I’ve made a lot of mistakes in my life. One of the biggest has been the steady racking up of debt, dating back to student loans incurred in the mid 1990s which I’m still paying off. Two years of minimal employment between 2003 and 2005 hugely increased that debt load, and while I have steady work now a very large proportion of income goes towards servicing these amounts due to various banks and credit card companies. It totals $81,000, $25,000 of which is debt owed to a wholly owned corporation which I created for tax purposes. My understanding is that the corporation limits my liability for that $25,000, but I don’t completely understand that. My credit rating is not awful but not very good, due to the extended nature of my finances. I’ve so far avoided bankruptcy or any formal process but I’m not sure where to go from here. Simple maintenance isn’t getting me anywhere, and things like car repairs always threaten to upset the delicate balance.
Has anyone here had any luck escaping these kinds of debt loads? Did you do it through second jobs, credit counseling companies, etc? Any advice is appreciated.
I’d look for a comprehensive debt elimination program on the web that you think is doable. Maybe you can find a free one. I’m sure there’s a lot of BS out there so you have to find a system you believe in and that you’ll stick with. Personal anecdotes from a videogame forum might make you feel optimistic at first, but you need to figure out what works for you. It’ll be a hard slog, so in those moments of crisis you need a stronger foundation than some random tip that somebody else “had luck with.”
Also, make sure you’re serious first. Most people need to go through a series of psychological stages before there’s any chance to make progress. My dad is in debt and recognizes it, but refuses to make hard choices. My mother-in-law is unaware of her impending financial doom. At least make sure you’re past that stage. (You don’t need to reassure me in a reply, just go over it with yourself.)
I’d say the first step is figuring out whether your income is sufficient to dissolve that debt in a reasonable period, even if you were uber-efficient.
If the numbers crunch out to a decade or more of severe fiscal discipline, than it’s near undoable. In that case, you would have to look at some procedure to reduce the debt, be it bankruptcy, reaching an accommodation, etc.
No use servicing interest of the debt if you don’t have the wherewithal to ever address all of the principle.
Talk to a professional debt counselor (not one of those scammy debt consolidation places). There’s no way to know what to do without laying out all of your finances, and I don’t think you’d be willing to do that here, and you shouldn’t.
I graduated college with around $20,000 credit card debt. My payoff plan was “get a high paying software development job, don’t get married, don’t have kids, and pay down the highest rate card as fast as you can.” In other words, it’s a completely useless plan for anyone else.
$81,000? You poor bastard. Yeah, at that level you need a professional.
It’s a corporate line of credit from a bank. I make the payments but I believe I don’t have complete liability for the debts in the sense of seizing personal assets.
Yes, I’m going to contact a local association. I don’t want to do anything to compromise my credit rating, but it’s at a point where there’s not much left over once the debt is serviced.
Rough, man. I sympathize. I was about 20k in debt but just recently got into the black. Mine was a combination of poor choices + school loans. Took settlements on a couple debts, then just gung-ho’d everything else by brute force, even if it was just smaller payments each month. Was lucky to find a much better paying job that helped immensely in the last year. At this point, I just take it as a good lesson learned. I wish you the best of luck getting everything sorted, and I think going with a professional is the way to go.
I’ve been debt-free since early 2008, assuming you don’t count the new mortgage, but all I had to dig out from was one year’s worth of student loans to a state school, $2300 of idiot credit card debt, and $4400 of uninsured medical bills. Maybe 10% of what you have. What everyone else is saying – talk to a professional.
I couldn’t imagine having that much debt or living paycheck to paycheck. I have no debt outside of my Mortgage…which I plan to pay off in 15 years if not sooner.
The rest of my immediately family has each declared bankruptcy at least once…and I’ve been generous enough to loaned out a total of 3,000 dollars between three of them. The simple fact is they all tried to “live” beyond their means. Spending money they didn’t have day in and day out. Interestingly enough, I make the least amount of money out of the lot.
Remember that banks are mostly staffed by lobotomized chimpanzees whose diet consists entirely of documents people send them.
This will help you understand the necessity of having someone who can translate between chimp and human. AKA a bankruptcy lawyer, although a debt professional can help too.
Also, based on helping my parents deal with similar stuff, you can pretty much stop paying for a few months before a bank even notices or does anything about it.
There is some good advice in this thread. Here’s something you can do today to get started on a debt plan:
Head down to the local library and grab a pair of books:
“Total Money Makeover” by Dave Ramsey
&
“Debt Free for Life” by David Bach
Neither of these books should be treated as gospel, but both contain a lot of useful information on how to change the behavior that gets you into debt to begin with and how to deal with debt already incurred. Both have lots of real-life situations outlined with examples of how you can start paying down debt and live without incurring more.
There is no magic bullet to reducing debt overnight. If done correctly, debt reduction is a long and often fairly painful process, but one that can be very rewarding in the end. I’ve personally been using some of the information from both books and elsewhere on the web to form my own strategy for debt reduction that has been working slowly but surely for the past three years now.
I like making excel spreadsheets to play with money math. Basically I do how much I take in against how much I owe on whatever per month. Then I overpay almost everything that’s got interest attached to it and try to keep myself honest about what I’m putting into savings vs spending on fun stuff by having a “Should to go savings” column and a “Actually went into savings” column.
To get rid of my student loans, whenever I paid one off, I’d then put that payment on another one to get rid of it that much faster. Since I wasn’t used to having that money to spend, I figured I wouldn’t miss it. It hurt, but it was really worth it.
And just remember money math always, always looks better on paper. Always.
Almost a decade ago I’d racked up about $30K in credit card debt. Took out a consolidation loan through my credit union, paid the cards off, then paid off the loan via automatic withdrawal over the next 4-5 years. Huzzah. I don’t even use credit cards anymore.
I feel for you. I’ve been in the process of paying off my debt for years now. I accumulated mine through student loans and well, the everyday needs of living. I don’t feel like I lived beyond my means, no unwarranted trips, I don’t have a new car (at least this is paid off), not a lot of partying, but the debt still piled up. It’s frustrating making the monthly payments I can afford which barely makes a dent in what I owe. But I keep plugging away and fortunately in the past year I HAVE paid off a loan and a credit card. Success!
I hear this a lot. There’s nothing wrong with credit cards if you use them right. I use them more or less as a convenience feature only. Not “Q: Can I afford this? A: No = pay with credit!” I almost never have to fiddle around with cash, loose change.
The trick being I always pay the ENTIRE balance off every month without fail. NEVER the minimum payment. That would be financially irresponsible.
This is what I do also, except I pay it off two or more times a month usually. I use it more like a debit card. In fact the only reason I use it instead of my debit is because of the various incentives (like cash back) that credit cards offer.
Only reason I ask is I did split my mortgage into two bi-monthly payments. I apparently build equity/trim off interest faster that way. I can chop it down more into quad-payments but then it goes a little convoluted.
My sister tends to do this and then have a nervous heart attack every month.
I mostly go with the “try not to spend money unless you really really want to” approach, and it has served me fairly well.
I also don’t have a credit card, although I’m fully aware that that is a mistake. I prefer the PAYGO safety of my debit card, and the regular transfer of large portions of what lurks within to my savings account.
