So for context, my husband and I are both 22. We’ve had three pregnancies, one extremely early, with several complications leading to medical debts. Together, we owe about $15,000 in medical bills. This also led to me taking short term disability income from my job for almost two years at only 60% pay, so things quickly got behind.
We have a car loan we’re upside down on, but need to keep it as we have no other options. We owe about $20,000 on it. There’s another car loan I co-signed for my mom, which we owe $28,000 on.
Here’s the breakdown of what we owe:
$15,000 medical debt
$48,000 for vehicles
$500 in credit card debt
$12,000 in unsecured and secured loans
$900 in payday advances
$5,000 for phone bills and utilities
$3,000 owed to the bank
We’ve made some bad decisions, but we’re trying to fix our credit and start building again. We make an okay amount of money for our ages — about $80,000 a year. Our monthly expenses are around $3,500, not including the payments towards most of our debts.
This feels like a huge amount of debt to me. I’m not sure what the best option is in the long run. Should I try paying down these debts little by little and hope my credit score improves? Or should I file for bankruptcy and start over? Any advice would be greatly appreciated. We’re trying to clean up our mess and create a better future for ourselves and our kids. Thanks in advance!
If you haven’t reached out to a good bankruptcy lawyer yet, I think you should — like, now. Try to find one who doesn’t advertise a lot. Referrals can be really helpful, so ask around. What you need is advice, not a sales pitch. There are a lot of things to consider with bankruptcy, and a good attorney isn’t cheap. But they can help you figure out what assets can be protected and how to avoid surprises. The first consultation is usually free, so if you don’t feel good about it, just move on. Trust me, picking the right lawyer is key. Best of luck!
@Lyric
I’m already talking to one! We haven’t made any decisions yet because of financial reasons, but we’re hoping to move forward in January. Thanks for the advice!
I’m not great with money myself, but I’ve dealt with large medical debt before. When you go to the hospital, try negotiating the medical debt. At the very least, they should set up an easy payment plan, and from what I’ve seen, it’s usually interest-free.
You should definitely try to find those medical bills and call the billing department. Explain that you’re on short-term disability with three kids and ask if there’s any way the bill can be reduced. They should offer some kind of payment plan too.
Also, what kind of car are you driving? Do you need car seats for your kids?
@Micah
Thank you! I’ll contact the hospital’s billing department tomorrow and see what they can do. We drive a 2023 Kia and yes, we have car seats. Thanks again for the advice. I really appreciate it.
You’ll need a bankruptcy lawyer to figure out whether you qualify for a Chapter 7 or if you need to file Chapter 13 with a payment plan. The cars are secured debts, so if you keep them, you still have to make payments. But in a Chapter 7, you can choose to give up the cars and discharge the debt. This might be possible in a Chapter 13 too, but I’m not sure about the rules there. If you keep making payments on the cars, they won’t be repossessed — but if you stop paying, they can be.
Ash said:
With that much debt, I’d recommend filing. If you miss court dates, those summons can turn into judgments, which could then lead to garnishments.
Bankruptcy should be your last option, and only if your debts are greater than your net worth. If your debt does exceed your worth, I’d say go ahead and call a bankruptcy lawyer for a fresh start. But if your debt is less than your worth, try refinancing high-interest debts first. Interest rates are really high right now and probably won’t go back to being as low as they were a few years ago. Either way, I think your credit will take a hit for a few years due to credit usage and inquiries, but with time, you can build it back up and have excellent credit in about 5-10 years.
Whether you decide to go through with bankruptcy or not, just remember, you’re still young. You’ve got plenty of time to recover from this. It’s a tough situation, but don’t give up. When you’re in your 30s, you’ll look back on this and be proud of how far you’ve come.
As long as you’re paying at least $10 a month on each debt, they can’t send you to collections. Just keep making those small payments. And remember, you’ll need to pay off the car loans in full to avoid repossession.