll incur thousands in attorney fees and court costs. Bankruptcy isn’t a cure-all; it’s meant for those who genuinely can’t pay their debts due to unexpected circumstances. It’s not designed for people who owe less than half their yearly income on credit cards. The courts will likely require you to repay your debts, possibly under slightly better terms, but it’s not worth it. You can dig yourself out instead.
Can you use the proceeds from the automobile sale to settle part of the credit card debt? When I did this, it really did help. I still owe money on a personal loan, even if I paid the ones with the highest interest.
Compared to you, I had significantly less credit card debt when I had to file for bankruptcy in 2017. Like you, I was unable to make a dent and could only pay the minimum. Because I paid off my car just before everything was released, I was able to keep it. After a few years, I managed to rebuild my credit, and with my credit in the 700s and the bankruptcy still visible on my record, I was able to purchase a house last year. This could be an option since you don’t care about your credit and you own a house and a car. Naturally, speak with an attorney.