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

Post by snowman » Mon Jan 07, 2019 1:13 pm

Excellent suggestions so far, but I would offer slightly different perspective. OP’s parents gave him down payment money just 3 short months ago to buy what clearly is too much of a house. I don’t know what they were thinking when they did that – maybe they thought their kid and grand kids lived in undesirable neighborhood with higher crime for their comfort. Or maybe they thought it’s a good way to start building wealth. Or maybe it was their “insurance” that their kid and his family will stay put in the area and not move away when good job opportunity comes. I don’t know, but I don’t think they knew about debt problem. But whatever their intentions were, they are not going to let him fail at this point in time. They will not let him file for BK, they will do whatever they will deem necessary to avoid that option. Personally, I don’t think BK is a good option for OP, but I also think it’s just not something that’s really on the table right now.

Pu239
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Pu239 » Mon Jan 07, 2019 4:02 pm

OP - I don't have much to add to what others have said other than recommend checking out a copy of Jane Bryant Quinn's "Making the Most of Your Money Now" (2009) from the library to supplement the MMM and Ramsey referrals. It's more comprehensive in scope than MMM and Ramsey without the celebrity trappings. No attitude, just good common sense advice from a consumer protection viewpoint. I've used it since when first published in 1991 to great effect. It's getting a little dated for some information (taxes, health care) but still offers much great advice.

That said, work towards cutting expenses and raising income to stabilize finances before changing housing and raiding retirement accounts. After righting the ship, you'll have time to consider more drastic actions and their costs which, if taken now, you might later regret. Youth is on your side. Weathering the storm will make you stronger for the long voyage ahead.

stimulacra
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Location: Houston

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

Post by stimulacra » Mon Jan 07, 2019 4:43 pm

OP,

You need to drastically change your lifestyle, improve your income, or both. A person making considerably more money than you are now would feel anxiety at the outflow of cash month to month. It's a structural issue long term.

Check out Dave Ramsey's Youtube channel (I find the calls entertaining and educational, I skip over his social commentary rants). Listening to callers slowly coming to realization (or stubbornly sticking to denial) is very edifying.
https://www.youtube.com/user/DaveRamseyShow

It might be worthwhile to have your wife take the lead on the family budget so that you can focus your time and energy to improving your income potential, either at work or through a new position elsewhere. 2019 Q1 is still a great time to move out to move up.

You could raid your tax-advantaged accounts but they would only make a dent in the issue. You'll be back in the same spot with less cushion in a year without fundamental changes.

Automotive:
- Minimize pleasure driving and consolidate separate trips into one as much as possible.
- Don't drive anywhere for lunch
- Find excuses to not drive out to meet people. I have zero issues telling people I am trying to drive less or avoid racking up miles on my car
- If you have comprehensive coverage on your car, consider having it just be liability only
- If you have a Costco membership, fuel up there. If not finding the cheapest place to fuel up near home and work and make sure to only fuel up there. I'm able to save $8-10 a tank if I am intentional with where I fuel up.

Electricity:
- One way to save a lot of electricity is to hang dry clothes. I think that reduces the power consumption per load by 2/3rds
- Replace incandescent lightbulbs with LEDs as they go out. LEDs are more expensive up front so it'll take a while to fully switch over but your lighting costs should go down.

Cancel:
- ADT (piece of mind is not worth that much). Next door app or joining the neighborhood watch is probably more useful.
- Cable (keep internet if you must)
- Life Insurance (you can add it back later or just stick with your employer provided one).

Debt:
- For cards where you have not missed or were late on a payment, call and ask them to lower your APR. Easy way to knock a few percentage points off.
- How are you tracking progressing or visualizing the snowball? I would definitely track your debt and net worth on a spreadsheet and attack it week by week, month by month. If you want to visualize your debt and spending below is a great tool to do so:
https://docs.google.com/spreadsheets/d/ ... =223114950

Example visualization:

Image

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

Post by Cycle » Mon Jan 07, 2019 5:04 pm

stimulacra wrote:
Mon Jan 07, 2019 4:43 pm
- Don't drive anywhere for lunch
FYI, lunch and breakfast are optional. I only eat dinner. I do this more for health and productivity reasons than anything else, but I never have to spend a dime at my megacorps gormet food court.

After the habit is established you don't get hangry during the day. I've already exercised an hour and a half today and feel no hunger despite having not consumed a calorie.

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

Post by Tdubs » Mon Jan 07, 2019 5:25 pm

geologist20 wrote:
Mon Jan 07, 2019 12:33 am
smitcat wrote:
Sun Jan 06, 2019 3:56 pm
OldSport wrote:
Sun Jan 06, 2019 3:26 pm
Many entry level professionals (geology and engineering) fresh out of undegraduate from accredited state schools are making at least what the OP makes with no professional experience.
He is in enviroenmental consulting in Fla. - not the petroleum industry.
That's correct. Environmental consulting is not typically known for the best salaries. That said, I will keep an eye on the job market.
OP, what do you make of all the contradictory advice on selling your home?

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

Post by alfaspider » Mon Jan 07, 2019 5:28 pm

Cycle wrote:
Mon Jan 07, 2019 5:04 pm
stimulacra wrote:
Mon Jan 07, 2019 4:43 pm
- Don't drive anywhere for lunch
FYI, lunch and breakfast are optional. I only eat dinner. I do this more for health and productivity reasons than anything else, but I never have to spend a dime at my megacorps gormet food court.

After the habit is established you don't get hangry during the day. I've already exercised an hour and a half today and feel no hunger despite having not consumed a calorie.
I'm not sure skipping meals is really a recipe for saving money. At the end of the day, you should be consuming a healthy number of calories regardless of how many increments they are consumed in.

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

Post by The Wizard » Mon Jan 07, 2019 5:48 pm

WhiteMaxima wrote:
Mon Jan 07, 2019 1:01 pm
OP has debt problem. Bankrupt won't solve this problem.
Wrong.
OP appears to have had a SPENDING problem in the past.
Bankruptcy may indeed solve the debt problem but if the spending problem isn't solved separately, things could recur in five years...
Attempted new signature...

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

Post by mhalley » Mon Jan 07, 2019 5:52 pm

Many security cos like adt make you sign a contract, so op may not be able to cancel. One thing to do is review the security contract as they are very strict on the cancellation window and if you miss it you are auto renewed
.
I agree op is house poor and needs to move.

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

Post by WhiteMaxima » Mon Jan 07, 2019 5:53 pm

The Wizard wrote:
Mon Jan 07, 2019 5:48 pm
WhiteMaxima wrote:
Mon Jan 07, 2019 1:01 pm
OP has debt problem. Bankrupt won't solve this problem.
Wrong.
OP appears to have had a SPENDING problem in the past.
Bankruptcy may indeed solve the debt problem but if the spending problem isn't solved separately, things could recur in five years...
Spending on borrowed the money, isn't it a debt problem? Bankrupt? Does OP want a normal life or not? No bank will loan money to bankrupted people.

stimulacra
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Location: Houston

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

Post by stimulacra » Mon Jan 07, 2019 5:57 pm

Cycle wrote:
Mon Jan 07, 2019 5:04 pm
stimulacra wrote:
Mon Jan 07, 2019 4:43 pm
- Don't drive anywhere for lunch
FYI, lunch and breakfast are optional. I only eat dinner. I do this more for health and productivity reasons than anything else, but I never have to spend a dime at my megacorps gormet food court.

After the habit is established you don't get hangry during the day. I've already exercised an hour and a half today and feel no hunger despite having not consumed a calorie.
I wasn't advocating skipping lunch per se, either brownbag it or walk to a food court. I've noticed on average driving out to lunch can add a few miles to your odometer daily. That's a few gallons of gas per month.

If the weather is nice, I'll usually walk somewhere for lunch within a one mile radius.

AZAttorney11
Posts: 495
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by AZAttorney11 » Mon Jan 07, 2019 6:08 pm

WhiteMaxima wrote:
Mon Jan 07, 2019 5:53 pm
The Wizard wrote:
Mon Jan 07, 2019 5:48 pm
WhiteMaxima wrote:
Mon Jan 07, 2019 1:01 pm
OP has debt problem. Bankrupt won't solve this problem.
Wrong.
OP appears to have had a SPENDING problem in the past.
Bankruptcy may indeed solve the debt problem but if the spending problem isn't solved separately, things could recur in five years...
Spending on borrowed the money, isn't it a debt problem? Bankrupt? Does OP want a normal life or not? No bank will loan money to bankrupted people.
That's not true at all. Post discharge, many debtors are flooded with offers for secured credit cards and unsecured loans (albeit at very high interest rates). Several lenders will also extend credit for used vehicles (again, at very high interest rates). And, if OP and his wife stay current on their obligations to their lender re the house, that will pass through BK just fine without any changes whatsoever.

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

Post by JBTX » Mon Jan 07, 2019 6:10 pm

Main problem is this is too little income for a HCOL area. That isn't a great salary for any kind of engineer, and spouse makes very little. Between mortgage and HOA you are almost 50% of income. Normally I'd say sell the house, but as articulated you may not save a lot of money. Perhaps move to a one bedroom apartment in a modest area and commute a little. I just looked at a one bedroom where I used to live down there is $1300. That was a reasonably nice place. You could probably find a bit more modest one bed from $1000-$1200 a month. Yeah, it is cramped, but something has to change. Otherwise Renting a room (or two) in your house is a good idea if you can make that work.

Either drive a junker, or perhaps do Uber on the side.


All of that credit card and discretionary just needs to go. Spending more than you make just shouldn't be an option, period. The fact that you are debating and thinking of not getting rid of almost all of this discretionary spending means your situation just isn't sinking in. Bankruptcy won't do any good, if you just keep spending more than what you owe.

Try to find a better paying job. DW probably needs to work more. Or maybe to find a job somewhere else in a LCOL area.

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

Post by WhiteMaxima » Mon Jan 07, 2019 7:00 pm

Don't get into backrupt. Once you did, your future credibility, borrowing cost, apt rental application, employment will all have problem. Cut expense, increase income are only way out.

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

Post by SrGrumpy » Mon Jan 07, 2019 7:05 pm

I'd like to hear from Mrs. Geologist20. Can you put her online?

Mofritty
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Location: "Somewhere in the middle of America"

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

Post by Mofritty » Mon Jan 07, 2019 7:17 pm

Hey. Welcome to the $40,000 debt club. I was there in 1991. It hurt, but I sold my car, ate rocks and started crawling out of debt. What was slow at first started to snowball gradually and I got back to zero. This tough lesson set me up to make better financial decisions and my income income increased along the way. It’s how I learned to live below my means. You can do it. Besides, $40,000 isn’t worth going bankrupt over.

Sam1
Posts: 212
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by Sam1 » Mon Jan 07, 2019 8:03 pm

You need to pull in another 2k per month.

You drive for Uber 2-3 nights a week.

Your wife needs to babysit for $16-18 an hour tax free both Friday and Saturday nights.

This should get you $400 a week. Close to $2k

Next:
- get rid of the security system. Unless you live in a horrible area. If that’s the case then move bc you can’t really afford your house anyway
- sell iPhones and get inexpensive phones
- cut up all credit cards. Use cash. Take out cash weekly for all expenses - even gasoline. It’s worth it.
- sell things in your house. Even if it’s just $1k it will help you pay $1k in debt
- sell any jewelry you have
- see if you can turn in the lease
- get rid of cable. When we were saving like mad we has a year $29 directv plan

But really the problem is your house and car. You need to sell your house and I’m not kidding - move in with your family for ) months. Only six months. They will let you if they gave you downpayment money. Get at least half of the debt paid off if not more. Even sell your furniture when you move. Sell most of your clothes. Start over. Your life is a disaster and you have nothing to lose by moving

Other option is for a signriciant raise.

Sam1
Posts: 212
Joined: Mon Apr 09, 2018 7:24 am

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

Post by Sam1 » Mon Jan 07, 2019 8:22 pm

I realize selling the house isn’t the best long term solution but it truly is the easiest and fastest way to get out of jail

Rent an apartment for $1k. Try and find something near your office. When the lease runs out don’t get another car. Walk.

Cut up the cards. I said this above.

Don’t buy again until you have the DP saved up yourself. Your parents did you a huge disservice because you never learned how to save. You never learned to live within your means.

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

Post by Compound » Mon Jan 07, 2019 8:31 pm

8foot7 wrote:
Mon Jan 07, 2019 12:02 pm
WhiteMaxima wrote:
Mon Jan 07, 2019 11:54 am
cherijoh wrote:
Mon Jan 07, 2019 9:39 am
WhiteMaxima wrote:
Mon Jan 07, 2019 1:42 am
OPEN home equity line credit, use it pay off all credit card debt
Get off car lease
Get rid of ADT, life insurance, etc

Get a high pay job.
OP has been in the house 3 months and has no home equity, so this is not an option.
Depend how much OP down and bank value of the house. CC interest is like 14-15% home equity is like 5%, big difference. they can do refinance, interest should be lower now than 3 month ago. The mortgage interest is tax deductable. Also if OP has 401k, he can borrow from it up to 50K at interest of 5.5% now, still much lower than 15%. Also Op has so much CC debt, reflect the life style. I would suggest afetr payinhg them off, cut off CC or just keep one or two (with reward point). Or simply live on cash.
If the OP is only able to get a credit card with a $500 limit no bank in the world is going to give him a HELOC. This is just a non-starter.
I wonder what the bank was thinking when they approved the original mortgage in the first place! Feels like it hearkens back to pre-crash 2008.

OP — best of luck to you and your family. You’re in a tough spot, but I agree with the encouragement others have given you. Seems that if you tighten that belt enough, you’ll pull yourselves out of this and be much better off for it in the future. Please keep us posted with periodic updates.

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

Post by JGoneRiding » Mon Jan 07, 2019 10:00 pm

WhiteMaxima wrote:
Mon Jan 07, 2019 5:53 pm
The Wizard wrote:
Mon Jan 07, 2019 5:48 pm
WhiteMaxima wrote:
Mon Jan 07, 2019 1:01 pm
OP has debt problem. Bankrupt won't solve this problem.
Wrong.
OP appears to have had a SPENDING problem in the past.
Bankruptcy may indeed solve the debt problem but if the spending problem isn't solved separately, things could recur in five years...
Spending on borrowed the money, isn't it a debt problem? Bankrupt? Does OP want a normal life or not? No bank will loan money to bankrupted people.
I am a little bit concerned we may have over stressed this idea, because I assure you they in fact will! With in 2 months of finalizing his bankruptcy OP will have several offers to finance a car and open credit cards. The reason is simple they can charge him astronomical rates AND there isn't a single thing he can do about it. If he defaults they will get a judgment so fast he might not be able to pay his mortgage! He is a much safer bet to loan money to 2 months after a bankruptcy is final then he is right this very second. Because he can t declare again for what 7 years? And he has a job so he is NOT judgment proof.

I have had several friends declare bankruptcy every time they were blown away on the credit offers in very short order.

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F150HD
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by F150HD » Mon Jan 07, 2019 11:05 pm

Lots of rice and beans posts. :D

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

Post by InMyDreams » Mon Jan 07, 2019 11:40 pm

Seriously, CSL Plasma says they may pay "up to" $400/month. Undoubtedly, that would mean twice a week donation. Two adults donating...

Yard sale. Have the children outgrown toys, bassinets, clothes and so on? What about your own toys? kitchen gadgets? sports equipment?

OP, I wish you well. It's a tough spot to be in.

michaeljc70
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by michaeljc70 » Tue Jan 08, 2019 1:14 am

I read many posts, but not all. You've received a lot of good advice. It sounds like your wife's mother will watch your child sometimes. Can she watch them more so your wife can work more? I really think you are at a point where you need more income. Cutting expenses is great, but with the debt and house payments that will only go so far. I think the situation is pretty dire and one person working full time and one going to be working part time isn't enough.

I also hate to look a gift horse in the mouth, but if you can come up with a mutually beneficial arrangement with your parents (assuming they can afford it), that might help a lot. By mutually beneficial I mean they refinance some of your high interest debt saving you money on interest and they get a higher return than they would with the money sitting in a bank account. Of course, if you don't cut expenses and/or increase income in the long run this will just delay the inevitable.

I can't tell you what specifically would happen if you declared bankruptcy, but my guess is it wouldn't be very favorable. Getting more information on how a bankruptcy would look might help. I doubt you'd get to keep the house and have all the credit card debt just wiped out. Most likely you'd be put on a payment plan and your credit would be ruined.

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

Post by DarthSage » Tue Jan 08, 2019 6:54 am

OP--you have an overspending problem that goes back, way before the house purchase. Quite probably, it goes back before the birth of the children. I realize you can't "un-ring" those bells, but you need a serious, come to Jesus moment on your debts. The $40k in debt is a big one right now, but you hardly mention the student loans in forebearance, which is a fancy way of saying "compounding interest with no payments being made at all". That's a ticking time bomb.

As others have stated, you need to decrease your spending and increase your income. No income-generating method is beneath you. No savings is too small to consider. Heck, I would look at moving in with parents for a year or more and renting out the house to get this under control. Mostly, though, you guys need to change your attitude. You are living a lifestyle that you cannot continue. You need to take a deep breath, put on your adult pants, tackle your credit card debt, and then move on to the student loan debt.

I also wanted to mention--my BIL filed bankruptcy, over 20 years ago now. He STILL has credit issues because of it. At this point, he has a credit card, and I know he's been able to obtain a HELOC. But, that's mostly because his mom bought him the house they currently live in.

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

Post by olliema » Tue Jan 08, 2019 9:44 am

OP, sorry to hear of your challenges, but you can get thru this.

You have many things in your favor - you're young, you have a family who loves you, you have a job, a roof over your head, food to eat, presumably good health, and you're self aware there's a problem that you need to fix.

Close your eyes for a few seconds and visualize a time in your future where:

Your kids live in a household where money isn't a problem, and they are smart money managers.
You feel proud that you can provide for your family and you take accountability for your outcome.
You're building a retirement nest egg that ensures you'll never burden your kids for your care as you age.

How would that feel?

Your journey will take between 5 and 20 years depending on effort and luck. Debt is ONLY the 1st chapter. Bankruptcy, credit card debt consolidation, turning off the alarm service, these are tactics that can get you there, but sustained changes require YOU to change who YOU are and what you VALUE in life. Are you ready to do that? If your wife ready to do that? Will your family & friends support you?

Make sure you're on the same page with your spouse, thinking positively, taking joint accountability, changing behaviors together, and celebrating small steps. Make an effort to stay married as you guys go thru this.

PM if you would like peer advice on debt mgt tactics and philosophies. Good luck!

sailfish2
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by sailfish2 » Tue Jan 08, 2019 3:21 pm

Are you committed to South Florida in the long term?

I ask because I moved from Fort Lauderdale to Central Florida, and the decrease in cost of living is significant.
While you may not be able to do this soon, I would seriously consider the Tampa Bay area if you are not bound to Southeast Florida.

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

Post by indexmonkey » Tue Jan 08, 2019 3:27 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
As someone who had similar issues 25 years ago, let me give you some encouragement and shock therapy. I also agree, Dave Ramsey is great for people in this situation, because he doesnt sugar coat what needs to be done.

Pay cash for everything, NOW
The credit cards need to be consolidated to a lower fee. No reason in the world to have them all.
You have WAY too much house. In my opinion, there IS a time to Rent. That time is now. RENT until you get out of this mess. It will also free up home associated costs that creep up. If you can rent closer to work and strike a balance of less commute time and less living expenses, great.
I can understand the cell phone for security, but a $50/month flip phone for you and the spouse are all you need.

You need to attack on both fronts, spending AND income. If your spouse can workpart time doing something, anything, it is a win. This is a two headed monster.

Lastly, do the small stuff first. If you cant find $300+ to kill in monthly costs in the next week, then you may really not be able to attack the bigger issues like the HOME. If this is the case,, and I mean this seriously, get some counseling. You have a problem. YOU plural have a problem, but both need to acknowledge the problem to be a unified team and take the SMALL steps first.

This CAN be done. In the grand scheme, your debt is not bad at all. Your Spending is a big, big problem. Don't declare bankruptcy, because you haven't addressed the real issues and they will rear their head.

Again, knock out the small stuff and give yourself a timetable to do so, like a week, then tackle more. Good luck. It CAN BE DONE!!!

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

Post by Mr.BB » Tue Jan 08, 2019 4:46 pm

Your biggest problem is that you have too much house/mortgage for what you make. It is almost 50% of what you make. I would look at trying to refinance or move to a smaller place that you can afford.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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

Post by edudumb » Tue Jan 08, 2019 5:20 pm

F150HD wrote:
Mon Jan 07, 2019 11:05 pm
Lots of rice and beans posts. :D
:D :D :D Same thoughts here :D :D :D

I live in the same area as the OP, and rice and beans are real cheap here. I don't know how much kid stuff costs, but Broward is not really that expensive.

OP, shop at ALDI, and buy only BOGO and store brand items at Publix and Winn-Dixie. Grocery for a family of 4 can cost <$40/ week.
Broward isn't the safest place on earth, but I agree with all others that you really don't need ADT. Use free surveillance app on used phones if peace in mind is all you need.
Get the cheapest internet plan at Comcast (should be $20-30/ month), switch phone services to Xfinity Mobile for talk/ sms (pay as little as $5/ month), and there's free xfinity wifi almost everywhere in Broward. Watch YouTube for free or get movie streaming for <$10/ month.
With kids there's probably no way you can ditch car, but if you live on bus routes, bus pass is only $70/ month.

Definitely do Airbnb. Empty a room, furnish it, and price it at $40/ night with a min 7-day booking or $900/ month. There're lots of visiting workers in the area.

If you have the determination, you can cut most of your unnecessary expenses. $40k debt is not a big deal in the long turn, but bankruptcy is.

Good luck! :sharebeer

wolf359
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by wolf359 » Wed Jan 09, 2019 10:48 am

When your outgo exceeds your income, your upkeep will be your downfall.
- Bill Earle
Bankruptcy will not help. As long as you insist on spending more than you are making, all bankruptcy will do for you is provide a reset. A few years later, you will be in the same situation again.

There are other consequences to bankruptcy:

- Your student loans cannot be discharged through bankruptcy. While deferred, they will continue to pile up. Watch out for penalties and interest. That is a debt you cannot escape if it gets too big.

- You will not be able to get additional credit for a while. Good credit is often required to get a job. Banking may be more difficult (many banks check your credit reports before doing business with you.) Utilities may require you to put large deposits down. You may be required to drop your luxury non-essential services like cable, cell phones, alarm systems.

- You will lose most of your assets. They do not discharge your debts without selling your assets first. There are some exceptions to this. Some states have a homestead exemption (of varying amounts.) Your 401-k and IRA (depending on state) may be safe.

You have received a lot of good specific advice on ways that you could cut back and save money. Let me frame those suggestions with a slightly different take. Create a zero based budget.

1. Start with your monthly income.
2. Pick one expense item at a time, and subtract it from your income. Certain fixed expenses (like mortgage) can't be easily adjusted in the short term, and have to be applied to the income.
3. Start with survival expenses (food, medical, shelter, water, electricity) before moving to luxuries. Follow advice in other posts to save money and minimize your expenses.
4. If you hit zero (income-expenses) then you stop. Anything else, you can't afford. If you want to afford it, you either have to increase income or reduce expenses elsewhere.

Next month, start over. As you do this month after month, you will be able to structurally change some of your expenses for really big savings. Those are items like changing your housing, transportation, student loans, taxes, and other large fixed expenses. Add in additional income streams (like your spouse working) as that comes online. Set up a plan to tackle that student debt so it doesn't snowball on you.

You are in crisis. You are seriously considering bankruptcy. If you don't start making hard choices now, they will eventually be made for you. You need to act like your financial house is on fire. It is.

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dm200
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by dm200 » Wed Jan 09, 2019 12:05 pm

I am reminded of the question:

"How do you eat an elephant?"

Answer "One bite at a time!"

balbrec2
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by balbrec2 » Wed Jan 09, 2019 9:02 pm

Get a second job! No, really. Cutting expenses is part of the
equation but you can increase your income as well.

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

Post by leeks » Thu Jan 10, 2019 1:25 pm

viewtopic.php?f=1&t=232853&newpost=4312194#p4311839

Thread above has a current update from a family that was in debt in 2017. A different kind of situation but some similar behaviors to what we have recommended here were needed to fix. Note the part where their incomes have gone up too. Hopefully will be encouragement...

cherijoh
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Location: Charlotte NC

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

Post by cherijoh » Thu Jan 10, 2019 7:53 pm

WhiteMaxima wrote:
Mon Jan 07, 2019 11:54 am
cherijoh wrote:
Mon Jan 07, 2019 9:39 am
WhiteMaxima wrote:
Mon Jan 07, 2019 1:42 am
OPEN home equity line credit, use it pay off all credit card debt
Get off car lease
Get rid of ADT, life insurance, etc

Get a high pay job.
OP has been in the house 3 months and has no home equity, so this is not an option.
Depend how much OP down and bank value of the house. CC interest is like 14-15% home equity is like 5%, big difference. they can do refinance, interest should be lower now than 3 month ago. The mortgage interest is tax deductable. Also if OP has 401k, he can borrow from it up to 50K at interest of 5.5% now, still much lower than 15%. Also Op has so much CC debt, reflect the life style. I would suggest afetr payinhg them off, cut off CC or just keep one or two (with reward point). Or simply live on cash.
Unless they put down a large downpayment or house has increased dramatically in price, whatever home equity they may have will NOT be accessible with a HELOC. Total of Mortgage + HELOC credit limitplus is usually limited to 80% LTV. And considering their debt situation, my guess is that they didn't put down a huge down payment.

Interest rates haven't dropped that much in 3 months - there are usually closing costs involved with a refinance. Also if they have been using CC to cover daily necessities like food and only paying the minimum balance, they may have a higher consumer debt load and could end up getting a higher mortgage rate than they already have!

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

Post by cherijoh » Thu Jan 10, 2019 7:55 pm

Jimmie wrote:
Mon Jan 07, 2019 10:37 am
cherijoh wrote:
Sun Jan 06, 2019 9:05 pm
I had the exact same thought. Did you guys go on a spending binge to furnish the new house?
At some point (or points) there had to be other funds spent beyond the $500 per month shortage. To be $40,000 in debt with a consistent $500 shortage had to have started before the kids were even thought of. Otherwise, the math doesn't work out.

That said, the OP needs to find far more than $500 per month. I'm thinking closer to $1,000 to cover anything that falls through the cracks and ends up on a credit card. I think he's bleeding out on other expenses that were not on the list. In an earlier post, I mentioned "Home Maintenance". What pays anything medical-related that is not covered by hospitalization or HSA? What about auto maintenance? My oil changes are cheap, but aren't free.
They could also have continued to spend as though they had two incomes coming in after wife quit working.

catfish48084
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by catfish48084 » Thu Jan 10, 2019 8:34 pm

geologist20 wrote:
Sat Jan 05, 2019 12:50 pm

Do you really need cable? (Perhaps an indoor antenna would work for a year or so.) Directv now (streaming service) is $45. Internet is ~$40. I could do fine without direct tv now, but my wife would have a different opinion.


You have 8 or 10 credit cards maxed out and are contemplating bankruptcy, but both you and your wife consider subscription TV services a necessity? Sorry to be the one to give the tough love, but one or both of you have some serious issues with money. If you were equal partners in running up that debt so be it, but if its primarily the work of one person, the other is really unhappy with their life right now, and that's a bigger issue than -$40K debt. I think there is more to the story you are not sharing - hard for me to believe a mortgage company would give you any loan in your financial condition, let alone one with such a high payment to income ratio which you cant afford. What's really going on?

jayk238
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by jayk238 » Thu Jan 10, 2019 9:00 pm

gclancer wrote:
Sat Jan 05, 2019 1:27 pm
geologist20 wrote:
Sat Jan 05, 2019 12:50 pm
Do you really need a security system? I have two young kids and it gives peace of mind. The services is basic


Get SimpliSafe. Upfront cost for the system, but skip the monitoring (someone breaking in will run when they hear the alarm). ROI is only a couple of months.


Simplisafe sucks. I have simplisafe. When i come home i just hit cancel and it stops. No code nothing. What a joke.

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

Post by countdrak » Thu Jan 10, 2019 10:20 pm

Tons of great suggestions! Everyone here said your water bill is too high. Happened to me recently where my water bill suddenly shot up for a few months. Called the water company , they came by, changed my meter which was defective. Water bill went down by 50-60%! Naturally they weren’t willing to refund me any money.

Make sure you at least call. We have kids who take baths, sprinkler, dishes and laundry. Bill is not more than $70 a month. Also check out mint mobile - $15/month for unlimited calls, text, 2 gb lte.

Bookmark deals sites like slickdeals. Lots of deals for groceries, daily items, food and baby stuff. You can save a lot instead of going retail. Lastly local ethnic groceries stores have the best deals for produce, try them to save money.

Good luck!

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

Post by AerialWombat » Thu Jan 10, 2019 11:41 pm

WhiteMaxima wrote:
Mon Jan 07, 2019 7:00 pm
Don't get into backrupt. Once you did, your future credibility, borrowing cost, apt rental application, employment will all have problem. Cut expense, increase income are only way out.
The negative impact of BK is fairly short-term, about 2-3 years for most people if they manage their finances intelligently afterwards.

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

Post by Spinola » Fri Jan 11, 2019 12:58 am

As far as water bill, check leaking toilets (I had this happen, almost doubled my quarterly water bill!) and dripping faucets, much like high expense ratios, they add up.

BK is not the end of the world and can be a good reset / new lease on your financial life if you are eligible. Talk to a BK lawyer if you can't find a way to get out of this debt. You are one paycheck away or one medical emergency away from BK already. I have family and friends who filed for BK due to loss of employment after the 2008 crisis, and also due to medical bills. Life goes on and they are happier, more financially stable now for it. If you can some how pay off this debt and get back on track, go for it, but don't let social stigma keep you from exercising your legal rights to file for BK as a last resort. It worked out great for certain real estate magnates. If businesses can do it and move on, so can individuals. :mrgreen:

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

Post by WhiteMaxima » Fri Jan 11, 2019 11:57 am

Spinola wrote:
Fri Jan 11, 2019 12:58 am
As far as water bill, check leaking toilets (I had this happen, almost doubled my quarterly water bill!) and dripping faucets, much like high expense ratios, they add up.

BK is not the end of the world and can be a good reset / new lease on your financial life if you are eligible. Talk to a BK lawyer if you can't find a way to get out of this debt. You are one paycheck away or one medical emergency away from BK already. I have family and friends who filed for BK due to loss of employment after the 2008 crisis, and also due to medical bills. Life goes on and they are happier, more financially stable now for it. If you can some how pay off this debt and get back on track, go for it, but don't let social stigma keep you from exercising your legal rights to file for BK as a last resort. It worked out great for certain real estate magnates. If businesses can do it and move on, so can individuals. :mrgreen:
BK lawyer? Do they work for free? BK has cost. OP's future borrowing cost, BK lawyer fee. Not all 40k would be forgiven. 40K is not a huge number. OP could cut a lot non essential expense to deal with it.

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

Post by Spinola » Fri Jan 11, 2019 12:02 pm

WhiteMaxima wrote:
Fri Jan 11, 2019 11:57 am

BK lawyer? Do they work for free? BK has cost. OP's future borrowing cost, BK lawyer fee. Not all 40k would be forgiven. 40K is not a huge number. OP could cut a lot non essential expense to deal with it.
I stated : "if you are eligible". I have no idea if $40K is above or below the threshold. Most lawyers will give an initial free consultation, so it won't cost the OP anything to look into it. Consider all options is all I am saying.

I agree, $40K probably "is" manageable, but I cannot determine this for the OP.

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

Post by WhiteMaxima » Fri Jan 11, 2019 12:13 pm

get a high paying job or just take a side 2nd job is not that difficult. Uber or Lyft can make 40k a year easily.

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

Post by Silk McCue » Fri Jan 11, 2019 12:32 pm

jayk238 wrote:
Thu Jan 10, 2019 9:00 pm
gclancer wrote:
Sat Jan 05, 2019 1:27 pm
geologist20 wrote:
Sat Jan 05, 2019 12:50 pm
Do you really need a security system? I have two young kids and it gives peace of mind. The services is basic
Get SimpliSafe. Upfront cost for the system, but skip the monitoring (someone breaking in will run when they hear the alarm). ROI is only a couple of months.
Simplisafe sucks. I have simplisafe. When i come home i just hit cancel and it stops. No code nothing. What a joke.
If you didn't change The Master Pin that can happen. Try Google next time or call customer support if something doesn't work the way you think it should.

Cheers

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8foot7
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by 8foot7 » Fri Jan 11, 2019 12:40 pm

WhiteMaxima wrote:
Fri Jan 11, 2019 12:13 pm
get a high paying job ... is not that difficult.
You're right, we should all just go grab those high paying jobs. They're everywhere. Look, there, in the tree!
:oops:

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

Post by corysold » Fri Jan 11, 2019 12:42 pm

8foot7 wrote:
Fri Jan 11, 2019 12:40 pm
WhiteMaxima wrote:
Fri Jan 11, 2019 12:13 pm
get a high paying job ... is not that difficult.
You're right, we should all just go grab those high paying jobs. They're everywhere. Look, there, in the tree!
:oops:
While "high paying" might not be available, I'm sure there are side jobs that are. All the budget savings in the world isn't going to help, he needs more income. I work as a paper carrier and right now we can't beg people to pick up a route. Smaller routes aren't huge money, but $800 month is easily doable.

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8foot7
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by 8foot7 » Fri Jan 11, 2019 12:57 pm

corysold wrote:
Fri Jan 11, 2019 12:42 pm
8foot7 wrote:
Fri Jan 11, 2019 12:40 pm
WhiteMaxima wrote:
Fri Jan 11, 2019 12:13 pm
get a high paying job ... is not that difficult.
You're right, we should all just go grab those high paying jobs. They're everywhere. Look, there, in the tree!
:oops:
While "high paying" might not be available, I'm sure there are side jobs that are. All the budget savings in the world isn't going to help, he needs more income. I work as a paper carrier and right now we can't beg people to pick up a route. Smaller routes aren't huge money, but $800 month is easily doable.
Agreed and I said as much already in the threat. I just saw "go get a high paying job" and it stood out to me as completely unrealistic advice. $800 month plugs the OP's hole for sure.

boglewill34
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Re: $40,000 in debt, bankruptcy seems to be the best option right now

Post by boglewill34 » Fri Jan 11, 2019 2:12 pm

leeks wrote:
Thu Jan 10, 2019 1:25 pm
viewtopic.php?f=1&t=232853&newpost=4312194#p4311839

Thread above has a current update from a family that was in debt in 2017. A different kind of situation but some similar behaviors to what we have recommended here were needed to fix. Note the part where their incomes have gone up too. Hopefully will be encouragement...
Hey thanks, that was me!

I tried a consult with a BK lawyer, it was the worst decision we made along the way. He put us in touch with a terrible CPA, who then referred us to an ex-IRS friend of his that basically did nothing for me and bilked me out of $250. I'm glad in retrospect that I didn't go down the BK route. I know there's reasons for it, it just didn't suit us.

Wife did consumer credit counseling years ago. That did seem pretty good, OP should see if they can get local referrals for one. Outside of that on the creditors side, I'd encourage the OP to call their creditors, maybe starting with the highest interest rates. Ask for any help at all, some will reduce rates, or waive past due fees.

On the spending side, yeah ditch the security. No cable, get the cheapest internet you can. I think you said you spend $700 a month on grocery, that's too much. I spend $500 a month for a family of 5, and that's eating very well. Go to Aldi, they are cheaper on every line item. We have been and were all along customers of a local farm CSA. It's expensive but I was able to work out a low income share AND traded some money for work with them one year. We knew that after paying $400 or so in April we'd have fresh veggies throughout the growing season.

Do whatever you can to ditch the high cost car lease. I wouldn't consider that even at the stage that we are in. You're not only paying that lease but also maximum priced car insurance, I pay like $300 a year for minimum coverage on my 2005 Saab (that itself was only $2200 4 years ago). Get a $2000 Honda, or a lot better yet ride public transport and ditch the car, it's making you poor.

I don't remember all your numbers, but maybe you want to go to some sort of community outreach to see if you can get temporary social welfare benefits, even partial for a few months can make a huge difference.

Good luck. You can do this, but you're going to have to look inward.

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

Post by FoolMeOnce » Fri Jan 11, 2019 2:17 pm

Silk McCue wrote:
Fri Jan 11, 2019 12:32 pm
jayk238 wrote:
Thu Jan 10, 2019 9:00 pm
gclancer wrote:
Sat Jan 05, 2019 1:27 pm
geologist20 wrote:
Sat Jan 05, 2019 12:50 pm
Do you really need a security system? I have two young kids and it gives peace of mind. The services is basic
Get SimpliSafe. Upfront cost for the system, but skip the monitoring (someone breaking in will run when they hear the alarm). ROI is only a couple of months.
Simplisafe sucks. I have simplisafe. When i come home i just hit cancel and it stops. No code nothing. What a joke.
If you didn't change The Master Pin that can happen. Try Google next time or call customer support if something doesn't work the way you think it should.

Cheers
It's pretty funny that someone thinks people all over the country are buying, and people on this site are recommending, a security system that doesn't do anything.

Silk McCue
Posts: 1733
Joined: Thu Feb 25, 2016 7:11 pm

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

Post by Silk McCue » Fri Jan 11, 2019 2:23 pm

FoolMeOnce wrote:
Fri Jan 11, 2019 2:17 pm
It's pretty funny that someone thinks people all over the country are buying, and people on this site are recommending, a security system that doesn't do anything.
I have no idea what you are talking about. The system absolutely works. Period.

I was responding to a poster's complaint about the system for which I pointed them to the source of the problem which they could have easily found for themselves.

Cheers

WhiteMaxima
Posts: 1620
Joined: Thu May 19, 2016 5:04 pm

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

Post by WhiteMaxima » Fri Jan 11, 2019 2:29 pm

boglewill34 wrote:
Fri Jan 11, 2019 2:12 pm
leeks wrote:
Thu Jan 10, 2019 1:25 pm
viewtopic.php?f=1&t=232853&newpost=4312194#p4311839

Thread above has a current update from a family that was in debt in 2017. A different kind of situation but some similar behaviors to what we have recommended here were needed to fix. Note the part where their incomes have gone up too. Hopefully will be encouragement...
Hey thanks, that was me!

I tried a consult with a BK lawyer, it was the worst decision we made along the way. He put us in touch with a terrible CPA, who then referred us to an ex-IRS friend of his that basically did nothing for me and bilked me out of $250. I'm glad in retrospect that I didn't go down the BK route. I know there's reasons for it, it just didn't suit us.

Wife did consumer credit counseling years ago. That did seem pretty good, OP should see if they can get local referrals for one. Outside of that on the creditors side, I'd encourage the OP to call their creditors, maybe starting with the highest interest rates. Ask for any help at all, some will reduce rates, or waive past due fees.

On the spending side, yeah ditch the security. No cable, get the cheapest internet you can. I think you said you spend $700 a month on grocery, that's too much. I spend $500 a month for a family of 5, and that's eating very well. Go to Aldi, they are cheaper on every line item. We have been and were all along customers of a local farm CSA. It's expensive but I was able to work out a low income share AND traded some money for work with them one year. We knew that after paying $400 or so in April we'd have fresh veggies throughout the growing season.

Do whatever you can to ditch the high cost car lease. I wouldn't consider that even at the stage that we are in. You're not only paying that lease but also maximum priced car insurance, I pay like $300 a year for minimum coverage on my 2005 Saab (that itself was only $2200 4 years ago). Get a $2000 Honda, or a lot better yet ride public transport and ditch the car, it's making you poor.

I don't remember all your numbers, but maybe you want to go to some sort of community outreach to see if you can get temporary social welfare benefits, even partial for a few months can make a huge difference.

Good luck. You can do this, but you're going to have to look inward.
Avoid lawyer like plague. Don't know what car you are leasing? You could trade a Toyota Prius for better Mpg, esp if you choose to run a Uber business. Just do anything that can save you a penny and anything that make your extra money. Pay off credit one by one. Start from highest APR one. Forget about bankrupt word.

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