$40,000 in debt, bankruptcy seems to be the best option right now

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Jmo24
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Joined: Wed May 23, 2018 7:46 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Jmo24 » Sat Jan 05, 2019 5:30 pm

I second the Dave Ramsey recommendation. Please go to a financial peace university class. I am sure there are many near you. If you follow the Dave Ramsey baby steps you will get out of this mess but it is going to take a couple years to clean it up. Your alternative is to continue down this disastrous path and get further in the hole and never be able to retire.

https://www.daveramsey.com/show/podcast ... amsey-show

The above is a link to the first lesson in FPU in podcast form for free.

FPU teaches you everything finance related, from budgeting, to getting out of debt, to investing, to what type of insurance to buy and what to avoid, it goes over it all. If you follow the baby steps not only will you get out of this mess but in time you will become wealthier than you ever could have dreamed possible. GOOD LUCK AND GOD SPEED!

mrc
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by mrc » Sat Jan 05, 2019 5:31 pm

JGoneRiding wrote:
Sat Jan 05, 2019 5:10 pm
Seriously, why did you think you could afford the house when it puts a fairly basic budget $478 a month in the hole?

You need Dave Ramsey, it's your only hope and you need some serious gazelle focus. You MUST get your wife on board. Anything that isn't tied down needs to be sold or given back to its lean holder (are you leasing furniture???) You should check out "buy nothing" boards for your area, you should sell on Craigslist, you might consider food banks in your area.
CC debt is about $38,6K. That's 80 months of a 478/month negative cash flow. This has been happening for a while. Get serious about a solution and get started today. You can do this, but you have some immediate major changes ahead. In a couple years, you're either in the black as a family, or your $100K in debt. It's your choice (for now).
Macs are for those who don’t want to know why their computer works | Linux is for those who do | DOS is for those who want to know why their computer doesn’t work | Windows is for those who don’t

User avatar
Toons
Posts: 13430
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Toons » Sat Jan 05, 2019 5:33 pm

Eat Rice and Beans for a while
Get Tough
Hardship is the pathway to peace.
Take Charge of your destiny,
Change you spending behavior,
No excuses
:idea: :idea:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

HEDGEFUNDIE
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Joined: Sun Oct 22, 2017 2:06 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by HEDGEFUNDIE » Sat Jan 05, 2019 5:36 pm

The one thing I have not heard mentioned is you should try to get a new job that pays more. The economy is still in good shape, see who might be hiring. A 20% pay increase would make a lot of your problems go away.

Kensai
Posts: 1
Joined: Fri Feb 10, 2017 10:42 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Kensai » Sat Jan 05, 2019 5:40 pm

I Think this is a first post - I Had to figure out how to get my information because your post hits close to home (and that I'm still recovering)

I went through a very similar situation, except my housing wasn't a huge concern.


Everyone has made great suggestions thus far. Rather than repeat cancelling non-essentials for you to say why they are important I will give you my situation. Instead of ignoring it and coming up with excuses as to why you need each expense... consider them an option. Excuses are why you are in the debt you are in.

From someone that was in a very similar situation... (I didn't buy too much house, but the debt issue hits close to home)

1) You can dig a hole with a track hoe, it can only be filled back in with a teaspoon. Remember this on the road to recovery from the spending problem not an income problem. You didn't get that many credit cards with such a high balance from one bad decision you have bad habits. Bankruptcy is just a get out of jail free card, you need to modify your behavior. The frustrating part is in a year of making 0 mistakes - you will have barely made progress. Make one mistake and start over (Except likely farther behind).

2) I see many times you and your wife are on different pages. You are a team. Next time you want to use a "My wife" card - say "We" as you are as much to blame as she is.. I was the same way, it's easy to see others errors, not your own. I'm guessing not every single penny spent is listed - as that amount of credit card debt couldn't have happened that fast- Many bad decisions... (It appears you used leverage to buy furniture for example?)

Step 1) Re-read and follow advice already given that is possible. Rather than reasoning why you can't cut. Search/investigate all options. I won't cut and paste the many good thoughts. I did get a chuckle out of a security system, maybe someone will break in and ... pay your debt?

Step 2) Look at a personal loan (if you can get one) as a debt consolidation (Credit union/etc) . They will cancel a card and pay it off, and in turn you MIGHT lower your interest rate - worth investigating, I did this with three cards which helped.


Step 3) What worked for me was CANCELLING all but one of my cards, I kept the one near max limit... Yes with a moderate/high balance. One day I was in a mood, and determined I was done circling and making excuses (similar to the ones you have made in this post - wife wants this etc) I called and started cancelling, and guess what? We didn't starve.. Yes some weeks were rough, yes some months were rough - but we are finally on the downhill slide. And unable to make the same mistakes we did - as the credit isn't there..) I was originally stressed out beyond belief and traded labor for food etc., about 2 years later and I feel like the world is off my shoulders.

By keeping the one with the maxed limit - it prevents you from using the credit card ... beyond what you pay. So you can't just rack up faster credit card debt by keeping a lower balance one.


I'm guessing you won't change your habits - but that is fully up to you. You came, asked for advice and then determined most of it isn't possible. Time to stare in a mirror and accept responsibility.

SrGrumpy
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Joined: Wed Aug 05, 2015 3:21 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by SrGrumpy » Sat Jan 05, 2019 5:40 pm

HEDGEFUNDIE wrote:
Sat Jan 05, 2019 5:36 pm
The one thing I have not heard mentioned is you should try to get a new job that pays more. The economy is still in good shape, see who might be hiring. A 20% pay increase would make a lot of your problems go away.
Wouldn't change the mindset, though. Let's get the premium cable package. And an iPhone.

Tinks
Posts: 12
Joined: Sat Jan 05, 2019 5:26 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Tinks » Sat Jan 05, 2019 5:42 pm

We are in a similar boat. I am 50, my husband is 46. We are in big time debt as well! I highly recommend Financial Peace University (Dave Ramsey). My husband is the free spirit but he is finally motivated after watching Dave Ramsey's lessons.

Here are some things we are doing. I'm hang drying all of our laundry. It's winter time, so I'm drying in the basement. We got rid of the deep freezer and the garage fridge will be picked up in 10 days. We are no longer eating out and I am grocery shopping at Aldi or use coupons. Both my husband and I are driving what I like to call PLPD cars. My Yaris has 229,000 miles and is still getting 32 miles to the gallon. My husband is driving a Jetta with over 200,000 miles. Auto insurance is expensive in Michigan, so no full coverage for us at this time. We have our phones pay-as-you-go through Boost Mobile, $37 a month each. We have not yet addressed the cable bill, but I'm hoping for improvement there.

I'm into "natural" stuff and it just so happens to save us a ton of money. With our hard water, I have to clean off dishes with a sponge anyhow, so I just use some vinegar in the dishwasher. It is the heat that sanitizes them anyhow. I put Milk of Magnesia in empty roll-on bottles for deodorant. It actually works better. And I use Dr. Bronner's unscented castile bar soap for toothpaste. It actually cleans your teeth better. I water out dish soap with water for shampoo, not because I'm cheap but because I tend to have really greasy hair. It just happens to last forever and saves us money! We have also been saving on our electric bill by using power strips and turning the strip off when not in use.

All of this is adding up and making a big difference!

Ron Ronnerson
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Location: Bay Area

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Ron Ronnerson » Sat Jan 05, 2019 5:47 pm

When I was your age (12 years ago), I had credit card debt, spent all my savings on a car, and then got married to someone who also had credit card debt. We celebrated our honeymoon in Greece and one-year anniversary in Paris. We had $40k of credit card debt at that point.

Then my wife and I both woke up to the reality of our situation and saw where things were headed. We came up with a plan to get out of debt. We transferred balances onto 0% cards and paid the minimum. We each got jobs that paid better and started banking all our savings (banks paid over 5% interest at that time so we were using the spread to help us). Right as the 0% on a card was about to end, we would take money out of the bank and pay off the balance in full. We eliminated the highest interest rate cards first. We didn’t pay a penny of interest.

You need to start looking at ways to increase your income while finding inexpensive alternatives for all spending categories. Here are a few things that I would consider in your situation: Selling the house and renting an inexpensive apartment or renting out part of the house if it’s big enough. I would find a cheaper form of transportation. Buy an inexpensive car and carpool if it's possible (I carpool in a Corolla and am hoping to get 15-20 years out of the vehicle). You can get security signs on eBay. You also need to look into increasing your income. Higher paying and/or side jobs could make a big difference.

A higher income along with cutting expenses were the key to us getting out of $40k of credit card debt. It only took us two years. My wife and I are both 44 now and have a net worth close to $1M. I’m a teacher and she used to work for a small business making around $50k/year. She’s a stay-at-home parent now since we've found ways to make it on just my income while still meeting our savings goals.

You can do this if you really work hard at it. However, you and your wife have to be united and focused like a laser on your goal. I wish you the best on this journey. It can be very satisfying as you see progress being made.

aristotelian
Posts: 6698
Joined: Wed Jan 11, 2017 8:05 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by aristotelian » Sat Jan 05, 2019 5:55 pm

Devil's Advocate wrote:
Sat Jan 05, 2019 1:23 pm
Your track record with debt is not good. When your parents gifted you the downpayment money and paying off your debt was not truly a gift...giving a drunk a drink as Dave would say.

Unfortunately you can't afford this house. Until you unwind this purchase everything else is like p*ssing into the wind.

Good luck.

DA
The other option is having the wife contribute a second income. Even if she only contributes 10k after childcare, the debt would be gone soon.

I agree, cutting out cable isn't going to get it done.

JGoneRiding
Posts: 1846
Joined: Tue Jul 15, 2014 3:26 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by JGoneRiding » Sat Jan 05, 2019 6:10 pm

On the cards: the thing to do is get one paid off. You then use that one for monthly bare necessities giving you a 30 day float and pay it off monthly.

I would then throw all you got at the card with the next lowest balance that is not in a zero % period. Destroy that card when done unless it's rate is better than card 1

You can do this if you are willing to scrounge for every penny and put it all towards debt while dumbing every last thing out of the budget and selling things.

After Dave I rec a book called "how we killed the debt dragon " it's written by a women and deals with a lot of the emotional stuff and also more nitty gritty on the "how" then vague stuff like maintain focus and cut every thing it especially might be good for your wife if she is having issues with budget cut

I rec a chart or spread sheet or some sort of visual in the house. Maybe bar grafts anything to help remind you daily of where you are and where you need to be!

fmhealth
Posts: 185
Joined: Tue Mar 25, 2008 10:24 am

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by fmhealth » Sat Jan 05, 2019 6:13 pm

Excellent strategies already commented upon up thread. Here are two others that may merit some consideration on your part.

1- Your parents are very generous people, as illustrated by their gift to you. How about discussing the depth of your financial problems & asking for a $40,000 loan? Work out an aggressive repayment program that would be reasonable & doable. The worst that can happen is that they decline.

2-Start a "Go fund Me" page. You'd be surprised how much money can be generated from people nationwide that can relate to your situation. Once again nothing to lose here.

I won't rehash the steps you'll have to implement to ultimately change your life permanently. Look at this as an exciting life-altering challenge. I truly believe you can succeed.

Be Well,
fmhealth

delamer
Posts: 9492
Joined: Tue Feb 08, 2011 6:13 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by delamer » Sat Jan 05, 2019 6:23 pm

I have not read all the replies, but I recommend downloading the TaxCaster app and estimating your 2018 federal income tax.

You may find out that you have been over-witholding and can reduce it going forward to help with cash flow.

And if you find out you’ve been under-withholding than you’ll need a plan for when 2018 taxes are due and to adjust it for 2019.

Treat your situation as an emergency. Eliminate all savings and all non-essential spending, and direct the money toward debt. Spend cash only for groceries. Try consignment stores for the kids’ clothes. No new clothes for the adults.

Good luck.

frugalmama
Posts: 205
Joined: Tue Mar 20, 2018 12:53 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by frugalmama » Sat Jan 05, 2019 6:36 pm

autopeep wrote:
Sat Jan 05, 2019 4:57 pm
I think everyone here is sympathetic to your situation. That said you seem somewhat reluctant to make the necessary changes. Security services, gym memberships, car leases, cable packages. These are all elective expensives you are choosing to take on. You either need to spend less or make more. Again, I am sorry you are going through this.
Absolutely. I think it would also to help to realize that there are a lot of people who have 6 figure incomes who don't have any of those things. If you declare bankruptcy, I suspect you will be in this same situation again in the near future. Bankruptcy doesn't solve your problem. Your level of spending based on what you earn is your issue and until you come to grips with that, you won't make much headway as you will find yourself in the same situation.

Mr. Money Mustache, Dave Ramsey, etc. both need to be your new best friend. Additionally, if you are using YNAB and have this kind of debt, you are somehow not using it right as you should not be spending more than you have each month....the budget isn't for you to plug in #s after the fact, it is for you to use as a proactive tool to keep yourself within your means. You need that Available to Budget # to go to zero (not negative) each month.

You can do this OP! We want to hear you come back and tell us your success story.

keepingitsimple
Posts: 195
Joined: Sun Mar 18, 2018 8:20 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by keepingitsimple » Sat Jan 05, 2019 6:52 pm

geologist20 wrote:
Sat Jan 05, 2019 12:34 pm
Hello,

I am a 32 year old male, wife and two kids under 4. I currently work for an environmental consulting company in Miami for the past 7.5 years. I currently live in Broward County (not as expensive as Miami, about 40 miles north). My wife has not worked since my second kid was born in late 2017, but is starting part time work this month. It just seems that debt keeps snowballing and there doesn't seem to be a way to pay it off. It's to the point where it's negatively affecting my family time.

The only strategy I can think of is to focus on only paying down one card (with the lowest balance), while using the other cards for the normal budget (thereby paying the minimum payment but effectively not paying the cards down at all).

Monthly budget
Net Income: $4,300.00 (including wife's project net income)
Bills
mortgage $1,871.00
association fee $135.00
car lease $355.00
Discover card $250.00
All other credit cards $463.00
car insurance $75.00
groceries/necesities $700.00
gas $170.00
dining/misc $0.00
life insurance $35.51
student loan deferment
ADT/Security $39.21
Wife's bills $365.00
Gym $0.00
Cable/Internet $80.00
FPL/electricity $140.00
Water $100.00
Savings $0.00

Total amount of bills $4,778.72
Remaining -$478.72


All accounts
Account Jan-19
HSA Investments 1536.11
Roth IRA 1370.89
City Furniture -684
Chase Slate -4804.91
Barclay Card -1845.77
Amex -996.18
Citi Double Cash -4083.12
Discover Credit Card -13662.36
Student Loans -4717.2
Schwab Brokerage 78.01
Discover Savings 19.08
Fidelity 401k 9037.36
Amaz CC -3044.41
HSA 733.86
Schwab Savings 0.08
Chase Freedom -4309.62
BankAmericard -5196.83
Net Worth -30569.01
First I want to say you and your wife can certainly tackle this debt and get things straightened out. I think it's an excellent sign you are on this forum seeking input because it shows you are serious about seeking a solution. It is 100% possible to turn things around if you both want it badly enough, are realistic about the sacrifices you need to make and commit to a plan. It's doable and I genuinely believe you can turn things around.

There will be several difficult decisions along the way. Some decisions will feel painful but you should remember that some of the things you'll need to give up don't have to be given up forever, just until things are turned around. Below are some suggestions, a number of which have been made already. The thing to remember though, is that if certain suggestions keep coming up, they are likely ones you definitely need to take action on.

Bankruptcy:
I would not file bankruptcy for three reasons:
1. Your current level of debt is serviceable if you are willing to make the necessary changes.
2. The damage to your credit will only make your future more difficult and possibly more expensive. Your current credit score may not be good, but it's likely not as bad as a bankruptcy on your record.
3. Bankruptcy will only truly be of long-term benefit to you if your debt was caused by large, catastrophic, unavoidable things happening in life. If your debt is mostly due to financial behaviors within your control, you'll likely find yourself in a similar position of flirting with the need to file bankruptcy again at some point in the future. I have a friend that filed bankruptcy maybe ten years ago. Their debt was mostly behavioral. This friend has not filed bankruptcy again but their financial behaviors have not changed and they are usually living on the edge of having no money. Their salary is such that they need not live on the edge of having no money. The point is their bankruptcy put a band-aid on their problem, they learned nothing.

Income:
1. Your income needs to go up if possible. You've been at your current company for 7.5 years, could you find a job paying more with a different employer? If not, you should seek a part-time job (whether related to your field or not).
2. Your wife, if possible, needs to seek a full time job. I know this may be difficult logistically with children. Are her parents, your parents, other family members or trusted friends able to help with the children? This might only be necessary for a year or two, then perhaps she could scale down to part-time.

Bills:
mortgage $1,871.00
association fee $135.00
--As has been mentioned, this is too high for your current projected take home pay. I think your salary covers a mortgage/rent more in the $1,000 to $1,500 range. I think selling the house and renting for awhile needs to be considered. I lump association fees in with your mortgage because it is a permanent expense associated with the home. So the $1,000 to $1,500 range includes any association fees or mandatory fees such as property taxes, etc.

car lease $355.00
--This is too high for your income. You need a car that costs at least half of this, preferably one you own.

groceries/necesities $700.00
--I would have a very specific shopping list before going to the store. Use coupons but don't be lured into buying multiple items at a discount if they are not items you normally consume. Sams Club, Costco, store brands, coupons...all things to consider.

car insurance $75.00
--Make sure you aren't paying for extras you don't need. Sometimes you end up paying for unexpected add-ons you don't realize.

ADT/Security $39.21
-- SimpliSafe is a good option. The drawback is the upfront money for buying the system. You should save up for this, don't put it on a credit card.

Wife's bills $365.00
-- I understand from one of your follow up posts that $70 of this is for her cellphone and the remaining amount is credit card debt, am I correct? If so, on your budget and strategy her credit card debt does not need to be separated from the other credit card debt. Your debt is a collective.
-- Also, her phone bill needs to be half or less of what it currently is. This might mean a prepaid phone or a more basic phone.

Cable/Internet $80.00
-- I would do away with the cable tv for sure. It will be missed but it's not worth the price given your current expenses. The internet...I would only keep this if it's needed for your or your wife's employment. Otherwise, just check email on your smart phone. If you decide you must keep internet then purchase your own modem so you don't have to rent one from your cable provider (unless they provide it for free). Owning your own modem will pay for itself in one year.

Water $100.00
--Seems high as others have indicated. Perhaps coming up with a strategy to limit the number of loads of laundry needed.

401(K) / IRA
--I wouldn't contribute to these until your debt to income ratio has improved substantially. I am a big advocate of saving for retirement but right now you need to save for your current living.

Paying off Debt:
I know some advocate paying off the smallest debt first, others say pay off the highest interest rate first. I would do a combination. I would pay off debt in group 1 (below) first, then organize Group 2 from highest interest rate to lowest and pay off in that order. Then I would address the Discover Credit Card and Student Loans. After each credit card is paid off I would use whatever was going towards that card and put it towards the next. I choose this order because I do believe there is some psychological benefit to seeing cards getting paid off. Though it seems obvious it's worth stating that you should no longer be charging anything to any of your charge cards. If you want your monthly fixed bills to be automated then I would have them debited from your bank account or use a debit card. As credit cards are paid off they need to be cut up. Don't continue to carry them, their temptation is too great. Perhaps keep only one card for emergency use only and be very, very cautious with what you classify as an emergency. Needing something you can't afford does not necessitate an emergency.

Group 1 (pay off lowest amount to highest amount):
City Furniture -684
Amex -996.18
Barclay Card -1845.77

Group 2 (pay off highest interest rate to lowest):
Amaz CC -3044.41
Citi Double Cash -4083.12
Chase Freedom -4309.62
Chase Slate -4804.91
BankAmericard -5196.83

Discover Credit Card -13662.36
Student Loans -4717.2

Dave Ramsey & Others:
You've seen Dave Ramsey recommended by several forum members, I think his system is a good one to consider. There were also a few other systems / people recommended to follow. My suggestion is to pick the one you relate to the most and follow their system exactly. You need a strict budget that accounts for every dollar spent and a strategy for paying off debt. Pick a strategy and go with that plan.

Remember, lots of seemingly small changes can cumulatively lead to a large, positive change.

Best of luck to you. I really think you can take care of all this without bankruptcy. It's doable!! Please share the plan you decide on and the ultimate victory you experience. I anticipate we will all be reading of your success in the future.

moneysaving
Posts: 1
Joined: Sat Jan 05, 2019 6:14 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by moneysaving » Sat Jan 05, 2019 6:56 pm

here is my new monthly budget to pay off debt

total student loan and credit card debt $43340
monthly payment 5 years 7% rate for the debt $859
mortgage $1871
association fee $135
car insurance(assume you get rid off car lease,and pay minimum) $50
gas (new used card with minimum 40MPG,drive 50miles daily) $70
life insurance $35.51
internet only $40
cell phone (tello, red pocket) $20
eletricity(no AC,) $60
water( try to use less than 12000 gal per month) $50
saving $400
Total $3591
Income $4300
left over(for food, clothes,repair, etc) $709

Five years from now, you will debt free and has saving $25923

chevca
Posts: 3069
Joined: Wed Jul 26, 2017 11:22 am

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by chevca » Sat Jan 05, 2019 6:56 pm

I've been there myself. In my late 30's, we/I were about $30k - $40k in debt, and the ex was divorcing me at the time. Could be worse!

I'm with the others that mentioned cutting spending any way you can, get a higher paying job, a second job, sell stuff, or do whatever you need to do. It feels so good to get out from under that debt. I still carry a mortgage, but no other debt and far into the positive on the net worth side now. It's tough to even think how I got myself into that negative net worth situation years ago. I never want to be there again though.

I used and like the snowball method paying off the smallest debt first and then moving onto the next one. It feels good to see bills going away. The way I looked at it was, when you're that far in the hole, it's not about optimizing interest being paid... it's about progress and seeing balances go down and away. To each their own that way though.

You can do it, OP!

bubbadog
Posts: 872
Joined: Wed Mar 26, 2014 9:17 pm
Location: Cincinnati,Ohio

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by bubbadog » Sat Jan 05, 2019 7:04 pm

jharkin wrote:
Sat Jan 05, 2019 4:09 pm
Without reading every reply in detail the #1 thing you have to realize that is the credit cards are not your problem. they are just a symptom - Your true problem is that you are living a mid 6 figure lifestyle with a 5 figure income.

You HAVE to break the over spending cycle. Bankruptcy would just be a band aid. I dont usually like Dave Ramsey but you are a perfect candidate for his system of budgeting and debt snowball.

#1 - The house. Sell it and rent. Yes I know that's drastic but you pay more mortgage than I do and have 1/3 the income.
#2 - Car lease. Tooo much in your situation. See if you can break the lease and either buy a used beater with cash or lease something like a Honda Civic/Fit, Kia, Hyundai or similar small car which will only run < $150/mo.
#3 - Be very honest with yourself and figure out what you can eliminate from groceries/necessities. Shop wholesale clubs and buy generic.
#4 - Dump the security system. You probably dont have much worth stealing anyway. If you do start selling things on Craigslist to raise cash.
#5 wifes bills - What are these? If its not a basic necessity (food/shelter/clothing) stop spending it.
#6 Drop the cable and get a digital antenna for the TV. Get on the cheapest internet plan you can. stream YouTube for entertainment.
#7 Why is your water bill so high???? Ours is less than 1/2 of that and we dont make any effort to conserve. If you have sprinklers turn them off tomorrow - you cant afford it.


Do all of that and start paying the cards off one by one in order of highest interest rate to lowest. Once you have eliminated them all get that student loan out of deferment and start making payments. Then start contributing more to retirement. Only after all that consider giving yourself a break on spending. Yes this is scary and I am sure that making those drastic changes will make you feel miserable at first, but trust me ... in a couple of years the feeling of being in control of your finances (rather than vice versa) will be liberating and bring you more happiness than all that consumer spending ever did.
geologist20 wrote:
Sat Jan 05, 2019 12:34 pm

Monthly budget
Net Income: $4,300.00 (including wife's project net income)
Bills
mortgage $1,871.00
association fee $135.00
car lease $355.00
Discover card $250.00
All other credit cards $463.00
car insurance $75.00
groceries/necesities $700.00
gas $170.00
dining/misc $0.00
life insurance $35.51
student loan deferment
ADT/Security $39.21
Wife's bills $365.00
Gym $0.00
Cable/Internet $80.00
FPL/electricity $140.00
Water $100.00
Savings $0.00

Total amount of bills $4,778.72
Remaining -$478.72
THIS^^^^^x100 :moneybag :moneybag

jharkin is giving you an excellent and easy to follow plan that will lead to you and your wife becoming financially solvent.

I hope you follow his advice as it makes a lot of sense.

mortfree
Posts: 1989
Joined: Mon Sep 12, 2016 7:06 pm

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by mortfree » Sat Jan 05, 2019 7:07 pm

I’ll focus on the groceries.

Who does the grocery shopping?

I do the shopping since I am better at math. I clip coupons. I use the grocery store app for more coupons. I price shop and stock up when things are on sale.

Early on when my wife would shop with me the bill was always so much higher. She isn’t allowed to come along anymore but she does write out the grocery list each week.

Definitely do not take the bankruptcy route.

Water bill: does your house have a pool??
Last edited by mortfree on Sat Jan 05, 2019 9:39 pm, edited 1 time in total.

SrGrumpy
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by SrGrumpy » Sat Jan 05, 2019 7:15 pm

keepingitsimple wrote:
Sat Jan 05, 2019 6:52 pm


Water $100.00
--Seems high as others have indicated. Perhaps coming up with a strategy to limit the number of loads of laundry needed.
Maybe there are a bunch of taxes and fees and add-ons, and it's not entirely water usage? Failing that, there may be a leak somewhere. Failing that, two per shower. No bath for the kids.

delamer
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by delamer » Sat Jan 05, 2019 7:15 pm

fmhealth wrote:
Sat Jan 05, 2019 6:13 pm
Excellent strategies already commented upon up thread. Here are two others that may merit some consideration on your part.

1- Your parents are very generous people, as illustrated by their gift to you. How about discussing the depth of your financial problems & asking for a $40,000 loan? Work out an aggressive repayment program that would be reasonable & doable. The worst that can happen is that they decline.

2-Start a "Go fund Me" page. You'd be surprised how much money can be generated from people nationwide that can relate to your situation. Once again nothing to lose here.
1. No, the worst that can happen is that the OP and his wife borrow more from his parents (they already intend to payback the downpayment gift) and aren’t able to make the agreed upon payments. A potential disaster for family relations.

Look, I got the downpayment for my first condo from my parents. But I never needed their help to pay my mortgage.

The OP and his wife need to figure this out on their own. As others have noted, the overuse of credit cards preceded the house purchase and needs to be fixed.

2. They need a lifestyle change, not to be begging money via online panhandling.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by smitcat » Sat Jan 05, 2019 7:17 pm

mortfree wrote:
Sat Jan 05, 2019 7:07 pm
I’ll focus on the groceries.

Who does the grocery shopping?

I do the shopping since I am better at math. I clip coupons. I use the grocery store app for more coupons. I price shop and stock up when things are on sale.

Early on when my wife would shop with me the bill was always so much higher. She isn’t allowed to come along anymore but she does write out the grocery list each week.

Definitely do not take the bankruptcy route.

Sorry IF your in-laws thought the downpayment gift was a good idea but now they left you with the house burden. I would imagine there was some pressure there to provide for their daughter and grandkids.

Water bill: does your house have a pool??
"Water bill: does your house have a pool??"

Yup - something is wrong with the water bill, but not even a pool can make these charges add up like that...
A leak maybe?
http://www.broward.org/WaterServices/Ra ... Rates.aspx

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Slacker » Sat Jan 05, 2019 7:42 pm

I see a lot of remarks on the water bill. Without knowing how many gallons the op uses per month, it is a little bit of a waste of time to go after. I've lived in many cities across the us and typically use between 1200 gallons to 2500 gallons a month in most cities I lived in. This resulted in water bills that were anywhere from $40 (combined sewer and water) up to $125 (combined sewer and water) depending on city. Currently, we pay around $45 for trash, water and sewer... But my prior experience tells me that water prices are highly variable per city.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by whodidntante » Sat Jan 05, 2019 7:53 pm

You aren't bankrupt, you are house poor. Sell that noose. Move to a cheaper area if it is beneficial.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by snowman » Sat Jan 05, 2019 7:58 pm

Slacker wrote:
Sat Jan 05, 2019 7:42 pm
I see a lot of remarks on the water bill. Without knowing how many gallons the op uses per month, it is a little bit of a waste of time to go after. I've lived in many cities across the us and typically use between 1200 gallons to 2500 gallons a month in most cities I lived in. This resulted in water bills that were anywhere from $40 (combined sewer and water) up to $125 (combined sewer and water) depending on city. Currently, we pay around $45 for trash, water and sewer... But my prior experience tells me that water prices are highly variable per city.
I was just about to comment on that! My water bill is $85/month without any usage, just the connection, taxes and fees. Actual usage fees start from there, and they are steep. I could only wish for $100 monthly water bill!

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beyou
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by beyou » Sat Jan 05, 2019 8:00 pm

Simplify, you have too many accounts. Disclipline is required and having so many accounts is an indication if lack of discipline


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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by snowman » Sat Jan 05, 2019 8:11 pm

I agree with so many excellent suggestions, but I have the same question someone already asked up thread: how on earth did you get approved for mortgage 3 months ago? With all that CC debt, and income to debt ratio approaching 50%? Is the mortgage agreement done with your parents, not the bank?

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by delamer » Sat Jan 05, 2019 8:25 pm

snowman wrote:
Sat Jan 05, 2019 8:11 pm
I agree with so many excellent suggestions, but I have the same question someone already asked up thread: how on earth did you get approved for mortgage 3 months ago? With all that CC debt, and income to debt ratio approaching 50%? Is the mortgage agreement done with your parents, not the bank?
The income he noted was take-home, so that isn’t what they would have qualified on.

InMyDreams
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by InMyDreams » Sat Jan 05, 2019 8:56 pm

Conserve cash and costs wherever you can.

Visit a food pantry to cut costs on your food bill.

Not sure if you & your family would qualify for food stamps (SNAP) or WIC:
https://en.wikipedia.org/wiki/WIC#Income_requirements
https://en.wikipedia.org/wiki/Supplemen ... ce_Program

If you are a member of a church, ask the ministry about assistance - some of them get it, some don't.

Second hand clothes.

In a large city, there may be a "fell off the truck" type store. Food and goods can be extremely inexpensive there.

There may be an informational assistance program. In my city, dial 211, I think?

How big is the house? Could you take in a boarder?

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by ThePrince » Sat Jan 05, 2019 9:02 pm

DanMahowny wrote:
Sat Jan 05, 2019 4:38 pm
Bankruptcy isn't the answer here.

You are trying to plug a hole in a boat with more water.

Sorry man.

+1

aqan
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by aqan » Sat Jan 05, 2019 9:16 pm

How much equity do you have in the house? I'd consider selling the house and renting until you get back on the track.

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geologist20
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by geologist20 » Sat Jan 05, 2019 9:21 pm

snowman wrote:
Sat Jan 05, 2019 8:11 pm
I agree with so many excellent suggestions, but I have the same question someone already asked up thread: how on earth did you get approved for mortgage 3 months ago? With all that CC debt, and income to debt ratio approaching 50%? Is the mortgage agreement done with your parents, not the bank?
Approval was based on $63000 gross income and using the gift to pay down a $10,000 loan and $5,000 credit card.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Tdubs » Sat Jan 05, 2019 9:21 pm

Given the softening market and the brief time of ownership, isn't it likely he takes a loss and exits the house with more debt?

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geologist20
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by geologist20 » Sat Jan 05, 2019 9:33 pm

Thanks to all the replies. A lot of good advice in here that I will comb through to develop a plan with my wife. I sent her the link to this thread to read as well.

Student loans are currently in deferment. It would be around $110/month. I'll start paying that once a couple of credit cards are paid off.


By wife's bill, I mean her credit card payments and cell phone ($70). She is starting work part time this month, which will help tremendously. I'll continue doing surveys and in a few months I'll start doing freelance side work (GIS related).

We don't have a pool or sprinklers. I don't water the grass. I suspect that the high water bill is due to the kids daily bath and the washing machine. The last water bill included water($37), wastewater($46), garbage ($17), recycling ($3), stormwater($8), and water tax ($4).


My previous rent was $1600 for a two bedroom-two bathroom apartment. Rent's are not significantly cheaper. We bought the house 3 months ago, so there is no equity. There's would also be the problem of needing $3,000 for a rental down payment. I'll end up with more expenses trying to sell now. I'll evaluate it at the end of 2019.

I should also elaborate that it was my parents, not my wife's parents that gifted the home downpayment. Part of the mortgage approval was using the gift money to pay of a $10,000 loan and $5,000 credit card, which was one of the main reasons I agreed to go through with it.

We are going tomorrow to see if we can downsize the lease.

I will start paying off the smallest balance cards first to start eliminating payments, then use the debt avalanche strategy after that.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by mhadden1 » Sat Jan 05, 2019 9:47 pm

arrieros81 wrote:
Sat Jan 05, 2019 1:07 pm
Your housing expenses are nearly 50% of your take home and that is just way too much.

I don’t see where you can cut back much, maybe your groceries/food bill a little.

Can you or your wife work more and increase income that way? It’s probably hard with young children at home.
You are in a tough spot, where you don't make all that much money, for your relatively HCOL area, but you have expenses, particularly housing, commensurate with the HCOL area. Something has to give: make more money, spend a big chunk less, or a combination of the two. Possibly you could move away from Florida Gold Coast to an area where the housing numbers work better. Minimizing expenses like cell phone or entertainment, getting a real cheap car, etc. is appropriate but I don't know if that really cures your ills. Yet, it's a shame to declare bankruptcy over such a relatively small amount, particularly when you will have to invest some money in the process, up front, for legal fees and such (I think). Also, it's possible you might not get relief for all the debt. (I think.)

If you just can't pay some of the bills sometimes, then you will have to skip them. This will lead a bunch of late charges, extra interest, fees etc. and your credit will get trashed, maybe not quite as bad as a BK. I think it will take some amount of time, maybe many months, before you get sued and lose, and are ordered to pay. At some point you can probably negotiate some of the debt for cents on the dollar, after a lot of jawing and effort probably. What you need to avoid is getting your wages garnisheed, after which I think a lot of employers might dismiss you. Would yours?

I wish I had some really useful advice other than Titanic deck chair arrangements. I hope you can break out of this somehow, with maybe a move, better paying job for you/your spouse, cheaper housing somehow, etc. Good luck!
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

OldSport
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by OldSport » Sat Jan 05, 2019 10:05 pm

There are multiple issues going on. Expenses are too high and income is too low. Dave Ramsey Baby Steps are very appropriate. I would not file for bankruptcy. Your credit would be terrible for 10 years and you will lose your house and vehicle(s) and other assets of value. Please avoid this.

Is there any way you can increase income? Anything from getting a better paying job, to either you or your spouse getting a second job or your spouse working full time? Increasing income would be something I would do first.

I would cutback on discretionary purchases. Cable is expensive. You could probably cut the grocery by $100 or $200. Shop at Aldi, at least for the time being.

I would also pay of your highest interest credit cards first and put extra money to paying off debt in order of highest interest rate. Also get a $1000 emergency fund.

Get out of the expensive car lease. Your lease is higher than my payments to OWN a new Accord. I would look at a Toyota Corolla or Honda Fit if you need family cargo space. Inexpensive reliable vehicles.

ADT is expensive, but they had obscene cancellation fees that I would consider borderline criminal! We have security at half the ADT price, but had to cancel at the end of the ADT contract term. In urban South Florida, I agree that it IS CRITICAL to have a monitored security system.

I would do everything possible to keep the house and avoid bankruptcy. Unfortunately in that part of the country, not having money means lower quality of life and higher crime.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by momvesting » Sat Jan 05, 2019 10:13 pm

I have not been in your shoes as far as the debt goes, but I have been a stay-at-home mom living off of about the same income. One of the biggest obstacles you have to overcome (and from your posts it does not sound like you have) is getting past the idea that small expenses don't matter. Every single dollar counts. Whether it is $40 for cable or $30 for a security system, or even $2 for a soda at the drive-thru. You have to truly consider every expense and whether or not it is worth it. Your wife may want the $40 cable package, but when you equate it to her take home pay, does she feel like it is worth it? If it was phrased as "work 2 extra hours every Saturday for cable," would she do it? Here are a few things that helped us:

Reevaluate all of your bills. Can you get a cheaper cell phone plan, cheaper homeowners insurance, cheaper car insurance, etc.Remember, every dollar counts. I just shopped homeowners insurance and got better coverage for about $200 less than I was paying. I got a refund of escrow from my mortgage and a statement saying I will have a $20 lower payment for the next 12 months. $20 does not seem like much but like I said, every dollar counts!

Make a realistic meal plan and then stick to the plan. We do this by writing down what we have on hand, seeing what is on sale, and buying what we need to make low cost meals. Have a strict grocery list of only what you need and stick to it. Impulse spending is a HUGE money drain. But it is important to be realistic here, for example, plan to use a crockpot and make a meal ahead of time if an evening will be too chaotic for someone to cook. Also, have some very low cost emergency options instead of eating out. My favorite emergency option is Costco $5 rotisserie chicken and a bagged frozen veggie ($1) for dinner. I can feed my family of 3 for $6. There is no way I can do that at a drive-thru.

Keep a list of staples that your family uses regularly and know pricing. Be able to identify a killer deal and be prepared to buy up at that price. Now I am able to do this out of our regular budget but when our budget was very tight, I kept $100 just for this purpose.

Combine trips. If you are driving that far from work, try to do necessary errands during your commute whenever possible. Also, look for gas deals like the recent 10% back at Chevron that AMEX did or cycling thru gift cards to pay for gas if you have a Kroger affiliated store, or some other fuel rewards program.

Go on a "no spend" program for a period of time where you do not buy anything at all, or what we have found works even better is a "low spend" for a more extended period of time. For example, about 6 months ago we did six weeks of a $100 budget/week for everything that isn't a regular bill/utility, so all clothing, food, gas, activities, etc. It worked great and really made us carefully plan meals since the majority of the $100/week went to gas and groceries.

Definitely see if you can find some kind of quick way to earn some extra money, but NOT any kind of MLM selling or anything that requires you to spend money upfront. I'm talking about something like participating in market research studies, working a temp job, selling some of your used kid stuff on ebay, etc.

Hope some of this helps, good luck!!!

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by stlutz » Sat Jan 05, 2019 10:16 pm

I don't live anywhere close to Florida, but the median home price in Broward County is $263,000 according to a quick Google search. That should equate to a mortgage payment of about $1270/month. I agree with the OP that switching to renting probably doesn't help, but it seems like either getting into a less expensive home or getting about $10,000/yr in additional after-tax income is what's needed. There are certainly places where the OP can cut back (i.e. the security system), but the income/expense imbalance is driven by the house payment and the car payment--the other expenses really aren't *way* out of whack.

Housing affordability is a huge problem in most cities right now. Some of that is driven by not enough housing; some of it is driven the size of the "average middle class home" getting bigger over time.

The OP's income looks to be right about the median in Broward County, maybe a little bit above. Simply put, the house and car should be very much "average" with everything else in the area. Looking at nothing but numbers, it looks like both are more in the "above average but not outlandish" category--again along the lines of what would make sense with $10K more in income.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by OldSport » Sat Jan 05, 2019 10:21 pm

stlutz wrote:
Sat Jan 05, 2019 10:16 pm
I don't live anywhere close to Florida, but the median home price in Broward County is $263,000 according to a quick Google search. That should equate to a mortgage payment of about $1270/month. I agree with the OP that switching to renting probably doesn't help, but it seems like either getting into a less expensive home or getting about $10,000/yr in additional after-tax income is what's needed. There are certainly places where the OP can cut back (i.e. the security system), but the income/expense imbalance is driven by the house payment and the car payment--the other expenses really aren't *way* out of whack.

Housing affordability is a huge problem in most cities right now. Some of that is driven by not enough housing; some of it is driven the size of the "average middle class home" getting bigger over time.

The OP's income looks to be right about the median in Broward County, maybe a little bit above. Simply put, the house and car should be very much "average" with everything else in the area. Looking at nothing but numbers, it looks like both are more in the "above average but not outlandish" category--again along the lines of what would make sense with $10K more in income.
I know the area well. Crime is high, which is extremely unfortunate. Security systems and living in a good area are important.

With that said, OP should provide more details on the mortgage payment: terms, interest rate, breakdown of Principal/Interest, Taxes, Insurance, Other (PMI, etc).

Everything else can and should be cut first and trying to increase income before changing the housing situation. Selling houses and moving are extremely expensive (closing costs, etc.) and would require new mortage at current rates and OPs credit situation, which may be impacted by missing bills. Changing housing would be the absolute last resort after every else - both cutting expenses and increasing income is tried.

go_mets
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by go_mets » Sat Jan 05, 2019 10:36 pm

I generally don't clip coupons. They're usually for major brands.
What I do is shop at local supermarket using their loyalty card and buy what is on sale that week.
For example, next week, pasta is 59 cents for a box of spaghetti.
Toilet paper , detergent, batteries are actually cheaper at this supermarket than Walmart.


Ask your wife's cell provider unlock her phone so you can use it to shop for the cheapest BYOP plan.
Once that is done, buy service with Red Pocket Mobile.
Unlimited talk+text+5GB for $240 = $20/month if you from them on eBay.
If you can't swing the $240 up front, you can get unlimited talk+text + 1 GB for $20/month billed monthly.

Good luck.

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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by SrGrumpy » Sat Jan 05, 2019 10:41 pm

momvesting wrote:
Sat Jan 05, 2019 10:13 pm

Definitely see if you can find some kind of quick way to earn some extra money, but NOT any kind of MLM selling or anything that requires you to spend money upfront. I'm talking about something like participating in market research studies, working a temp job, selling some of your used kid stuff on ebay, etc.
+1. Or also clinical studies, and continue working while at the site; some may be outpatient. Many easy thousands to be made.

stlutz
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by stlutz » Sat Jan 05, 2019 10:48 pm

I know the area well. Crime is high, which is extremely unfortunate. Security systems and living in a good area are important.
Again, looking at stats, violent crime in Broward County is about the same as Denver (not generally considered a high crime city as far as I know) and is half that of Detroit or Oakland (to pick places known as high crime). And we should keep in mind that crime overall is way below what is what when most people on this board grew up. I don't mean to be dismissive, but there are tradeoffs to be made here. Is it better for mom to spend more time with the kids or have a higher paying job to live in a better neighborhood? Not an easy choice. But one that needs to be made. The problem isn't driven by DirectTV Now or the security system. Sure, cutting those out can help, but getting to a significantly happier place financially involves making the big choices, not the little ones. I'm not just seeing the $5000 annual Starbucks bill to cut out.

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geologist20
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by geologist20 » Sat Jan 05, 2019 10:48 pm

OldSport wrote:
Sat Jan 05, 2019 10:21 pm
stlutz wrote:
Sat Jan 05, 2019 10:16 pm
I don't live anywhere close to Florida, but the median home price in Broward County is $263,000 according to a quick Google search. That should equate to a mortgage payment of about $1270/month. I agree with the OP that switching to renting probably doesn't help, but it seems like either getting into a less expensive home or getting about $10,000/yr in additional after-tax income is what's needed. There are certainly places where the OP can cut back (i.e. the security system), but the income/expense imbalance is driven by the house payment and the car payment--the other expenses really aren't *way* out of whack.

Housing affordability is a huge problem in most cities right now. Some of that is driven by not enough housing; some of it is driven the size of the "average middle class home" getting bigger over time.

The OP's income looks to be right about the median in Broward County, maybe a little bit above. Simply put, the house and car should be very much "average" with everything else in the area. Looking at nothing but numbers, it looks like both are more in the "above average but not outlandish" category--again along the lines of what would make sense with $10K more in income.
I know the area well. Crime is high, which is extremely unfortunate. Security systems and living in a good area are important.

With that said, OP should provide more details on the mortgage payment: terms, interest rate, breakdown of Principal/Interest, Taxes, Insurance, Other (PMI, etc).

Everything else can and should be cut first and trying to increase income before changing the housing situation. Selling houses and moving are extremely expensive (closing costs, etc.) and would require new mortage at current rates and OPs credit situation, which may be impacted by missing bills. Changing housing would be the absolute last resort after every else - both cutting expenses and increasing income is tried.

Interest - 4.625%

Principal $336.23
Interest $1,001.56
Escrow (Taxes & Insurance) $533.83
Fees $0.00
Credit Balance $0.00
Total $1,871.62

stlutz
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by stlutz » Sat Jan 05, 2019 10:50 pm

Escrow (Taxes & Insurance) $533.83
Ahhhh.... got it. I was only considering P&I.

OldSport
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by OldSport » Sat Jan 05, 2019 10:55 pm

stlutz wrote:
Sat Jan 05, 2019 10:48 pm
I know the area well. Crime is high, which is extremely unfortunate. Security systems and living in a good area are important.
Again, looking at stats, violent crime in Broward County is about the same as Denver (not generally considered a high crime city as far as I know) and is half that of Detroit or Oakland (to pick places known as high crime). And we should keep in mind that crime overall is way below what is what when most people on this board grew up. I don't mean to be dismissive, but there are tradeoffs to be made here. Is it better for mom to spend more time with the kids or have a higher paying job to live in a better neighborhood? Not an easy choice. But one that needs to be made. The problem isn't driven by DirectTV Now or the security system. Sure, cutting those out can help, but getting to a significantly happier place financially involves making the big choices, not the little ones. I'm not just seeing the $5000 annual Starbucks bill to cut out.
Please see my above post. Moving is extremely expensive and is subject to OPs current credit rating. I don't know how much OP's house is, but assuming a $300k house, OP is looking at least ~$20k in closing costs plus moving costs and other fees. I have relatives who had a "fair credit rating' and have an $1800 mortgage on a $200k house. This is not so simple. Given the stresses and complexities of moving, I would reiterate that doing everything possible to cut other expenses (the above no expense is too small post is excellent) and increase income, then follow Dave Ramsey with the exception of tackling highest interest debt first.

Tdubs
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Tdubs » Sat Jan 05, 2019 10:57 pm

stlutz wrote:
Sat Jan 05, 2019 10:48 pm
I know the area well. Crime is high, which is extremely unfortunate. Security systems and living in a good area are important.
Again, looking at stats, violent crime in Broward County is about the same as Denver (not generally considered a high crime city as far as I know) and is half that of Detroit or Oakland (to pick places known as high crime). And we should keep in mind that crime overall is way below what is what when most people on this board grew up. I don't mean to be dismissive, but there are tradeoffs to be made here. Is it better for mom to spend more time with the kids or have a higher paying job to live in a better neighborhood? Not an easy choice. But one that needs to be made. The problem isn't driven by DirectTV Now or the security system. Sure, cutting those out can help, but getting to a significantly happier place financially involves making the big choices, not the little ones. I'm not just seeing the $5000 annual Starbucks bill to cut out.
Agree on the tendency to exaggerate the threat of crime--stop watching the local news.

But this requires attention to big AND small decisions. They just bought a house. There are few big decisions to be made here. Sure, get another job. But the way out is to pay a lot of attention to lots of small decisions. Take care of the pennies and the dollars take care of themselves.

stlutz
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by stlutz » Sat Jan 05, 2019 11:05 pm

Assume the credit card debt didn't exist but the OP had $3600/mo. in after tax income. What should the mortgage payment and the car payment be?

kelvan80
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by kelvan80 » Sat Jan 05, 2019 11:08 pm

Completely unrelated but when you are with your kids on the weekend you aren't watching them you are parenting. Agree with the DR advice. Powerpay.org is a great resource. If you are getting a tax refund bill kill lower balance cards. Please don't cash out your Roth.

k3vb0t
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by k3vb0t » Sat Jan 05, 2019 11:14 pm

I don’t think moving is the solution. Just bought the house. Will lose all equity and still likely have to pay realtor fees. This is an increase in expenses when you need to reduce. Plus as noted rental deposits, moving trucks, none of that is cheap and easy.

What is cheap and easy is cutting off non-critical services ASAP, significantly reducing the types of meals you cook (seriously, live like a broke college student and do rice, beans, ramen), switching providers for needed services (good options listed for cell phones in the thread), and earning more income.

Now that you’ve detailed out your water bill includes trash and recycling, it seems more than reasonable. No need to time everyone’s showers or anything. Shaving $5 here isn’t worth the effort compared to getting out of your lease, switching to cheap cell phones, turning off DirecTV streaming, eating cheaply, and earning more income.

Oh, and cutting up your credit cards so you stop spending on them. None of the above matters if you don’t stop spending on credit.

I do agree big wins are easier than many small wins, so you should target those first — earning more income (including selling non-critical assets) and the car lease. Then you start on the easiest small wins — stopping services like TV streaming that don’t cost you any early termination fees. Then work on the rest.

Impressed you came back, you’re having your wife read this as well. Good luck, it can definitely be done.

stlutz
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Joined: Fri Jan 02, 2009 1:08 am

Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by stlutz » Sat Jan 05, 2019 11:16 pm

And just to clarify my point--obviously something went awry at some point to end up with $40K in CC debt. I agree with the other comments about that. I also agree that all people, not just people in the OP's situation, benefit from periodically going through their expenses and axing things that add up but don't really provide benefit or happiness.

But the OP and his family will be happy when they they are $500/mo. to the good, not $500/mo. to the minus. Making that $1000/mo. change involves a number of pieces (debt consolidation, paring some expenses), but I'm just not seeing any way to get there without significantly lowering house/car payments or earning about $10K/yr. in additional income.

Once the debt is paid down, then of course they are really in a good situation.

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