How to get out of trouble?

[andrewg]

I really need some advice.

I have three credit cards, all high interest and close to the limit. Captial ONe $3000 Direct Merchants 4000 and a Union card $3000. I find that working two jobs, I can just meet the minimum payment on each , about 100 a month. (i am also paying off a student loan, and personal loan (almost paid off).

The trouble is paying the minimum, I will never clear the debt. I cannot pay any additonal, I am working two jobs now, but need to quit one and go back to school. I am skipping meals already as credit payment takes up a huge percentage of income.

I live in New York City (36yr old), where rent is high (700 month). Have no car or other assets. I make about 26,000(!) a year.

If anyone is still reading this, what are my options.

1. consolidation loan? But I have no assets. Also, would monthly payments be less? Can someone recommend a lender in NY?

2. bankruptcy? Immoral, I know, but would give me a second chance, I racked up most of these debts just after college, and a lot are due to fees etc. Reading the messages on this board, I get the idea it's not the end of the world. Would I ever be able to rent another appartement? Have terrible credit forever?

3 Just stop paying? What would happen if I did this realistically?

4. Credit counselling? I already got on a six month hardship program on the Direct Merchants card to lower interest to %5. I read a lot of bad stories about credit counseling on the boards thoush; a lot of people seem to get into worse trouble through the company not paying ontime, fees, etc.

Sorry to rant on and on. I guess I will have to make my own choice between a)having bad credit or having a bad life. I wish I could pay these cards back but it seems to be impossible. Any advice would be greatly appreciated.

[E Montgomery]

If you can hold on until you have your personal loan and student loan paid off (since you said they were almost paid off), continue to make minimum payments on your loans, then when one is paid off, apply all of the money that would have gone to that loan to paying one of the credit cards, you should be able to pay down your balance fairly quickly. Plus, if you do not pay at least the minimums, you will start to acrue penalties and late fees, which can raise your balance by thousands before they charge it off.

Therefore, if you were paying $100 on the student loan and it is paid off, take that money and pay capitol one that money plus the minimum balance you were paying before. Once capitol one is paid off, apply the money you would have paid capitol one and the student loan to the next credit card, and so on and so on. That way you don't mess up your CBR and when you want to buy that condo in Soho you can!

[jendev123]

Good answer... That's exactly the best route to take... GOOD LUCK!

[andrewg]

Thanks for those who've responded However, I have to point out that doing the math, at these interest rates it would take me more than 10 yrs to pay everything off.

Does anyone have information about a lower interest loan I could get? I could close the cards and pay off the loan at lower interest rates/monthly payments.

Also, as I said, my income may be decreasing due to return to school, and I am already on the edge.

[ananias]

What are the interest rates of the various debts?

The first thing I would do is talk to the debtor of the personal loan (which I'm assuming is at the lowest rate) and see if they'd be willing to increase the balance of your loan to pay off your highest rate loan, in exchange for increasing your monthyly payment to them by whatever you were paying monthly for that debt. Perhaps they will do this with all of your $10K in cc debt.

The next would be to go to my family and friends and ask them what rate they would give me on a personal loan to lower the expense of any remaining debt.

The next would be a rather proactive effort to sell all my non-essential property to friends. My criteria is this, suppose I have an item I could sell for $100 and the interest rate on my loan is 18%, I'm actually paying $1.50/month just to continue owning that item while I'm in debt. If that item is worth renting for that much per month then I'd keep it, otherwise I'd try to sell it.

Are you sending these notes from a publically available computer or are you paying for access? There was a time when people lived without such things. Calculating your debt liberation date on notepad with a pencil may be a lot more tedious that using a networked computer, but I can guarentee the answer you'll get will be a lot more pleasant to look at.

[Shawnimal]

I was in the same situation. And I just stopped paying..... luckily, nobody sued me (although they all repeatedly threatened/said they were). Of course it took me 7 years to get the last of my debts off my reports (SEARS and Dept of Education did not fold to the disputing process).

What state did the debts originate? If your state has a low statute of limitations, I'd stop paying and take my chances.... then dispute after the SOL expires.

The student loan: you should be able to get a hardship deferrment.... plus if you got back to school, that should exempt you from having to make payments (at least while you are attending).

Everyone will say this is bad advice... and it is. But it worked for me. And when you are facing 10 years of debt and can only make the minimums and feel it is hopeless.... I wanted to just give up and tell them to f-off... so I did. Be prepared to dodge A LOT of phone calls (get caller ID)....

I had over $28k worth of debt (over half was interest and penalties) and I didn't pay a dime. Except to the Dept of Edu ($6k) who garnished my wages.... once they did that, I got in the rehabilitation program... and started paying the garnishment PLUS the rehab payments.... Uncle Sam doesn't mess around.

Am I proud of what I did? No.... it was shameful.... but I wasn't making any money and had no way to really pay all those bills off. I'm sure they were able to check out my financials and saw that it was probably pointless to sue.

I now have a 766 Fico score. wOOt! That will teach people for trusting me with money!!