Should I file for bankruptcy or do debt consolidation. I have $42K in cc debt + my car, house, i cant keep up?

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I have $ 42K in cc debt with an average of about 14% interest. Another $ 10K in 0% financed stuff, $ 1,400 mortgage, and $ 330 car payment, $ 650 student loan payment, and another $ 2K in bills each month. Due to new kiddo and making almost half what i did due to sudden change at work, i can barely pay the minimum I need to plus just $ 1K towards my debt each month. I have stopped spending money on anything, but the interest and amount of debt is killing me, and im sure the credit card companies are just waiting for me to miss one payment to default me to 33.3% interest. Please no guilt trip on the amount of debt, i got stuck with alot of it after a divorce 2 years ago and i didnt even do the spending!!

11 Comments
  1. Reply
    Miss Know It All
    May 4, 2011 at 1:15 am

    Do a refinance on your home and if you have enough equity you can pay off everything else. If not that will give you a month with no house note and you can catch everything else up…

    Good Luck!

  2. Reply
    Mr. G.
    May 4, 2011 at 1:57 am

    First I would get a free consultation from a good money manager or an attorney. From what I have heard debt consolidation companies are in it for themselves and not such a good alternative. Try doing some internet research on both bankruptcy and DC. Good luck.

  3. Reply
    RAY
    May 4, 2011 at 2:31 am

    Trust me… I understand it’s not your fault but you need to be aware of some things. First of all the new bankruptcy laws make it harder to file for complete discharge. You are only allowed so much equity in your home and/or car in order to reaffirm the loans. You are allowed a car but only a value of $ 1,000 in equity so if you have more than that, you’ll have to pay the trustee the value of equity over that $ 1,000. That can be thousands. Debt consolidation doesn’t do you much good because it’s just moving the amount of your debt to another refinanced method. If you owe $ 42K, you will still owe $ 42K but for a longer time. If you can discharge that, do it. Your student loan payments will not be affected. You cannot default on them. Bankruptcy is for people who cannot pay their debts and you just might qualify but you can forget getting credit for several years at any normal interest rate. Are you sure you need a $ 1400 a month mortgage? Maybe you can get on a plan for repayment on your own and not mess with bankruptcy which may come back to haunt you with employment, insurance rates, etc. Why not talk to a consumer credit counseling agency first before you blow $ 1,000 for an attorney to do bankruptcy???

  4. Reply
    jilliebean3590
    May 4, 2011 at 2:40 am

    Have you thought about refinancing your house or getting a Home Equity loan? You can payoff everything you have and have one payment for it all. On a Home equity line you can get a low interest rate and your payments would only be 1% of what you owe. Also you can put a lock on a large lump sum of the line to lock in the interest rate.

  5. Reply
    GUS
    May 4, 2011 at 3:23 am

    You should contact a BK attorney in your state. He/She will explain the positives and negatives of declaring BK and can probably tell you the likely outcome of your filing (repayment vs. full discharge of all debts) The attorney will also be able to tell you the local rules and how the trustees look at things. For instance you may have 30k equity in your house but if the market it soft in your area the trustee may choose not to take your house. Sometimes the attorneys play golf or tennis with the trustees and you may be able to work the system in other ways. I filed almost 4 years ago after a divorce and kept my house, car, and another piece of property I owned. Best decision I could have made at the time. Good Luck

    P.S. 90 Percent of debt consolidations and repayment plans fail. I would not go that route. Full discharge of all debts wipes the slate clean and allows you to start over now. Debt consolidation stretches out your problems and usually fails anyway. If you start over now you will be in great shape in a few years. If you don’t you will still be dragging things out 3 or 4 years from now. And don’t worry about all those creditors you stiff – they look at you as a number, not a person. They will play you until they suck the last drop of life from you.

    P.S.S The one concern you should have is will BK affect your job or your ability to get a job. A lot depends on what you do for a living. Good Luck

  6. Reply
    Brian B
    May 4, 2011 at 4:15 am

    I would cut up all the cards except one for emergencies only. Call each CC company and tell them you afraid you will default. Most are open to giving you a low rate of interest for a time period. This will not necessarily get them paid off but allow the total debt to decrease to a point where the payments are manageable. Get a part time job if it is at all possible and apply all that money to the credit cards.

  7. Reply
    Franco
    May 4, 2011 at 4:51 am

    Bankruptcy is the last resort.

    If you are a student get a job for Saturdays or Sundays?

    You can let a spare room to another student.

    You can give up your car and use a bicycle. It is healthier.

    That 14% interest on the loan is too high. Shop around for a better rate.

    Scrutinize everything and only buy the essentials.

    Spend much less on clothes and go where entertainment is free.

  8. Reply
    adddictedtomonsterenergy
    May 4, 2011 at 5:45 am

    Sell your car now which Will free up 330 month plus the insurance amount. Get rid of cable TV and other various crap.

  9. Reply
    Jaclyn
    May 4, 2011 at 6:05 am

    I recommend Dave Ramsey’s book “The Total Money Makeover”.

  10. Reply
    See Saw
    May 4, 2011 at 6:22 am

    Opt for a debt consolidation loan: The easiest method of getting a debt consolidation loan is to utilize the equity of your home. Equity of your home is calculated and determined by the difference in the amount you have paid and the amount you owe. If the amount you have paid is more than the amount due, you can use it as collateral. This allows you to borrow money on lower interest rates. Besides, you also get tax benefit on this type of loan. Consult your tax advisor before opting for this loan.
    http://debt-trap.com/category/Debt-Consolidation-Basics.html

  11. Reply
    jmb_128
    May 4, 2011 at 7:10 am

    You need professional help. With this amount of debt, you will NEVER pay off the debt by making the minimum monthly payments. I would suggest using a debt settlement company, they are not owned by the CC companies (like CCC) and can usually settle your debt for 30-50% of what you owe. It is going to affect your credit score but it is much better than filing for bankruptcy. A couple good resources to check out are http://www.ccdebthelp.com and http://www.internetdebtrelief.com

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