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Thinking Bankruptcy, Need Advice


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I'm real stressed and not sure what to do and am in need of advice.  Two years ago I got divorced and got saddled with $33K in credit card debt.  I have been making the minimum payments and have kept my nose just barely above water.  Been able to make all of my payments, including living expenses (own a modest home and car but make payments on both) However, I've run into some problems that need money that I just don't have.  My HVAC needs to be replaced (about $5000, Live in central TX and no AC is not an option)  this spring before it gets hot!   I've also ran up a debt to a friend that needs to be paid ($2000).  This person nearly saved my life loaning me the money and they need to be paid.  I've trimmed the budget and taken a part time job on top of my decent salaried position (around $45K annually).  I'm stretched thin.  My credit is decent (700ish).


I don't know where to start or what to do.  I was thinking of not paying my credit cards to be able to pay the other items that need attention.  But once I go down that road I need to be sure it is the right path for me.  


Any advice?





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I do not think you are bankrupt. The first thing I suggest is coming up with a 0 based budget. This means you put your income at the top and work down the priority list until you reach 0.

I can give you the first set of priorities in order of importance:

  1. Food
  2. Basic utilities (Gas/Electric, not cable)
  3. Housing (rent/mortgage)
  4. Basic Transportation

Now I wonder if you can sell your car and buy a beater for a year or 2. That would remove the car payment. I also bet you will find extras like Cable TV which you probably do not really need right now if you are working 2 jobs. Stuff like that will help break the log jam and get you to a point where you can probably pay down/off some of these debts and get to a manageable level. $50k is alot but I bet it can be done if you focus.

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Have you looked into refinancing your home?

What is your current interest rate and payment?


If you have equity in your home you might be able to roll some of the debt into it. Say enough to pay for your HVAC, the personal loan and your car.

Then you can negotiate with the credit card companies about changing the terms. Some will go to zero to almost no interest if they are afraid you are going to default.


With a 700 score you might qualify for a 3% - 4% loan also which might not change your payment much. I don't give this advice lightly because I definitely would not want you to lose your home. Its just a lot easier getting by when you have good credit like I am assuming your currently have.


Remember bankruptcy stays on your credit report for 10 years and on your public record forever. When you wreck your credit you will pay more for everything including all types of insurance and it can make it much more difficult to get some jobs. Not to mention future credit will either not be available or you will pay much more for everything.


Its a lot to think about so please do not make any quick decisions concerning it. Making what may seem like an easy decision in the short term can really haunt you in the long term. Its really a decision you will have to make. Just get a lot of different opinions before you make it.


Good Luck!

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Thank you for the advice. I'm in a USDA loan and can't refinance for 3.5 more years. But hardly have any equity in my home anyway. My car is by no means luxurious, but probably. Nicer than I need. Here again not much equity in it though. But I feel that I'm in a position where I won't need to change house or car for a long time. The budget is thin.

After I continue to research, if I decide to file bankruptcy. At what point do I stop paying credit cards? Do I contact a lawyer first?

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You owe nearly as much as your salary. I'd suggest bk as a first option.

One thing you can't do if you file is repay your friend. He is defined as an insider and any payment to him within a year of filing is considered preferential and, the trustee can sue him for the return of the funds.

However, once discharged you can repay anyone you please.

Most bk lawyers give a free or lowcost initial consultation. Speak with a few and get all of your options explained.I'd also stop using credit cards since, bk is on the table.

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