Sally wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, My husband almost died due to an abscess on his liver. Medical bills piled up. Then he lost his job. Then I lost my job due to budget cuts. Currently my husband is unemployed, and I am working, but for less than my last job. Credit cards were used for everyday items such as food. Had been paying them off monthly at more than minimum. Then, credit card companies raised APR percentage and minimum payments to even more than had been paying them off at more than minimum. Could no longer afford monthly minimum. The credit card has spiraled out of control due to finance charges of $400 a month. How do I get the credit card company to lower payment to what I want. I can afford $400 a month to pay them off. That is it. There is no more in the budget than that, and that is even with cutting down on food, electricity, etc. I am more than willing to close the account. I have been talking to them for 3 months now to no avail. I want to get rid of this debt!!!!! Sally” Dear Sally, Actually, while you think it makes good common sense for you to enter into a repayment plan that you can afford, sadly the creditors don’t really care. Creditors look at acceptable repayments as what they want, and not necessarily what you can give. If you’ve already been communicating with them and they have not proposed anything substantial that will work for you then you have three options. Credit counseling or debt management programs may reduce your payment if you are currently behind. Click here for debt management information . Your payment will be calculated by the creditor formulas that the creditors dictate to the credit counseling groups and not what your budget allows. Talking to a debt management company is a good first step to take to see if it is a solution that will work for you. Bankruptcy is a legal and logical option if you just can’t get by each month anymore. Sure bankruptcy is painful but so is just making it from month to month without getting ahead at all. Talk to a bankruptcy lawyer and find out what your options are in bankruptcy . Keep paying the minimum payments or pay the cards off in full. Sure, this approach just leaves you on a treadmill and does not change anything but it is an option if you are not ready to take more drastic action like a debt management program or bankruptcy . As it stands now, you are perfectly situated to make the creditors a maximum amount of money from jacked up interest and fees. They’d rather see you do that than let you jump down to a payment to better fits your budget . One thought is that they try to extract their pound of flesh, and as much as possible, before you stop paying or go bankrupt so they are going to push you as much as possible before you eventually default. Big hug. Steve Source: How Do I Get the Credit Card Company to Lower My Payment to What I Want? - Sally Other Related Articles to Read Karen Writes In. “My Interest Rates Are Going Up. My Minimum Payments Are Going Up. Help!” Government Help With Credit Card Debt Lauren is Searching For Ways to Get Out Of Debt And Make Her Bad Credit Go Away John Had a Knee Operation And Says “I Can’t Pay My Bills” Is Debt Management and Credit Counseling An Effective Way Out Of Debt?

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Joe wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I had some bad luck in small business and had to use my credit cards and now I am about $50,000. in debt. I have very little income coming in right now and have about 3 months of cash left to pay the mortgage and monthly bills. I want to pay my bills,but I am or will start to have some hard times. What is your Answer? What is the best way to handle it. I might have some money coming in with my job, but I having been waiting a long time for the companies to start up, so I can make sales. I am in the insurance business and things are real slow. Let me know what you think I should do? Joe” Dear Joe, I stumbled as I read your question over your statement “had to use my credit cards ” to help fund the business. Actually, you didn’t have to use them, that was your choice. It could simply be possible that what you have worked hard to create is a business that will not be able to generate sufficient income within the time available. The business might just be a failure. This is a very difficult time to start a business for some, and a perfect time for others. What’s the difference and why do some succeed when others fail? There are lots of reason why businesses succeed or fail but a large amount of it is luck. What you can do to give yourself the best chance of success as you start a business that has a long timeline before it will pay off is to avoid all debt so the startup does not create obligations before it generates income. And if you do decide to launch anyway, then make sure you have six to twelve months of cash to sustain it without any income at all. It is just so sad to watch people sacrifice everything, put all their money into a new business and have it fold within six months. Luckily you’ve recognized the reality of your cash situation right now and you’ll need to prioritize the cash you’ve got left and pay your mortgage , utilities, food and transportation first. Without any money coming in, any money you send out now towards your unsecured creditors and credit card companies is just going to accelerate your speed towards foreclosure . The logical course of action here is to secure employment or income to bring money in. If you can do that then we can start to talk about solutions like a debt management program to get you some breathing room possibly to get you back on your feet. Otherwise, without expense reduction and no income, bankruptcy is probably in your future. Bottom line, stop funding startup business, search for income, prioritize payments to only the most important creditors and obligations. Do that first and then give me an update. Big hug. Steve Source: Joe Started His Business Using Credit Cards And Now He is in Trouble Other Related Articles to Read Therapist: Financial Infidelity Can End Couples I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do? Fear and Loathing in Debt Eleven Real Things You Should Do to Survive a Bad Economy Ben Wants To Know, “Will I Ever Get My Life Back After Bankruptcy?”

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Pam wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I am a single mom, my daughter is 17 and trying to get a job, but even for her it’s hard. I have a couple of credits cards that I just can’t pay. My priorities are rent first, then car payment, utilities, then food, gas. I am still married but I can’t go to my husband for help, all I can say about that is temper. One credit card has already sent my account to a collection attorneys office. I am so afraid they will garnish my wages, which if they do, I will really be in the hole. After I pay my regular bills, I have about 350-400.00 to last the whole month, that has to buy gas, groceries and misc., I have nothing I put in savings. I have $1.26 in my savings account and have sold just about everything I can. We moved and had a garage sale, hoping I would make enough to get us moved. We now have no furniture, both of us have a mattress on the floor, no bed. Believe me, 54 yrs old, it’s hard to get up off the floor. My credit is already ruined, so I wish they would just write of the debt and be over with it. By going further with an attorney and whatever his fees would be, I still wouldn’t be able to pay anything, so I don’t understand why they would pursue something that I can’t pay. Pam” Dear Pam, My deepest sympathies about the bed on the floor routine. I agree it was a lot easier when we were younger. Just this year I spent two months sleeping on the floor as I waited for my possessions to arrive from overseas. That first night in my own real bed was heavenly. It certainly sounds like you are just making ends barely meet at this point. I was certainly encouraged to see that you’ve got your payment priorities in the right order. Good job. Without any income to be able to afford a bankruptcy lawyer , which is what you probably really need, your options are to not pay those credit card accounts and deal with being sued and a latter garnishment if it happens. The garnishment can be neutralized with bankruptcy so that can be addressed. You can find local legal aid that might be available in your area by doing a net search. If you are not eligible for free legal aid assistance, contact a local bankruptcy attorney and see what payment arrangements could be made that you can manage. Bankruptcy at this point is not going to improve your financial situation, just close the door on debts you just can’t pay. In order to improve your financial situation you’ll have to find a better job or a second income. See if your daughter can find anything local through the snagajob.com website. It seems to be able to easily connect people with entry level jobs. I’m sure she would love to help any way she can. Unless you can increase your household income I’m afraid the next step is homelessness and I don’t want to see that happen to you. Big hug. Steve Source: Pam and Her Daughter Are Sleeping On The Floor Other Related Articles to Read Trisha is a Single Mom, Separated, and Facing Bankruptcy. What Should She Do? Samantha Says “My Husband And I Are Young And Don’t Want to File Bankruptcy. What Do We Do?” Pam Is Out Of Cash And Out Of Time Ryan Writes In Looking For His Lifestyle Back

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Kim wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I’m paying credit debt on time not getting anywhere with minimum payments. Husband laid off from work 15 months. Not using cards just trying to pay off. Income is very limited. How can I get ahead with paying off cards. Income is tight. Getting behind on other bills (house, gas, electric) husband laid off from job over 15 months, now has job that pays less than half of what he had before. We’ve really cut back on everything and not getting ahead. Being frugal in hard times. Tired of stressing out all the time. Thank you for your help. Kim” Dear Kim, The issue here is that your income adjusted downwards but your expenses did not. This is a chronic problem with contracts to borrow money. Those contracts are absolute agreements and don’t make any allowances for things happening, like layoffs. Being frugal only goes so far and if you can’t manage to get the income back up, and you’ve already trimmed expenses, then maybe the time has come to start thinking about bankruptcy . Bankruptcy can be a scary experience but it is a legal tool you can use to discharge your debt so you can attempt to make whatever money you are both making manage to keep a roof over your heat, the heat on and food in the cupboards. While you are just making the minimum payments I am worried that unless you can get some breathing room in your monthly budget that all it is going to take is one unexpected and unforeseen event to through your finances in complete disarray. You should be putting at least $50 to $100 a month into a savings account to protect you from these money emergencies. Continuing to just make the minimum payments is admirable and honorable but at some point don’t you have to financially plan to protect you and your family from future emergencies by saving? It seems like the only way to do that is through bankruptcy . Please contact a local bankruptcy attorney and ask for a free appointment so you can go in and find out what bankruptcy would mean for you. Don’t be ashamed, be responsible and do the right thing to protect your family moving forward. Big hug. Steve Source: Kim is Stressing Out Trying to be Frugal in Hard Times and Make Ends Meet Other Related Articles to Read Next big worry: Credit cards Robert Wrote “I Do Not Know Where To Start Other Than I Am in Debt” This Time I Asked “Do You Think You Are a Failure When You Break Your Budget?” David Writes In “I’m About To Lose My House” David Writes In “I Have No More to Give”

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Tim wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, We are currently $2600.00 behind on all are bills, including our mortgage. I can’t get aloan cause it would be just another bill. I was looking for someone who might just give a gift. I really want to go into Christmas stress free. I have a beautiful wife and two children.It is really hard looking at them with the situation we are in. I know if we could get caught up it would really change things. Things have really fallen off in the last three months cause my hours got cut at work. I am so tired at looking at an empty fridge and a pile bills. I just need someone to help us right now. I have tried everything. I am very dedicated to never be in this situation again want this problem is resolved. Where can I get help? Tim” Dear Tim, Even if there was some magic money fairy that paid off bills, it would not help. While it might bring you current so you could enter the Christmas season without delinquent bills, it would do nothing to resolve the underlying issue that you can’t afford your monthly obligations. Your tension and stress about entering the holiday time of the year is common. Often those feelings and emotions revolve around the guilt of not being able to give gifts. But the magic of the holidays is actually not about the gifts, but about the joy of family, fellowship and being thankful for what you do have at hand. This might be a good opportunity to sit down with the entire family and explain the reality of your current financial situation and let everyone think about what you can do special for each other without spending money on commercial gifts. Make things, do things and find other ways to give this year. In figuring out which bills to pay, always pay the mortgage , and utilities first. Don’t let those bills get behind. It might just be that bankruptcy might be the best option for you to eliminate the bills you can’t pay. It is a legal way to discharge your debt that is no longer sustainable with your current income. Otherwise, you can increase your income to cover the bills or ask your wife if she can work. For more information about bankruptcy , contact a local bankruptcy lawyer and ask for a free bankruptcy review or meeting to discuss if bankruptcy is right for you. If you are living on the edge and without food for your children, you may qualify for Nutrition Assistance Programs offered by the USDA. Check out the Supplemental Nutrition Assistance Program (SNAP). Big hug. Steve Source: Tim Wants His Share of Free Money Available to Consolidate His Debt Other Related Articles to Read Bankruptcy Rates To Significantly Increase Next Spring From Ho-Ho-Ho Hangover Gift Cards, The Gift That Can Stop Giving Expect Tidal Wave Of Limit Reductions and Credit Card Closures to Hit Before Christmas Your financial questions answered - Dallas Morning News How to Avoid Filing for Bankruptcy - WTVF

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Holy wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I am a divorced 56 year old woman who suffered an injury as a teacher in a public school in May, 2000. I now suffer with a severe and permanent chronic pain condition (Reflex Sympathetic Dystrophy). Social Security refused me any disability (chronic, debilitating pain is not considered disabling) and due to the struggles I’ve experienced throughout these 8 long years, I am deeply in dept. This probably would not have happened had I not been ill and needed pain med and treatments, which I am convinced alter my ability to make good decisions. I relied upon help from my brothers who abused their powers and left me owing close to $50,000 in credit card and medical debt. I am trying to work but just can’t function well enough to be able to pay these debts off, and still accumulate medical expenses at a frightening rate. I am trying to sell medicare insurance in an attempt to work again at my own pace since I never know if I can work from day to day and can’t handle stress associated with typical 8-5 jobs. It is hard and I feel like I’m adversely affected by my meds and am always trying alternate forms of therapy to alleviate my symptoms, but instead am feeling worse as time goes by. Is bankruptcy my only option? I was never a credit risk until 2005 when my brother’s manipulations put me in debt, and my medical expenses escalated at a frightening rate. I have no property anymore, and live with my son. I went from having a 750 credit score, nearly $20,000 saved after my divorce, no debt and the ability to earn between $45,000-75,000 a year to struggling on $14,770 a year in disbility retirement. My lousy retiree insurance plan requires a $5,000 a year deductible! My medical costs (meds and payments on accounts) average $500 per month, and I’ll never pay some of those debts off, much less be able to pay future expenses off. My car is 11 years old and pretty close to expiration, my brothers stole anything of any value I could sell, and I just don’t know what to do? Unfortunately, my children are young and struggling with their own businesses and lives, and can’t help much, nor do I want their help. Can you suggest a plan for relief of some kind? Holy” Dear Holy, I am positive that with everything that has gone on and is going on it must feel like there is no direction to head in to get any sort of relief from the drumming pain and depressing debt. Let’s tackle this is stages. Disability Just because you have been denied disability does not mean you are not entitled to it. It just means you’ll have to fight harder for it, that’s all. Many denied disability claims are approved on appeal as they move up the chain of command. See a previous question, “ Roise Has Panic Attacks, Can’t Work, And Is Now Out of Money ” for more information on steps you can take to push your case forward. Instead of giving up, get professional help. Growing Medical Debt You stated that you are still accumulating medical debts at an alarming rate. That concerns me. Even if you went bankrupt right now I’m not confident that it would place you in a better position since you may just accumulate debts that you will be unable to pay following bankruptcy . So in that situation, while bankruptcy may eliminate your past debts, it won’t do anything to improve the future. Stop Paying Your Bills. Really! The best course of action for you to take right now would be to stop paying the bills of unsecured creditors that would be discharged in bankruptcy . I know that sounds crazy, but it’s not. In your current situation you have no assets, cash in the bank or property for a creditor to go after you if they sue you for non-payment and win. If you don’t go bankrupt the advantage is that you will not have to pay for bankruptcy , with money you don’t have but the downside is that not paying your bills will leave you with bad credit, subject to collection calls, and possible lawsuits. If a creditor does decide to sue you and you lose, you can always go bankrupt then to get rid of those claims. The most stressful part of not paying your bills is dealing with collection pressure. But there are ways to deal with that. See How to Hide From Debt Collection, the Debt Collector, and Creditors for details. If you find that you are able to pay for your regular expenses after you stop paying your bills, then maybe bankruptcy is an investment worth making. In that case, you should meet with a local bankruptcy attorney and ask for a free bankruptcy review to discuss your situation. But, if you continue to get further behind then going bankrupt now will prevent you from going bankrupt latter and completely discharging your debts for another eight years and that can leave you hassled and without options. Additional Steps to Take There are some other ways to help increase you deal with this situation. While they won’t give you income via a check, they can lower your expenses to help you live. Rent assistance advice is possibly available through the Housing & Urban Development agency. For medical care you quite possibly qualify for Medicaid . You’ll have to contact your state Medicaid office to learn how. You may be eligible for food assistance programs , like SNAP. Job directories are available online . You can contact your local city or county health department and let them know your situation and see what local programs may be available. I’d explore the Social Security denial some more. The DisabilitySecrets website has some good advice on it. Just because you have been turned down, does not mean that you are either not eligible or can’t get it. It may take a fight. You can also get a free case evaluation here . Gratitude This may be the hardest step to take but the most important in dealing with your situation. While your situation is bad, it could always be worse. It sounds like you have children that love you, you’ve lead a nice life up until your medical problems, and you are still able to see a beautiful sunrise and draw a breath. Rather then feeling as if life is raining down on you, look for every opportunity to be grateful for what you do have. While your retiree insurance plan has a “lousy” $5,000 deductible, at least you have some retiree insurance, many don’t. Each hour and each day start focusing your attention on being thankful for the help you do get, the lives you changed as a teacher, the door held open by a stranger, a hug from your child, or a nice word you can offer to a stranger. Smile. Granted, it won’t change the numbers of your debt but it will help you to move through the days with more grace, instead of more fear. Big hug. Steve Source: Holy, Divorced, Disabled and Desperately in Debt Other Related Articles to Read Willis Asks “Do I Pay Or Ignore My Credit Card Company?” Disjointed Use of Your Credit Score Can Leave You Unemployed or Dead Shellie Had Cancer And Is Now Slowly Dying From Terminal Debt Rachel is in Medical Debt, Was Sued And Lost. What’s Next? Trisha is a Single Mom, Separated, and Facing Bankruptcy. What Should She Do?

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Holy wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I am a divorced 56 year old woman who suffered an injury as a teacher in a public school in May, 2000. I now suffer with a severe and permanent chronic pain condition (Reflex Sympathetic Dystrophy). Social Security refused me any disability (chronic, debilitating pain is not considered disabling) and due to the struggles I’ve experienced throughout these 8 long years, I am deeply in dept. This probably would not have happened had I not been ill and needed pain med and treatments, which I am convinced alter my ability to make good decisions. I relied upon help from my brothers who abused their powers and left me owing close to $50,000 in credit card and medical debt. I am trying to work but just can’t function well enough to be able to pay these debts off, and still accumulate medical expenses at a frightening rate. I am trying to sell medicare insurance in an attempt to work again at my own pace since I never know if I can work from day to day and can’t handle stress associated with typical 8-5 jobs. It is hard and I feel like I’m adversely affected by my meds and am always trying alternate forms of therapy to alleviate my symptoms, but instead am feeling worse as time goes by. Is bankruptcy my only option? I was never a credit risk until 2005 when my brother’s manipulations put me in debt, and my medical expenses escalated at a frightening rate. I have no property anymore, and live with my son. I went from having a 750 credit score, nearly $20,000 saved after my divorce, no debt and the ability to earn between $45,000-75,000 a year to struggling on $14,770 a year in disbility retirement. My lousy retiree insurance plan requires a $5,000 a year deductible! My medical costs (meds and payments on accounts) average $500 per month, and I’ll never pay some of those debts off, much less be able to pay future expenses off. My car is 11 years old and pretty close to expiration, my brothers stole anything of any value I could sell, and I just don’t know what to do? Unfortunately, my children are young and struggling with their own businesses and lives, and can’t help much, nor do I want their help. Can you suggest a plan for relief of some kind? Holy” Dear Holy, I am positive that with everything that has gone on and is going on it must feel like there is no direction to head in to get any sort of relief from the drumming pain and depressing debt. Let’s tackle this is stages. Disability Just because you have been denied disability does not mean you are not entitled to it. It just means you’ll have to fight harder for it, that’s all. Many denied disability claims are approved on appeal as they move up the chain of command. See a previous question, “ Roise Has Panic Attacks, Can’t Work, And Is Now Out of Money ” for more information on steps you can take to push your case forward. Instead of giving up, get professional help. Growing Medical Debt You stated that you are still accumulating medical debts at an alarming rate. That concerns me. Even if you went bankrupt right now I’m not confident that it would place you in a better position since you may just accumulate debts that you will be unable to pay following bankruptcy . So in that situation, while bankruptcy may eliminate your past debts, it won’t do anything to improve the future. Stop Paying Your Bills. Really! The best course of action for you to take right now would be to stop paying the bills of unsecured creditors that would be discharged in bankruptcy . I know that sounds crazy, but it’s not. In your current situation you have no assets, cash in the bank or property for a creditor to go after you if they sue you for non-payment and win. If you don’t go bankrupt the advantage is that you will not have to pay for bankruptcy , with money you don’t have but the downside is that not paying your bills will leave you with bad credit, subject to collection calls, and possible lawsuits. If a creditor does decide to sue you and you lose, you can always go bankrupt then to get rid of those claims. The most stressful part of not paying your bills is dealing with collection pressure. But there are ways to deal with that. See How to Hide From Debt Collection, the Debt Collector, and Creditors for details. If you find that you are able to pay for your regular expenses after you stop paying your bills, then maybe bankruptcy is an investment worth making. In that case, you should meet with a local bankruptcy attorney and ask for a free bankruptcy review to discuss your situation. But, if you continue to get further behind then going bankrupt now will prevent you from going bankrupt latter and completely discharging your debts for another eight years and that can leave you hassled and without options. Additional Steps to Take There are some other ways to help increase you deal with this situation. While they won’t give you income via a check, they can lower your expenses to help you live. Rent assistance advice is possibly available through the Housing & Urban Development agency. For medical care you quite possibly qualify for Medicaid . You’ll have to contact your state Medicaid office to learn how. You may be eligible for food assistance programs , like SNAP. Job directories are available online . You can contact your local city or county health department and let them know your situation and see what local programs may be available. I’d explore the Social Security denial some more. The DisabilitySecrets website has some good advice on it. Just because you have been turned down, does not mean that you are either not eligible or can’t get it. It may take a fight. You can also get a free case evaluation here . Gratitude This may be the hardest step to take but the most important in dealing with your situation. While your situation is bad, it could always be worse. It sounds like you have children that love you, you’ve lead a nice life up until your medical problems, and you are still able to see a beautiful sunrise and draw a breath. Rather then feeling as if life is raining down on you, look for every opportunity to be grateful for what you do have. While your retiree insurance plan has a “lousy” $5,000 deductible, at least you have some retiree insurance, many don’t. Each hour and each day start focusing your attention on being thankful for the help you do get, the lives you changed as a teacher, the door held open by a stranger, a hug from your child, or a nice word you can offer to a stranger. Smile. Granted, it won’t change the numbers of your debt but it will help you to move through the days with more grace, instead of more fear. Big hug. Steve Source: Holy, Divorced, Disabled and Desperately in Debt Other Related Articles to Read Willis Asks “Do I Pay Or Ignore My Credit Card Company?” Disjointed Use of Your Credit Score Can Leave You Unemployed or Dead Shellie Had Cancer And Is Now Slowly Dying From Terminal Debt Rachel is in Medical Debt, Was Sued And Lost. What’s Next? Trisha is a Single Mom, Separated, and Facing Bankruptcy. What Should She Do?

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Rosie wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I worked as a teacher for sixteen years. I developed disabling panic attacks which would no longer allow me to work. Soon after, I filed for bankruptcy. I later applied for social security disability in 2001 but was denied. In 2003 I was forced to sell my home in order to have money to live. I began renting an apartment with a roommate and have managed to frugally live on the proceeds of the sale until now. I was able to reestablish an excellent credit record. But my funds have now been completely depleted and my credit cards have been my sole source of support the last several months. I have nothing left, no money and no family or friends that can help in any way. I tried reapplying for social security disability recently but was denied again. All I have is some credit card credit left. But by next month, I will no longer be able to make my minimum payments, pay rent/utilities, or buy food. My roommate was just laid off and cannot help either. I am 46 years old and facing homelessness and hunger. I am completely terrified. I am a good person and have always been a very good money manager. I suffer from extreme anxiety disorder and after many years of therapy and treatment, my condition just will not go away. I do not have the money for anymore treatment, and I have continually looked for work that I can do at home, but I just have not been able to find anything. What do I do? I’m afraid I am a hopeless case. Thank you for reading this. Rosie” Dear Rosie, I’m so sorry that you are living through this situation and a resurgence of your panic attacks. Debt does not help anxiety, it intensifies it. The biggest issue is that for whatever reason, you have held off finding a solution for this terrible situation until the very last minute. Debt problems are not like a fine wine, they don’t get better with age. I understand the limiting factors of your situation with the anxiety and panic attacks. I feel for you but that does not change the fact that you have no money coming in to live on, to safely shelter yourself or to keep you warm. The reality of your situation is that once you started living on credit cards to get by, you were also living on very borrowed time. With cash gone, credit gone and soon, your apartment potentially gone, there is a good chance that you may wind up homeless. The good news is that there might be some solutions to provide advice and assistance. Rent assistance advice is possibly available through the Housing & Urban Development agency. For medical care you quite possibly qualify for Medicaid . You’ll have to contact your state Medicaid office to learn how. You may be eligible for food assistance programs, like SNAP . Job location assistance and job directories are available online . You can contact your local city or county health department and let them know your situation and see what local programs may be available. I’d explore the Social Security denial some more. The DisabilitySecrets website has some good advice on it. Just because you have been turned down, does not mean that you are either not eligible or can’t get it. It may take a fight. You can also get a free case evaluation here . Although disability claims based upon mental impairments may be harder to achieve an allowance at the initial and reconsiderations levels, these claims have a fair chance of allowance at the administrative law judge hearing. Therefore it would be sound advice to appeal your claim if you are denied at the initial and reconsideration levels of the Social Security disability process. Specific guidelines for anxiety related disorders are found in Social Security’s Listing Of Impairments in Section 12.06. According to these guidelines an anxiety sufferer must have “a persistent irrational fear of a specific object, activity, or situation which results in a compelling desire to avoid the dreaded object, activity, or situation. Or recurrent severe panic attacks manifested by a sudden unpredictable onset of intense apprehension, fear, terror and sense of impending doom occurring on the average of at least once a week”. Since the Social Security Administration approves panic attack disability benefits on a case by case basis, there is a formal application process. There are strict guidelines for average monthly income made year-to-date, case severity, and future work plausibility. However, for those stricken with debilitating anxiety and panic attacks that make work impossible, it offers a glimmer of hope and financial assistance. But even with all these helpful tips we can’t take our eye off the primary issue, the lack of income. Establishing a source of income must be the number one priority. Without income you will not have many, if any, choices. I would suggest taking a look on Snag A Job for places that are hiring, right now, in your area. Rosie, I think that if you put effort into exploring all of these options that out of it you may create at least an emergency solution that may assist you. Big hug. Steve Source: Roise Has Panic Attacks, Can’t Work, And Is Now Out of Money Other Related Articles to Read Clinton Wants to Know “Am I Doing The Right Thing By Repaying My Debt?”

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Eva wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, My husband and I just bought a home and besides the mortgage, we are in debt for $26,000. I called up my credit card companies and they said they aren’t offering lower rates to customers now. I went to CCCS website and they say lowering customers rates is one of their ways they can help out. If I can’t get the credit card companies to lower my interest rates, how can CCCS? I have also read some negative things about CCCS and other agenices like theirs. What can I do to protect my family from not being able to make ends meet? Eva” Dear Eva, Congratulations on the new house. I got you this answer for a house warming gift. CCCS or any credit counseling group offers what is called a Debt Management Plan or Debt Management Program , DMP, as a way to consolidate your debts. Many people think it is a loan, it’s not. Others think it is an easy way out of debt, not necessarily. Credit counselors are recognized by creditors to offer special terms that might involve lowering your interest rates. These terms are generally reserved for people that are having financial problems, not as a way to just lower your monthly payments. Entering into a credit counseling program can negatively impact your credit score since it is an indication that you are having financial problems. And once your creditors see or learn about your participation, your interest rates and/or monthly minimum payments could go up. A credit counseling program is paid for primarily by the creditor that pays the credit counseling group a percentage of money they collect from you and return to the creditor. I know, it sounds dangerously close to the services provided by a debt collection agency. Now, there are times to use a debt management program , especially if you are having a tough time getting by each month and if you don’t get into a debt management program then you will fall behind or go bankrupt. Nobody can give you specific advice about what terms will be offered to you in the debt management or credit counseling program until you contact the credit counseling group and ask about what terms your specific creditors typically offer. Since the terms and interest rate reductions are very important to you, I think you should contact this group and see what the current terms are. When you contact them, also be sure to ask what your creditors will do with your minimum payment when you are in the debt management plan and ask for an estimate of what your monthly payment would be. There is no reason for you to enroll or signup for a debt management plan to learn this information and while CCCS is one group that offers debt management plans, they are not the only one. Finally, a debt management plan is primarily dictated by the terms the creditors offer through the credit counseling agency and not by the credit counseling agency negotiating on your behalf. There is no negotiation. Protecting your family from not making ends meet has less to do with CCCS than it does with utilizing your money so that your most important bills are paid first. This means that your mortgage , car payment, utilities, food, etc. should be paid before you send any money towards your credit card debts. In fact, I think you should also be putting at least $100 a month into a savings account as part of your most important obligations. If you were to fall behind on your bills and creditors closed your accounts, you’d need the savings account money to help you in an emergency. Its logical and makes sense. Big hug. Steve Source: Eva Has Heard Negative Things About CCCS Other Related Articles to Read April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” Jeannie Already Went Bankrupt And Is Now With CCCS But Can’t Afford to Feed Her Daughter The Perfect Debt Assistance Program Rita Asks “Should We Consolidate Our Debt?” Tony Writes In “I Have Too Much Debt On My Credit Cards”

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Jerry wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I have a time deposit at the bank and borrowed 80% of it using the deposit as collateral. I already skipped 3 payments even for the interest alone. My car is also mortgaged at another lending firm and I already skipped 2 monthly payment for my amortization. I have a small business but the income I get is just good for food. Based on my situation above what can you advise or a remedy to do on my part. Thanks Jerry” Dear Jerry, I suppose this is a variation of the good news - bad news situation. In your case, since you deposited the money with a bank and then took a loan using the deposit as collateral, the bank can take the money from your deposit to pay off the bank loan. It might actually make sense to ask them to do that since it does not sound like there is a reasonable expectation that you will be able to get caught up on that loan again in this current economic climate. The money that is leftover from your deposit, after paying off the loan, could be used to help bring the car loan current. Of course if the car is not affordable at all with your current income, that is a different matter and bringing the car loan current may just give you a few more months with the car before it is repossessed if you fall far behind again. I hope that helps. Steve Source: Jerry Wants to Know How to Repay Debts He Can’t Afford Other Related Articles to Read Mary Had Her Motorcycle Repoed And Wants Your Advice Dayna Can’t Afford to Keep Her Car Or Get Rid Of Her Car, Even By Repossession Is Debt Consolidation a Viable Debt Solution For Unsecured Debt? Slowdown nails contractors: Dozens of Idaho small business owners I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do?

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MJ wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I’ve been able to work very little because of severe health issues. Sadly they are on going, with uncertain prognosis. Medical bills mounting as well. (about 5K). I’ve been living off of credit cards and can no longer keep up with payments. Approx 2k per mo. in credit card payments. I’m not late on anything yet. I’m wondering if you have any tips or tricks for relief? I’m working on selling my “stuff” to raise money but the state of the economy is a hindrance for that. MJ” Dear MJ, If I had a magic wand to wave to make your situation repair itself, I would wave it for you. To be ill with an uncertain future is stressful enough, but to add about $40,000 of credit card debt on top of that, only compounds the stress and potentially shortens your life. I know you have tried to do what is right for you, your obligations, your sense of right and wrong and what you have been taught. But I’m afraid that trying to meet the goal of not falling behind on your bills has left you in a worse situation. At first, I bet you used the credit cards to make ends meet in an uncertain time but latter the cards got used more and more just to get by. And before you knew it, the balances were so high and so out of control. You might have actually found yourself taking a cash advance or two from one card to pay another. And then when that day came, when you had no more money on hand to pay your bills, you started selling stuff to help make ends meet. But let me ask you, what is your plan to make ends meet when all your stuff is sold and the money is spent? Selling stuff and draining assets to perpetuate a path that does not lead to a resolution is a comfort only while the money lasts. When all the cash has been spent and at the stuff has been sold, you will have nothing and nothing to give. You will discover that all that you have accomplished is to postpone the difficult day of reckoning and not made the actual problem go away. Before we turn to solutions to euthanize your debt we must first set our attention to making sure that without reliance on credit, credit cards , and selling stuff, that you will be able to make it from month to month and live a life worth living. It does no good to eliminate your financial responsibilities, which you can no longer meet, only to leave you unable to afford food, shelter, utilities and clothing. From what you wrote I can only assume that your severe health issues are not only ongoing but also may lead to your death. Unless you take bold action to eliminate your debt your struggles to repay debts that you can not afford my linger to your absolute last living day. I would suggest that you take a long walk or go to that favorite cafe or restaurant that brings you joy. Order something to drink, maybe a hot cup of delicious coffee and and tuck in to a tasty treat. I want you to sip the coffee slowly and concentrate on the wonderful flavor of your edible gift and as you enjoy that moment, I want you to visualize how you want your remaining days to be. Ask yourself the following question, “Do I have a greater responsibility to fix my financial past or create a safer financial future for the time I may have left to live?” If you decide that the next hour, the next day and the next year are most precious to you, then I would urge you to click this link and go see a bankruptcy attorney and seriously contemplate bankruptcy to eliminate your credit card and medical debts. It certainly sounds to me as if there is no reasonable expectation that you will be able to live both a life where you can heal and a life where you can repay your debts, without sinking further in either health or debt. Big hug. Steve Source: MJ - “I’m Ill, I’ve Got Bills, And I Don’t Know What To Do” Other Related Articles to Read Teresa Writes In And Asks “What Should I Do Next?” Tina Says “My CPA is Under Investigation For Fraud” I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do? Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore Tanisha Wants to Cash Out 401K To Get Rid Of Debts.

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This weeks personal finance brain trust question was a tough one that caused many of our bloggers to not contribute because there really isn’t a good answer to it. I knew it was going to be a tough one. DHL just announced massive layoffs that will cripple the town of Wilmington, Ohio and the surrounding area. What advice do you have for the DHL employees, businesses and people of Wilmington, Ohio to be able to deal with this? WC - A 27-year-old writer living in Chicago and writing about personal finance through The Writer’s Coin . This is a tough one because I don’t know that I have an answer for the people who are now out of a job at DHL. My answer is more about what you can do before this happens, and I think it has to do with what’s happening in the auto industry and in Detroit. You have to diversify your skills. If you’re really good at something, then by all means go out there and do it well and you should be fine. But always make sure you’re expanding your skills. Don’t let this happen to you where a shipping company says “You’re fired” and all you can do is something related to shipping (or the auto industry). Picture yourself doing something else—if you can’t then you need to re-evaluate what you’re doing. This is another reason to always push yourself at your current job (another being that it makes you a better worker), so that you get better as time goes on. This makes you less expendable and, if you do lose your job, better positioned to find a new one. Patrick Bryan - Living in Northern Ireland, Patrick helps people in a very different environment and economy but yet, much is universal and much is the same. Visit Patrick’s Northern Ireland blog on debt . It is the sheer scale of the job losses in Wilmington that is staggering – 7,000 jobs in a town of just 12,000 people. It is hard to imagine how a small community manages to recover from a shock like this, and I’m afraid that there could be some hard times ahead for both the former DHL workers and the local shops and businesses which rely on the money they spend with them. If you have lost your job my advice is to first do a serious appraisal of your financial situation and where possible cut out all unnecessary expenditure immediately. Cut back on Christmas, sell the second car, hold off booking the family vacation for next year. Second – consider if you should relocate elsewhere – is there a job you can do in another country/state? It might be tough moving away from your friends and neighbours but you must at least consider this option as it could be the quickest route back to financial security. For those who want to stay (and I can’t blame you, I believe Wilmington is a beautiful town with a close-knit community) then you need to think about what you can do to make yourself employable again. Can you retrain for another trade or profession? What service do people need right now in your local area and are willing and able to pay for? If you have always harboured a desire to do something else with your life then this is your chance – to go back to school or learn a new trade, or start a business. Bear in mind that there might not be a lot of money being spent in your town for a while so perhaps there is either something you can do which involves selling your product or service on a wider scale? The internet and ecommerce is a great liberator in this respect and enables many businesses to operate without any major constraints on location in relation to their customers. I live in Northern Ireland which over the past 40 years has gone through the cycle of suffering a large number of job losses from a number of large employers (shipbuilding and heavy engineering), through to a period of economic regeneration to create the relative prosperity enjoyed now, and the best solution for job creation (which took a lot of trial and error to arrive at), was for the government to provide relatively small but numerous sums of grant money to encourage local people to create small to medium sized businesses which created jobs in their community. This spread the risk of one business or sector going into decline, and also avoided the prospect of multinational companies such as DHL cutting off limbs in an economic downturn as has happened in this case. Let’s hope the new administration has some grant money available to help towns such as Wilmington, Ohio rebuild their shattered economy and in future provide more local control over job creation. Steve Rhode - A personal finance blogger and founder of the Myvesta Foundation, a global social enterprise that helps people find solutions for money troubles. You can ask Steve your debt related question through GetOutOfDebt.org and he’ll help you for free. The DHL cuts create an economic dust bowl like that faced by the residents of Oklahoma and the High Plains back in the 1930s. The Dust Bowl exodus was the largest migration in American history within a short period of time. People had to move because the ground was no longer fertile and food and income were scarce. It didn’t rain in that part of the country for nearly a decade of blowing dirt and dust storms. In hindsight one can see that a region or town that is so dependent on one employer is playing with fire. It is one thing when ten local businesses fail that employ a total of 100 people but it is catastrophic when one employer fails and takes 7,000 jobs with it. This is a time and opportunity for government to provide assistance to local residents to allow them to create small business opportunities in the soon barren community. It is the good side of government and a role that it can play to make a real difference in the area. The thought that another similar employer is going to be located and enticed to fill the now missing jobs, is an unrealistic expectation. While residents may want to stay and fight for a better future, at some point the reality of having to put food on the table, make the car payment and pay the mortgage become a reality. And at times like these, these emergency days, this is the time that people, rightly or wrongly, turn to credit cards to make it through. Payments will be expected, life goes on and income must be replaced. Such a mass exodus out of town creates other problems as well. With so many homes going up for sale as people leave the Wilmington, Ohio area, housing prices will plummet. There will not be enough buyers for the homes on the market. Homes will languish and eventually be foreclosed on. The largest mistake people in Wilmington will probably make is to use up their credit and spend down their savings in hopes of finding a good solution to stay. That will only leave people broke and trapped in a dying community. There is no good answer for the people of Wilmington, Ohio that will leave them without the need for sacrifice or loss. With the drying up of DHL it is much like the Dust Bowl drought. It would be best to learn from history and not repeat the same mistakes learned by the residents of the Dust Bowl or those from economically ravaged steel towns that have yet not come back. With unemployment rising all across America it may no longer be a choice of finding work where you want to live but living where you can find work. Like the Oakies of the Dust Bowl that loaded up the Model T Ford for the drive west in pursuit of jobs, so will many Wilmingtonites migrate to other corners of the country, in search of jobs and in search of financial dignity. Wilmington, Ohio can come back in the future but it will first go through a period where it will wither and die back. Government intervention may be a solution to revitalize the area but those programs will take time. Spring does not come immediately. But in the future where there might not be hope right now, opportunity will rest in potential. What one person sees as an empty town, another creative soul might see as a blank canvas of new and better things. Downtown storefronts might turn into unusual residences with character. Local pizza shops, service and craft stores may open and from the ashes a future new Wilmington may be born. Source: What Do You Do When The Town Is Laid Off? - Personal Finnance Bloggers Question of The Week Other Related Articles to Read Good News - Post Office to Layoff Only 40,000 Workers. Bad Time to Be In Delivery Business. So What If GM Goes Bust. Let’s Just Hope You Don’t Own a New GM Vehicle. Your financial questions answered - Dallas Morning News David Writes In “I’m About To Lose My House” Charlotte Writes In, “I’m Desperate To Get Out of Debt”

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April wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, Mounting credit card debt is getting difficult to pay. I’m thinking of just ONLY taking care of house, car, utilities, food, insurance. I’m a single mother of two kids and get no child support. I’ve worked so hard for good credit and I am losing it. What do I do? Not pay and wait for it to wipe off credit? File for bankruptcy before it’s too late? April” Dear April, First, let me extend to you my biggest hug and deepest feelings of hope to help you through this difficult passage in your life. The pain and pressure you are living with right now, today, must be intense and make it difficult for you to be the strong mother that you want to be. Good credit is an elusive target. You only really have good credit when your financial life conforms to what your creditors are most looking for. Your credit score is in fact a calculated score to allow creditors to identify who is most likely to be the lowest risk and highest profit maker for the creditor. Good credit and a good credit score has nothing to do with what is right for you and your kids at this time. If there was a life score, I’m sure you would excel at it as a concerned mother that is trying to do what is best for you and your kids. Having bad credit does have consequences, but then too does not being able to feed your hungry children, maintain insurance or being able to live in a safe environment. Ultimately, which is more important? As I get older I realize that for me, the credit report and credit score are of lesser importance to me. What is most important in my life has to do more with trying to do the right thing, caring for my family and helping others. In your situation you have wisely prioritized your financial obligations and you have found that after paying those items there is little left over to pay the credit card companies what they demand. As much as you may not like the possibility, it might just be that you can no longer afford to repay the credit cards . In that case you have several options: You could stop paying the credit cards and let the collectors start calling; enter a debt management program and see if you can afford to pay a reduced payment to get out of debt; or consider bankruptcy . Doing nothing is a stalling tactic and not a solution so that’s not really a good approach. A debt management program might be able to craft a monthly payment for you but that payment will be based on what your creditors want and not based on what you can afford. Additionally, if you are living that close to the financial edge then I think you need to make sure you are able to put money each month into a savings account to protect your and your children in case of a financial surprise. Being in a credit counseling or debt management plan may not give you any room to save money each month. That leaves us with bankruptcy . Bankruptcy is a legal solution you can use but before you make up your mind that bankruptcy is right for you I urge you to schedule a free bankruptcy review with a bankruptcy attorney and discuss your specific situation. April, promise me this, that while the financial current situation is regrettable, promise me that you won’t loose sight of the fact that those small and loving faces that look up at you at night need you to be their protector and to care for them in a safe and healthy way. Do what is right for them, even if it is hard for you to face. I’ll always be here for you. Big hug. Steve Source: April Wants To Know “As A Single Mom, How Do I Get Out Of Debt?” Other Related Articles to Read Diana Is Struggling to Make Credit Card Payments And Afraid Jeannie Already Went Bankrupt And Is Now With CCCS But Can’t Afford to Feed Her Daughter Bad Credit Debt Consolidation - Brutally Honest Advice I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do? John Had a Knee Operation And Says “I Can’t Pay My Bills”

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Kayte wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, My husband and I have roughly $75,000 in credit card debt. Due to the economy, we both have experienced a substantial decrease in our income (i.e., commission based pay). We have exhausted our savings trying to keep up with our mortgage payment, credit card payments, car payments and other cost. We are now at a point where we can not pay all of our bills. Would a ‘debt management’, ‘credit counseling’ or a ‘debt settlement’ program be the best way to improve our financial situation? Kayte” Dear Kayte, Thank you for trusting me enough to send me your question. I only wish you had found me before you spent your savings trying to stay current. The problem, in situations like that, is that the savings keeps you afloat until it is gone, and then you are in double trouble. Debt settlement would not be the best path since you don’t have any money to make large settlements right now to eliminate some of those debts. And a credit counseling or debt management program might help with reducing the interest rates on your credit card debts but it is not going to help reduce your mortgage or car payments. If you can afford the mortgage , car payment and reasonable living expenses, without the credit cards , then eliminating your credit card debt through bankruptcy might be worth looking into. I’d suggest that you speak with a bankruptcy attorney and ask for a free bankruptcy review to discuss your situation. If you still can’t afford to live within your income even after eliminating your credit card debt then more dramatic and major lifestyle changes will be in order. These may include selling your home and renting for less money or selling the car and buying a less expensive vehicle. Generally the largest monthly expenses for families is the mortgage , health insurance, car payments, utilities, and food. It’s hard to find easy reductions in those items without making major changes in where you live, what you drive, etc. One major expense that I always hate to see people drop is health insurance. There is no doubt that health insurance is ridiculously expensive. For many the monthly amount spent on health insurance and medications is more than a mortgage payment. But if you don’t carry medical insurance, just one simple accident can clean you out and take you to bankruptcy . Please let me know what you decide to do. Big hug. Steve Source: Kayte Has Drained Her Savings And Can’t Pay The Bills Anymore Other Related Articles to Read Debt Problems Are The Same In Indiana As They Are In Ireland Ryan Writes In Looking For His Lifestyle Back Tina Says “My CPA is Under Investigation For Fraud” I’m Afraid I’m Going To Get Laid Off. How Will I Pay My Bills? What Will I Do? Jeannie Already Went Bankrupt And Is Now With CCCS But Can’t Afford to Feed Her Daughter

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Peter wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form . I’m happy to help you totally for free. Income from the GetOutOfDebt.org site advertising is used to help alleviate poverty . If you would like to help me to help others, there are easy and free things you can do, click here to learn how you can help . “Dear Steve, I’m wondering if it time for a a mid-recovery, mid-recession course correction? My situation is grad school era babies, two layoffs and completely unnecessarily missed/late CC payments have buried us in CC debt (65K@30%APR), auto (6K@0%, 15K@7%) and student loans (35K at 8%) with little hope of lower interest rates or new financing options. Thankfully we got out of our mortgage before the housing crisis, but are now renting. We’re at > 70% utilization of credit limits and have no emergency fund, but are doing everything “right” now and working on avalanching highest credit card debts first. My grad degree helps some, and salary is good, but industry is labile, layoff possible next six months. We’re putting every extra penny onto credit card debt each month, still saving up to the company match on dividend-yielding, 3.5% return-yielding 401(k). I have about 20K cash coming to me for various reasons in the next 2 months. The tight credit market has changed the landscape, and I fear my credit card limits being lowered, leaving no way to take on new debt in an emergency to cover ourselves. In other words, the credit card limits aren’t even a safety net anymore. Since it’s essential for survival, is paying off a secured debt (the car) a good move to stave off repossession, or should I retain a cash reserve against possible further crisis? Peter” Dear Peter, Thank you so much for all the detailed information. It really helps in answering your question. Your question really gave me pause because there are so many options you could select from and they range from the most calculating to the most emotionally responsive. Your senses are right on track for the coming credit card limit reductions and your statement that you can no long view your credit cards as a financial safety net, is so true. Something that I’ve been preaching about here. If I take two large steps back and look at your overall situation the issue that concerns me the most is the $65,000 credit card debt at 30% interest. That is an enormous chunk of change to payback at high penalty rates. Interest alone on that credit card debt is going to be about $19,500 over the course of the next twelve months. That’s quite a spanking to take. And paying back that $19,500 does not even lower the amount you owe on the credit card debt. It is so ironic that knowing you have a guaranteed $20,000 coming to you in the next couple of months is probably the worst thing that could happen. Here’s why. If you pay off the cars and then you are not able to sustain credit card payments and decide that bankruptcy is the only way out, then the cars may be at risk of being liquidated by the court since they would be a valuable asset to go after. Well maybe you could do a debt settlement to get rid of the credit card debt? But the $20,000 isn’t enough to do a debt settlement on all of the credit card debt to eliminate it. Eliminating some of the credit card debt might be possible but then it does not leave you with a much needed safety net, which is prudent and needed. Besides, if you settle the credit card debt then you can be left with a huge income tax bill on the forgiven debt and you’d have to use money from the $20,000 to pay that. So from the $20,000 you’ll have to pay income tax on the $20,000, use some to settle debts and then pay income tax on the forgiven debt. Before long the whole $20,000 will be gone and you’ll have little to show for it and nothing left over to protect you. Your Financial Tornado is Coming Doing what is right to protect your family and doing what is right to repay your debt is often two different things. It’s a lot like living on the open plains in tornado alley right before an upcoming really bad tornado season. Do you spend your time digging a storm cellar to protect your family for the coming tornados or spend your time harvesting wheat so you can repay a loan to the bank? I’m not sure there is a completely right or wrong answer to that question. It is a choice between contractual obligations and making sure your family is safe. Maybe this will help. To best prepare to survive a layoff you would need to shed all the debt you can and lower your living expenses to the lowest level possible to make any income stretch further. We know that the student loans are not going to go anywhere and are going to survive through any financial winter, so your only chance of preparing to best protect your family would be to seriously consider bankruptcy before you get any “potential” cash. I think you should talk to a bankruptcy attorney today for a free bankruptcy review and discuss your situation and take action immediately to get yourself best prepared for the coming economic tsunami that is forecasted to hit. And if I go back to my tornado analogy, in the case of a severe storm, you don’t need to store credit to pay for food to survive in your shelter, you need food in your shelter. Cash is going to be your food. You really need to discuss this situation with a licensed bankruptcy attorney in your state. You can click on one of the bankruptcy links to find one or to get a free bankruptcy review . If you were able to discharge your credit card debt you could reaffirm your car payments to keep them. Then, if you did get any lump of cash in the future you could use that as your twice welded steel storm shelter. I asked a friend, who is a bankruptcy lawyer , for some feedback on your situation as well. Here is what they said. As a bankruptcy lawyer, I see this as a matter of putting one’s priorities in order. The absence of a significant emergency fund is dangerous, especially in today’s economic landscape and when you have two children and significant student loan debt. It’s like going without health insurance, I don’t think you can afford to do it! The amount of credit card debt, even if the interest rates were to be reduced, is too high given the other factors. Student loans must be paid, they have no statute of limitations and go with you to your grave. Presumably, the two vehicles are needed to facilitate family life and work. You are currently renting and will want to fix your credit and begin saving for the downpayment that good mortgage terms are likely to require. I advise a chapter 7 bankruptcy if this is possible. The issue is the $20k that is coming. I strongly suggest that you consult NOW with a lawyer in your area who is a specialist in consumer bankruptcy law. This lawyer can help you with bankruptcy planning so that you can use the $20k in ways that will render it exempt from the bankruptcy case (this is a matter of state law). Such a lawyer will also advise you on how long you will need to wait after receiving and spending the money, to file your case. A vastly improved debt-to-income ratio and the fact that you will maintain your payments on the two vehicles and the student loans should help you to rebuild your credit quickly following the bankruptcy. So it seems that at least two people, myself and the bankruptcy lawyer , independently see the same issues of concern. I hope that helps. Big hug. Steve Source: Peter Is Trying to Find Shelter In These Uncertain Economic Times Other Related Articles to Read Clinton Wants to Know “Am I Doing The Right Thing By Repaying My Debt?” Ed Is Scared But Courageous In The Face Of His Debt Crys Writes In And Asks “We’ve Been to Credit Counseling But Should We File For Bankruptcy?” Eleven Real Things You Should Do to Survive a Bad Economy Jill Says, “I’m a Stay At Home Mom. We Are Starting To Sink.”

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