Need Advice To Avoid Personal Bankruptcy

July 4, 2004 | johnrobertson

[John Robertson]

Dear Freepers:I am in serious financial trouble. I need some advice. I do NOT want to file for bankruptcy.

[Dolphy]

Sorry to read about your financial troubles. As a finance officer once said to me, nothing is a problem that money can fix...so that's first, get perspective. Assuming you can't add another job to the household income stream, the second thing is to eliminate anything you can from your monthly budget. (If you have car payments, sell the car if you can come out ahead and by something for transportation only. Consider every monthly expense for similar opportunities.) Call the largest creditors and work out smaller monthly payments, I have helped a friend do this and it works. Pay off the smaller ones quickly with any savings.

You just have to make up your mind that every cent you can wring out of your income for the next year or two is going to debt, no luxuries, no eating out, no gifts. Just debt. The time will fly by once you have a plan and the current pain is turned into a light at the end of the tunnel.

[SedVictaCatoni]

It sounds like a debt counselor should be able to help you quite easily. They can help to restructure your debt to postpone things until your income situation improves. Most debt counselors are affiliated with non-profit consumer credit counseling centers, as well - you should be able to find a reputable one.

Failing that, bankruptcy is certainly a viable option for restructuring, especially if you're trying to postpone debt rather than have it erased. Personal bankruptcy doesn't carry anywhere near the stigma which it used to - and there's different kinds of bankruptcy (Chapter 13 to postpone debts vs. Chapter 7 to erase them). Consult a bankruptcy attorney in your area.

I am not however such an attorney, and this is not legal advice.

[Jasper Willowtree]

great advice...been there...done it...it works...

[SamAdams76]

You say that the credit cards are costing you $1350 a month. I assume you have more than one credit card. Here is what to do:

Stack rank your credit cards by interest rates.

Pay the minimum payment on all your credit cards except for the one with the highest interest rate. Subtract those minimum payments from the $1350 and pay the balance of the $1350 on the card with the highest rate.

Once the card with the highest interest rate is paid down, continue making minimum payments on the cards with the lowest rates and shift the remainder of the $1350 to the card with the highest rate.

Repeat until all cards are paid down. On your last card, you will be paying the full $1350 a month until it is paid down. Obviously if your income situation is improved, you might want to raise that $1350 a month to a higher amount so you can pay them down even faster.

Good luck! And remember that there are two types of people in the world: Those who pay interest and those who collect interest. You want to be in the latter category just as soon as you can!

[truthkeeper]

I prepare bankruptcies for a living and can tell you that most of the advice FReepers have offered you on this thread is excellent. Please take it and best of luck to you, hope you land on your feet. I'll send up a prayer for you too.

[spokeshave]

Make a budget.monitor every cent.cut down on expenses and I mean expenses....2nd car, truck, cell phone, newspapers, cable TV, high speed Internet, personal web site (unless you are making money on e-bay) even eating...miss eating entirely once a week for 24 hours (you will also get lean and mean) pay off the highest interest rate credit cards first...look for a second (or third) job or better yet a higher paying job..

And good luck

[John Valentine]

I've been through this. I had to work off over $120,000 in debt. It took me from age 47 to 62 - fifteen years of relentless discipline.

I agree with the suggestions of Tom Jefferson above.

You need to negotiate with each and every one of your creditors. You need to make it clear to them that personal bankcruptcy is looming.

You also have to realize that while YOU may not want to declare bankruptcy, it can be forced upon you. You need to enlist the support of your creditors by demonstrating to each of them that you have the WILL and the MEANS to pay off your debt to them over time, but that you need terms you can live with.

Creditors are usually willing to work someting out, but whatever deal you make with them has to be honored to the letter and without fail. If for example you commit to a payment of $200 each month by the 15th, you had better be there on time and in full each and every month.

This is going to be long, painful and discouraging for you. It is going to take you maybe ten years to dig out from this and at your age this will be tough - VERY tough. You are facing a test of character few ever have to deal with. Most would go the bankrupcy route.

Get started on this today. Don't wait for tomorrow. Start calling your creditors NOW. You will find strength in action.

Keep records. Get a financial software package like Quicken and put your entire family finances on this program Use it to monitor all your accounts - income and outgo - and to set and keep a budget as religiously as church.

Good luck.

[JDoutrider]

You will get some sound advice here on FReeRepublic John.

I can only offer you the advice that has seen me through your circumstance, and, circumstances that are given only to those who the Lord knows can bear them.

Have a good long talk with God. Pray for the strength and direction only He can bring to you...

Rev. JD

[freedom4ever]

Go to the Dave Ramsey website. Listen to him on the radio if you can. He also has a TV show in Nashville, Tn., I know of. He has been in your position and farther and can maybe save you. Here is his website:

http://www.daveramsey.com/radio/home/

Get the book " Financial Peace" or look around the website and find a Financial Peace University counselling seminar. You can even get a live one- on- one with a counsellor and I believe it's free, except for the books.

[reagan_fanatic]

Start one of those 'Send Me A Dollar' websites...

[Skooz]

It would be worth the time to visit the folks at Myvesta.

[1L]

I'm afraid the $1350 IS the minimum for all cards, so while your advice is sound, it probably won't help.

Bankruptcy is useless to avoid credit card charge-offs. If one is going to get out of the credit card debt anyway, don't pay the money to file bankruptcy; just quit paying. You almost certainly won't get sued for anything under $15,000 from one card holder. You just won't be getting any credit advances for a while -- anywhere from 2-5 years. You just have to weigh that against personal bankruptcy.

1. Move to a cheaper place to live. If that means an apartment, do it. You need to pay your bills and if you can cut your fixed expenses in half, do it.
2. Unless you have negative equity in them, sell any car you have a payment on and replace it with a paid-for vehicle. Or, at the very least, purchase a much lesser expensive car. If you are paying $400 a month, go buy a car where you pay only $200. I don't care if it is a Saturn or not. Do it.
3. Move to a totally different location. If you can't live on $3000-$5000 a month as a couple, even with $1350 in credit card debt service a month, you need to find a cheaper place to live. My wife and I lived on $2400 a month take home (plus some more I made here and there) when I was in law school (within the last 7 years) and we made it OK. Not great, but OK. And we didn't pile up credit card debt. It can be done.

[Skooz]

Oh, and tithe.

I'm not kidding.

You will be amazed at what God can do.

[95Tarheel]

I like Clark Howard as source of financial advice.

http://clarkhoward.com/

http://clarkhoward.com/topics/credit_debt.html

http://clarkhoward.com/library/index.html

http://clarkhoward.com/library/tips/credit_problems.html

These might help you. You could call his radio show or go onto his message boards for ideas/help. One thing is for sure, quit paying your credit cards if it comes to choosing between your house mortgage or your cards.

Some of the tricks inlcude paying every 14 days instead of every month and paying the minimum on all your credit cards except the card with the highest interest rate, which you pay off as much as possible.

Good luck.

[RightWhale]

Post 32 was also what I was going to suggest, but that would depend on your home ownership situation. Bruce Williams would say get another job, a second job, and work until the additional $45 k is in hand. That might take 2-4 years depending on the pay of the second job. There won't be any casual time for activities.

[Labyrinthos]

You really haven't told us enough to help you out. I do note however that you did not indicate that both you and your wife are working three jobs each and still can't make ends meet.

[SLB]

Ever hear of Dave Ramsey and Financial Peace University? Best advice since sliced bread with peanut butter and jelly. Be prepared for personal sacrifice, but if we can do it, anybody can.

[RichardW]

I was in the credit business years ago. What I would suggest is that you contact all your creditors and lay out the facts. Tell them you are willing to work with them and do not want to file for bankruptcy. It will cause untold headaches for you anyway so this is not a true option except for deadbeats. The only reason I can see for filing bankruptcy is medical bills. I don't see any reason to contact these credit counselors. They will tell you what you already know and then you'll have another bill to pay; theirs. Oftentimes you can get creditors to take interest only payments. Most creditors do not want your property. They are not in the real estate business nor the automobile business. If you run into some knotheads who won't work with you, try going up the line. Write some nice letters explaining your predicament. Most people avoid the creditors with unlisted numbers and the like and then some skip out altogether. It is a pleasure to deal with someone who is upfront about their situation. Good luck.

[agincourt1415]

Find a product you can buy at wholesale and sell at the Flea Market on the weekends. I did this and started making more money than my regular job. Flea Markets are booming right now.