Question: I have been trying to get a loan to pay off my credit card debt. I am unable to do so as my credit score is too low. I have been checking into debt management but I don’t know what I am doing and I am scared of all of them. I truly need help as I am about to lose everything but I don’t know what to do. I can not do bankruptcy because I just ended one last year for medical.
I lost my job unexpectedly and was out of work for almost a year before I found work again. I do not get paid as much as I was making which does not help me to pay my credit cards. I owe 4000.00 total in credit card debt and see no light at the end of the tunnel as this amount is just going to keep building unless I can find help and fast. Do you have any recommendations? I am desperate!!! Thank you so much for your time.
Amazon – $507
Capital One $506
PayPal – $266
Walmart – $776
Credit One – $646
Maurice’s – $651
Old Navy – $180
Steve Rhode answers…
I can’t see where a debt management plan is going to be helpful for you. The issue seems to be, for whatever reason, you’ve found yourself again in a situation where you living expenses exceed your income. As you said, your current job does not pay as well as the previous one and that has led to difficulty paying the bills.
It appears you’ve made up the gap a bit using easy to access credit from easier-to-get credit sources.
I also can’t see where a debt consolidation loan would be all that helpful either in this situation. The issue isn’t just rearranging and extending out the credit that you already have, but finding a way to increase income, reduce expenses, or a combination of them both.
You really have few good options at this point. But there are some things you can do to take some control over the situation.
First, if you are unable to get a new job making more or a second job to boost your income, then you are just going to have to face the fact taking out more credit to make ends meet is a black hole and not a good thing to do anymore.
Second, based on your statements about drowning in debt and making less, the logical path with your level of debt is either to go back for a Chapter 13 bankruptcy, which may not be beneficial at this point, or just default on the debts and deal with the consequences.
When you default on the debt, it will begin to roll through the collection process. And it is a process with different departments and demands. People fear the debt collector mostly because of the unknown and fear of being judged. Both of those are emotional responses rather than a logical way to deal with the debt.
You should absolutely read The 10 Best Ways to Deal With the Debt Collector to eliminate your fear of defaulting.
Without being able to increase income or further reduce expenses, the situation just is what it is. Rather than fear it, embrace it and learn how to deal with the debt collectors in a healthy way. This will reduce your stress and fear and allow you to move forward with some control which will improve your future.
Obviously, defaulting on your debts has some consequences, like showing up on your credit report or maybe even getting you sued by a creditor if you can’t negotiate something you can afford for repayment.
But the debts you shared with me are the least important financial obligations you have. The most important and the priority debts are shelter, utilities, and transportation. As long as you are paying those first, you will not lose everything.
While this feels dire, none of this is the end of the world and all can be overcome when the balance of income and expenses is adjusted in your favor.
Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.
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