Hi everyone! I have a bit of an issue with credit card debt that I’m trying to get ahold of. In total, my husband and I owe about 40,000 in credit card bills (22k, 6k, 12k). We pay roughly 900/mo. In credit card bills total. My husband messed up his credit score after I stopped reminding him to pay his credit card bills and he basically stopped paying his credit card (12k) to the point where they closed his account and put him on a payment plan. They had even offered to cut it down to 7k if we could make large payments. I ended up taking ahold of our finances and ensuring all of our bills come out of one joint account now to prevent anything like that from happening and ensure everything’s being paid. I was planning to take out a home equity loan (we put 200k down on our 340k house) of about 60k to consolidate our debt (including our car), but got denied due to my husbands credit score. I applied by myself with a 620 credit score (still not great), and got denied as our mortgage payment JUST increased by 200/mo once the loan went to processing which threw off my DTI last minute (can’t include his income.) loan officer said even when messing with the numbers and putting it down to 20, DTI was still not good. I’m going to reapply for 10k to at least consolidate SOME of the debt. Together, me and him make about 4,000 a month after taxes and insurance and have a mortgage of 1800 amongst other bills like utilities, phones, internet, groceries, auto. We also have a small child.
I am trying to find smart ways to pay off our debt or lower our payments and consolidate. I’m looking for a second part time job (I wfh and take care of our little one so options are limited), looking into debt relief programs, personal loans. I’d appreciate any and all advice.
Drowning in credit card debt
byu/coffeecup-11 inpersonalfinance
Posted by coffeecup-11
7 Comments
Have you stopped using all credit cards? Is $4k take home after all non-match retirement contributions? Besides the $1800, what do the rest of your monthly expenses (including debt minimums) amount to?
That is an incredible amount of debt to be in making such low amount in income. You are going to have to increase your income if youre going to have any hope at clearing this. If you cant increase your income you’re going to end up in bankruptcy court.
You can look into a debt management program. I have used an org called In Charge; they are a non-profit debt education and management company that will work with your creditors to get your interest rates down to a fraction of what they currently are so the debt can’t continue to grow. You’ll have to give up the cards, but that’s probably for the best anyway. They will work with you to figure out a monthly payment that is still manageable. My guess is you could have it paid off in 4-5 years if you stick with it. Better option than bankruptcy and won’t ruin your credit like debt consolidation.
Dual income with a kid and you’re only pulling 4k/month? Yikes. Reading the other numbers I assumed you made a lot more. You absolutely have to reel in your spending. Pinch every penny you have and pay that shit down. No more subscriptions, no more eating out, rice and beans for you for a while.
Girl my first husband was that guy. Then, I had to hold all the credit cards in my name so they would be paid. This after I bailed him out with those credit cards. He called it financial abuse. Anyway, we moved halfway around the world and he didn’t do anything to prepare (finding a new job, packing, etc). Ended up with a ton more debts. Got divorced, and he had family support to take a loan out and pay some of the debts down. I never received any help. Spent every dollar I had above bills on paying my minimum payments (my debts were over 100k at this point because I could never refinance or consolidate). After living on work paid lunches and Ramen while trying to maintain the “got it together as a Financial Advisor” appearance, I was hospitalized and couldn’t work. Ended up in Chapter 7 bankruptcy and he is doing just fine.
Will yours end up this bad? Probably not. Will you probably end up in some kind of debt settlement or bankruptcy of some kind if your Peter Pan husband continues to wreck you financially? Probably.
You’re not going to like this answer but you couldn’t afford the house to begin with. You definitely can’t afford it with a HELOC on top of the first mortgage. Thats why you got denied even though the HELOC would be secured by the home value.
Very unlikely you can cut your spending enough to not only reverse negative cashflow that has amounted to -$40k but also create enough positive cashflow to pay off that $40k (plus $8k in annual interest) on that income.
You’re probably not budgeting for a bunch of stuff including the random irregular large expenses like home repair, car repair, child and pet issues, and medical care.
You need to sell the house. That might mean you aren’t homeowners for a long time but that’s better than financing 12% of the house at 22% interest which is essentially what you’re doing with the credit cards. It’s either that or bankruptcy.
Comsolidate asap. Any regular loan is better than credit card Interest