Jump to content

How to survive large credit debt after divorce


skibble
 Share

The last post in this topic was posted 3484 days ago. 

 

We strongly encourage you to start a new post instead of replying to this one.

Recommended Posts

I am in the process of divorce, and I have racked up a lot of debt.

I am not sure how much information I should give, so I will start with some basic information.

I have a mortgage, car loan, lending club consolidation loan and 11 credit cards.

I want to try to keep from filing bankruptcy, but not sure if it is even possible.

My plan is to close several if not all of the credit card accounts.

I want to call each company and explain my situation and see if they will allow me to close the account, adjust the balance and/or APR

My wife owes me her share of the marital debt and is giving me half of the money owed.

I was going to look at the accounts with the highest APR and highest balance and apply that money on them to help lower monthly payment amounts.

Anyway I was curious if I am headed down the right or wrong path.

I appreciate any input.suggestions

 

sk

Link to comment
Share on other sites


Welcome skibble.

 

Are any of your accounts in a negative status yet?

 

A lot of what you can or should do is going to come down to what is decided in court and whether or not you and her can tolerate each other enough to work together to prevent financial ruin for both. Just because she give half of the money doesn't necessarily mean she is out of the picture if these are joint accounts.

 

What $ amount are we talking about for everything?

Link to comment
Share on other sites

We each have our own lawyer.

None of the debt is in negative status, all of it has been paid on time.

The following debt is in my name, she is responsible for the debt in her name.

There are no join accounts (per the lawyers, she basically owes me $10,000, she has given me $5,000)

Card1 = $754.16

Card2 = $4,125.67

Card3 = $997.29

Card4 = $2,972.11
Card5 = $3,000.15

Card6 = $3219.02

Card7 = $1445.43

Card8 = $3832.76

Card9 = $9798.27

Card10 = $1051.82

Card11 = $2448.34

Link to comment
Share on other sites

What are the interest rates and credit limits on the accounts? Do you know approximately what your current credit scores are? How are your finances and employment otherwise (is your job stable? Do you make enough to cover your mortgage, car loan?) Depending on these answers will decide the course of action.

Link to comment
Share on other sites

Most cards are maxed out, there are 2 cards that have a very low interest rate, the rest have an average of 25% give or take.

My current credit score is 656 on Credit Karma. I have just barely enough to make minimum payments, utilities, car payment, mortgage, etc.

Job is stable, but looking at new job making 20k more a year.

Link to comment
Share on other sites

Well, if I were in this situation, I would consider these three situations.

 

1. I would take that first $5k from the ex and dump it all on the card you owe $10k on (card 9) to get that monthly minimum payment down. I would take the other $5k when you get it and put another $2k on card 9 and spread the other $3k on say cards 2 and 8. Or something similar.

 

2. If you have any equity in your house, I would see if a home equity line is possible. Only consider this if you have the willpower to stick those cards in a safe and don't rack up more debt until the loan is paid back.

 

3. Do you have some 401k funds you can loan from? Again, same situation of putting the cards on ice.

 

The equity loan and 401k loan are not something I would usually recommend doing to pay off credit card debt, but since you have a chance to save your credit from having the next 7 years suck financially, I would consider it.

Link to comment
Share on other sites

The other thing I was going to say is if none of those options are available to you, and you have to let some of the cards go into default, I would let the smaller ones go because if you get a $10k debt in the hands of a CA they are more likely to come after you, if you get that new job and are paying down the others pretty quickly (raising your collection score). Some people may suggest you pay off the smaller ones first with the ex's money to feel like you have less cards to pay on, but if you do that and then something happens where you can't take care of the rest then you will have huge collections on your hands.

 

I think keeping up with the minimum payments (plus as much as you can), and not focusing on the interest rates right now, is more important at this point. I would also set up all of your cards on auto pay to make sure you don't miss a minimum payment while you sort this all out.

Link to comment
Share on other sites

Well, if I were in this situation, I would consider these three situations.

 

1. I would take that first $5k from the ex and dump it all on the card you owe $10k on (card 9) to get that monthly minimum payment down. I would take the other $5k when you get it and put another $2k on card 9 and spread the other $3k on say cards 2 and 8. Or something similar.

 

2. If you have any equity in your house, I would see if a home equity line is possible. Only consider this if you have the willpower to stick those cards in a safe and don't rack up more debt until the loan is paid back.

 

3. Do you have some 401k funds you can loan from? Again, same situation of putting the cards on ice.

 

The equity loan and 401k loan are not something I would usually recommend doing to pay off credit card debt, but since you have a chance to save your credit from having the next 7 years suck financially, I would consider it.

 

I would never recommend taking retirement funds from a 401k to pay down unsecured debt. It would be better to file a chapter 7.

Link to comment
Share on other sites

 

Well, if I were in this situation, I would consider these three situations.

 

1. I would take that first $5k from the ex and dump it all on the card you owe $10k on (card 9) to get that monthly minimum payment down. I would take the other $5k when you get it and put another $2k on card 9 and spread the other $3k on say cards 2 and 8. Or something similar.

 

2. If you have any equity in your house, I would see if a home equity line is possible. Only consider this if you have the willpower to stick those cards in a safe and don't rack up more debt until the loan is paid back.

 

3. Do you have some 401k funds you can loan from? Again, same situation of putting the cards on ice.

 

The equity loan and 401k loan are not something I would usually recommend doing to pay off credit card debt, but since you have a chance to save your credit from having the next 7 years suck financially, I would consider it.

 

I would never recommend taking retirement funds from a 401k to pay down unsecured debt. It would be better to file a chapter 7.

 

 

I'm not suggesting doing a one time withdrawal, I'm talking about a loan against the 401. I normally wouldn't suggest this but since the OP is not in default on any of their obligations, that option, to me, outweighs filing for BK. OP was looking for ways to avoid BK. He wouldn't have to take out the entire amount of credit card debt form the 401k; just enough to get him to a point where he can manage the debt without defaulting and manage paying back the 401k. It's not an ideal situation but I think it beats BK.

 

Filing BK for $23.6K in credit card debt when the OP has a stable job and the potential to get a job that pays $20k more doesn't make sense. The OP could potentially get a second job to help catch up faster. I guess it all depends on the OPs situation and future financial and career goals.

Edited by funkiehouse
Link to comment
Share on other sites

Most cards are maxed out, there are 2 cards that have a very low interest rate, the rest have an average of 25% give or take.

My current credit score is 656 on Credit Karma. I have just barely enough to make minimum payments, utilities, car payment, mortgage, etc.

Job is stable, but looking at new job making 20k more a year.

Get the new job and pay those puppies off, I like the snowball method, others like the high interest first method. You are on the edge but you can do it, keep everyone current, sell what you can, turn off the cable, eat ramen noodles. 23K is not BK-worthy, maybe 50k+ would be.

Link to comment
Share on other sites

I would never recommend taking retirement funds from a 401k to pay down unsecured debt. It would be better to file a chapter 7.

Terrible advise.

 

Especially considering he's not behind on any payments.

 

That BK would cost him way more for the next 10 years than the loan.

Link to comment
Share on other sites

So since most of the cards are maxed out, the odds of being able to do a BT are probably low. What I would do is take the $5K and apply it to the highest interest card and pay as much as possible on that while paying the minimum on the rest, after that, move to the second highest, and so on (the snowball method as mentioned above). I would also look for secondary sources of income like a second job, or selling some stuff, taking on a roommate, etc. Also cut all unnecessary expenditures like cable, eating out, etc.

 

I wouldn't recommend a 401K loan unless you are going to fall behind in the payments, only because if something unexpected were to happen, that may be your only life preserver.

 

I wouldn't recommend filing BK at this point. I know 23K seems like a lot, but it really isn't, and once you start getting ahead of this you will get them paid off very quickly.

Link to comment
Share on other sites

He actually is facing $33K in debt.

 

If you have the $5,000 available you could pay off cards 1,3,7, and 10. Take the balance of the money and pay down the card with the highest interest rate. If you get the additional $5000 from the ex I would pay off a few more cards.

 

That would eliminate 4 minimum payments and would give you some additional money in your budget monthly.

Link to comment
Share on other sites

Skibble....what is the $10,000 for marital debt that your ex has to pay to you for her share of the marital debt? You said you are responsible for the debts in your name, and your ex is responsible for the debts in her name. I don't understand how the court divvies up debt, but if it's marital debt, and she's paying the money directly to you, does that mean you are then responsible for turning around and paying that money towards the marital debt, meaning it wouldn't be available to pay towards the debt that's in your name? Is all of the debt you listed all of your debt, or is it only the debt that's in your name alone? Is there other debt on top of that? It would make a difference in the advice you've been given here.

Link to comment
Share on other sites

towards the marital debt, meaning it wouldn't be available to pay towards the debt that's in your name?

he already said there's no joint debt.

 

he obviously has more in his name,

 

so that's why she's paying him.

 

so to help him pay them off.

Link to comment
Share on other sites

He actually is facing $33K in debt.

 

If you have the $5,000 available you could pay off cards 1,3,7, and 10. Take the balance of the money and pay down the card with the highest interest rate. If you get the additional $5000 from the ex I would pay off a few more cards.

 

That would eliminate 4 minimum payments and would give you some additional money in your budget monthly.

 

$23k in credit cards remaining after the $10k from the ex

 

Hopefully he will put that $10k directly towards CC payments.

 

Paying off the smaller cards first is all psychological. Why pay more interest on the higher balances by paying off a few of the smaller cards?

Link to comment
Share on other sites

Ok, so here is what I am thinking after reading everyone's input.

I have 6 cards with high minimum payments.

Out of those 5 have high interest rates.

If I pay $1000 on those 5 cards, that would lower the minimum payment allowing me to survive long enough to get my new job and additional $5000 from ex.

what do you think?

 

Like everyone has said, as soon as possible pay those cards down (I do not plan on using the cards at all)

 

Now I eventually want to close most of these accounts once they are paid off, but I have heard that if I close several accounts at once that too will hurt my credit.

How should I hand this once I get there?

Link to comment
Share on other sites

Ok, so here is what I am thinking after reading everyone's input.

I have 6 cards with high minimum payments.

Out of those 5 have high interest rates.

If I pay $1000 on those 5 cards, that would lower the minimum payment allowing me to survive long enough to get my new job and additional $5000 from ex.

what do you think?

 

Like everyone has said, as soon as possible pay those cards down (I do not plan on using the cards at all)

 

Now I eventually want to close most of these accounts once they are paid off, but I have heard that if I close several accounts at once that too will hurt my credit.

How should I hand this once I get there?

 

Put the $5000 towards the highest interest rate card. Once they are paid off, don't close them. That will not help your credit score. If you can't control your spending then cut the cards, or keep them locked up offsite to reduce temptation, but don't close the accounts (unless they have annual fees where you don't generate enough in benefits/rewards to offset the fee)

Link to comment
Share on other sites

The last post in this topic was posted 3484 days ago. 

 

We strongly encourage you to start a new post instead of replying to this one.

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share




  • Member Statistics

    • Total Members
      188488
    • Most Online
      2046

    Newest Member
    Almaguer
    Joined
×
×
  • Create New...

Important Information

Guidelines