Seeking Advice On No-Win Situation

[dice727]

*TL;DR version*

• $1.2M in CC debt plus $700k in other loans
• no lates on credit yet, but will be in 2 weeks without payment
• BK not an option
• CC mins: $23k/mo ($11k interest)
• other loans: $10-20k/mo
• $75k total to work with for next 3 months, then $80k+/mo expected
• have to make a decision whether to let the cards go and settle later, or figure out how to keep up with payments over next 3 months.

Full Story

long story shorter, I had great credit and lots of it. I also had great income and a fairly lavish lifestyle. business declined late 2014 and I started to use a combination of my credit/savings to maintain my lifestyle expecting business to pick back up any time. fast forward to nearly 18 months later and business is finally starting to look up. money is starting to flow in again and I'm working on a mid-7 figure contract starting in about 3 months.

 

the problem is that I've racked up $1.2M in CC debt plus $700k in other loans and am almost out of cash. for the past few months I've been robbing Peter to pay Paul, making min payments by pulling cash from other cards through my businesses. this worked for a while, but now the interest/min payments are getting out of control big and I don't have the credit/cash to keep up with them anymore.

 

I have no late payments on my credit yet, however, I have missed the first payment on a few cards in the past couple of weeks. the first 30DL will show up in just over 2 weeks if I don't make the next payment, so I have until then to figure out a plan.

 

I already spoke to a BK attorney and it's not an option right now for various reasons. chap 7 would be a huge contested battle and there's a good chance I would not receive a discharge for much of the debt and chap 11 with a 5 year payment plan isn't going to do me any good. (too much debt for chap 13.)

 

I started by putting together a spreadsheet with all my accounts, due dates, balances, interest rates, min payments, etc to figure out where I am.

 

CC mins: $23k/mo ($11k interest)

other loans: $10-20k/mo (depending on what I can negotiate starting next month)

 

until Aug 1, I'm looking at a total of $75k to work with including my current cash reserves and anticipated income. when the new contract starts Aug 1, it should be about $80k/mo. (obviously I'm going to have to pay taxes on that next year, so that's going to have to be taken into account at some point.) then starting next year I'm expecting that to increase to over $100k/mo.

 

my min monthly spend right now for mortgage/cars/utilities/food/etc is around $10k. if I sell a couple cars and trim everything unnecessary, I should be able to get that down to about $7k. if I go completely drastic and sell everything and cut everything, it might be possible to get it down to $5k.

 

I'm well aware that $10k or even $5k is more than a lot of people make. so you might think I should be able to cut things even further. and I could, but that would mean fire-saling assets at less than I owe on them, which is no better for my situation than taking on new debt.

 

compounding the situation is that I'm well aware that credit is a one way street. if I let any of these cards go 30DL, there's no undoing that in 3 months when I have the money to start paying them again. I've worked hard for my good credit and hate to see it lost for the better part of 8 years because of these next 3 months.

 

but my main predicament is that the numbers just don't add up for the next 3 months. $75k to work with, but ~$110k in payments due.

 

so as far as I can see I have 2 options:

- sell a kidney or do whatever else I have to do to find a way to keep up with the payments for the next 3 months.

- let most of the cards go and ruining my credit (but keep a couple of key creditors current to assist in the rebuilding effort down the road) and plan on starting to settle on the cards when I get cash later this year.

 

I've let cards go in the past and gone the settlement route, so I'm well aware that's not an easy road. and after they jack up your interest rate and add penalties and interest continues to add up for a few months before they CO, the balance can balloon by 50% or more and then you settle on that increased balance and you often end up paying almost as much as you would have if you had stayed current. that and the destroyed credit means it's an absolute last resort for me.

 

but at the same time my debt load is so high that even if I manage to keep up with the payments for 3 months and then keep up with the payments and start paying down debt with the contract money, that still doesn't get me out of the hole entirely. I'm going to have to hope that the contract continues as planned for the next couple of years to get completely out of the $1.9M hole (plus probably $200k in interest). which is certainly possible, but not guaranteed at this point.

 

the major risk is that I sell my soul to keep up with these payments and then dump every dollar I earn into the debt and then next year or whenever, I lose that contract and I end up having to let the cards go at that point and I'm worse off than I would have been letting them go at this point.

 

so you can see it's not a simple decision and unfortunately at this point I'm almost out of time, so I have to make a call either way.

 

if you got this far, thanks for reading.

[Sandscrit]

Why not Chapter 11?

[ubercat]

1.2m in CCs alone? Can you elaborate a little?

[hegemony]

talk to another BK atty.

[Quincey]

Isn't this guy worth 30 million?

[FixnCred]

Wow that's a lot of debt to work with.

 

1. What are your scores like?

 

2. What is your reported UTL overall? How many of your tradelines are above 70%?

 

3. Is this all personal debt or is it a mixture of personal and business? Did you PG all of it?

 

4. With all due respect. It appears you still have a lavish mentality. You need to be looking for other sources of income. I only see you mention whays on hand plus the upcoming contract. You have no other source of income in the interim?

 

5. Cut anything you can cut ASAP and reduce your outgoing expenditures. No sense in incurring more unpayable debt which further accrues interest.

 

6. You need a disaster plan. Who are you going to burn and who are you going to make whole? You can't let them all go to the shitter.

 

7. Can you sell a stake in your business?

 

8. Do you have any AR that can be factored in between now and your contract?

 

9. Your debt is too big for anything conventional and as you stated... time is not on your side. You need an influx of capital.

 

10. You should have been planning for this a long time ago. It sounds like you are in some sort of business. You need to leverage that business by generating some additional revenue. It's your only way out as you probably can't secure any further cashflow.

[direct]

I've been in a situation like this in the past on a much smaller scale.

 

As an optimist, I see it like this. You are 3 months away from being able to begin digging yourself out of a deep hole assuming your contract payments come through as expected. That's really not a long time not to try to make it work. Do you have any friends and/or business associates that can give you a bridge loan to get you through the next 3 months? That would be the band aid you need and then pay them back first.

 

In the bigger picture, you need to refinance that debt from high interest credit card debt to a long term fixed payment loan. Bringing in an investor or offering an early prepayment incentive to your customers are two ideas that could work.

 

Don't give up if you are only 3 months away from the possibility of getting ahead.

[TampaDude]

Isn't this guy worth 30 million?

 

^ this, tbh

 

Obvious troll is obvious.

[Ldyjudge]

I agree at least you can see daylight in 3 months....maybe you can just sell a few assets to hold you over or at least help you to maintain until the contracts kick in.

Good Luck

[IndyPoolPlayer]

Donald? Is that you? C'mon man you're running for President of the United States for crissakes!!

[Herloss]

Since you didn't mention HELOC or 2nd mortgage I'll assume those are not options.

 

Bridge loan. Would any creditor you work with help with one? I thought even some bank / lending broker will sometimes loan against a firm contract you are receiving. Like offer a letter of credit against the upcoming receivables...

 

I didn't see if the debt is all personal or some in biz name too... I'd allow the biz only accounts - if any - to slip before any personal or even pg's.

 

Lastly, besides cutting your expenses to the absolute - total absolute - minimum... Knowing you will recover in a few months... I would try the rob peter to pay Paul method. Payment to card one, withdrawal to pay card two, etc. It CAN in an emergency help - a little - but if the card allows cash or check withdrawal, it can perhaps make the difference.

 

Hopefully others have ideas or solutions that continue to offer good advice.

 

Best of luck.

 

HL

[dice727]

ubercat, on 11 May 2016 - 10:20 PM, said:

1.2m in CCs alone? Can you elaborate a little?

sure, here's the info from my spreadsheet. some are LOCs, not all CCs, but all unsecured. many are business lines, but all PG'd. some cards have 0% offers on all/part of the balance.

 

[nooneimportant]

Consult another bankruptcy attorney. I'm no expert, but I think if you file it will provide a reprieve from payments in the short term. With that much $ and a mixture of business and personal, it is likely to take over 3 months and your lawyer can probably drag it out if needed. Then once your contract starts paying, you can stop the bankruptcy proceedings and start paying your creditors again.

[dice727]

FixnCred, on 11 May 2016 - 10:52 PM, said:

Wow that's a lot of debt to work with.

 

1. What are your scores like? 627/641/630 from CCT pulled today

 

2. What is your reported UTL overall? How many of your tradelines are above 70%? total util is 95%. almost every line is above 70%.

 

3. Is this all personal debt or is it a mixture of personal and business? Did you PG all of it? much of it is business, but all PG'd.

 

4. With all due respect. It appears you still have a lavish mentality. You need to be looking for other sources of income. I only see you mention whays on hand plus the upcoming contract. You have no other source of income in the interim? my only sources of income are my businesses. I have a few smaller contracts right now, which makes up the 75k I'm working with over the next 3 months.

 

5. Cut anything you can cut ASAP and reduce your outgoing expenditures. No sense in incurring more unpayable debt which further accrues interest. I can pay my bills with my income, just having trouble with the debt service.

 

6. You need a disaster plan. Who are you going to burn and who are you going to make whole? You can't let them all go to the shitter. agreed. I have debt with every major bank, some of which I know old very long grudges. so I will have to decide to not to burn.

7. Can you sell a stake in your business? unfortunately the business is nothing without me.

 

8. Do you have any AR that can be factored in between now and your contract? yes, that's included in the 75k number.

 

9. Your debt is too big for anything conventional and as you stated... time is not on your side. You need an influx of capital. yes, that would be ideal.

 

10. You should have been planning for this a long time ago. It sounds like you are in some sort of business. You need to leverage that business by generating some additional revenue. It's your only way out as you probably can't secure any further cashflow. I agree I should have done something a long time ago. I was too busy in denial and enjoying my delusions that it would all work out eventually. I am working my channels to get additional revenue, but gaining new contracts takes time. even if I found 20 new clients today, it would be a few months before deals were signed and I started to see any income. I need a plan in the meantime.

[dice727]

Consult another bankruptcy attorney. I'm no expert, but I think if you file it will provide a reprieve from payments in the short term. With that much $ and a mixture of business and personal, it is likely to take over 3 months and your lawyer can probably drag it out if needed. Then once your contract starts paying, you can stop the bankruptcy proceedings and start paying your creditors again.

honestly, I'm not really worried about a reprieve from payments. I can stop paying today and it will be months before anybody does anything other than call and send me letters.

 

but whether I BK (even temporarily) or stop paying, that's a one way ticket to a destroyed credit payment history.

[dice727]

I've been in a situation like this in the past on a much smaller scale.

 

As an optimist, I see it like this. You are 3 months away from being able to begin digging yourself out of a deep hole assuming your contract payments come through as expected. That's really not a long time not to try to make it work. Do you have any friends and/or business associates that can give you a bridge loan to get you through the next 3 months? That would be the band aid you need and then pay them back first.

 

In the bigger picture, you need to refinance that debt from high interest credit card debt to a long term fixed payment loan. Bringing in an investor or offering an early prepayment incentive to your customers are two ideas that could work.

 

Don't give up if you are only 3 months away from the possibility of getting ahead.

thanks for the outside the box ideas. I'm an optimist myself, so that's why I don't just want to give in and give up even though it looks bleak.

[dice727]

Why not Chapter 11?

because as far as I've been told/researched, the main advantage there is cram down on real estate debt of which I have no underwater properties.

 

a 5 year payment plan on my debt is most likely going to mean I pay back every dollar and still end up with the BK on my credit.

 

plus you live that 5 years at the mercy of the court, which is no picnic.

 

it seems to me I could do better by stopping payments and negotiating settlement plans on my own without dealing with the court at all. and it's not like I couldn't always file chap 11 down the road if I choose to go that route.

 

although if you see it differently, please enlighten me?

 

talk to another BK atty.

I have an appt with another one next week, but I did meet with the best one in my area. I may get a different answer somewhere else, but I'm not counting on that.

[dice727]

 

Isn't this guy worth 30 million?

^ this, tbh

 

Obvious troll is obvious.

 

Donald? Is that you? C'mon man you're running for President of the United States for crissakes!!

I keep hoping one day I'll wake up and this will all be a bad dream.

 

I'll let you know if that happens tomorrow.

[PotO]

 

ubercat, on 11 May 2016 - 10:20 PM, said:

1.2m in CCs alone? Can you elaborate a little?

 

sure, here's the info from my spreadsheet. some are LOCs, not all CCs, but all unsecured. many are business lines, but all PG'd. some cards have 0% offers on all/part of the balance.

 

Some of these accounts were opened within the last couple of months, it seems. How did that happen? I mean, why would they have even approved those applications seeing that you are virtually maxed out on every single account?

 

Even if you can service the debt going forward, I'd be surprised if those lines aren't going to be dead. There has to be at least a few, if not most, creditors that are going to start balance chasing and ultimately closing revolving accounts. But I guess at least there will be no derogatories on your credit reports if you pay.

 

Will talking with any of your creditors result in any type of short-term relief? Assuming you can get through the next three months unblemished, what lifestyle changes are needed to continue forward until everything is under control again?

 

While an optimist, Forrest Gump was right. I'd be planning an exit strategy right now, too.

[Chris58]

Isn't this guy worth 30 million?

 

Don't be silly.

 

The Op apparently lacks the liquid assets to pay the debt service on 1.2 Million in personal debt he managed to accrue.

 

To the OP, You have "Bigger Fish To Fry" than your personal FICO scores.

 

Good luck buddy.

[PotO]

 

Isn't this guy worth 30 million?

 

Don't be silly.

 

The Op apparently lacks the liquid assets to pay the debt service on 1.2 Million in personal debt he managed to accrue.

 

To the OP, You have "Bigger Fish To Fry" than your personal FICO scores.

 

Good luck buddy.

You missed the point.

 

Quincey is referring to a known individual.

[dice727]

Some of these accounts were opened within the last couple of months, it seems. How did that happen? I mean, why would they have even approved those applications seeing that you are virtually maxed out on every single account?

 

If you're talking about the 0% dates, the recent ones of those are convenience check offers.

[ProcessServer]

Donald? Is that you? C'mon man you're running for President of the United States for crissakes!!

# Make America Great Again!

[FixnCred]

What type of work do you do?

 

Do you know what I meant by factoring? Are you saying including factoring your AR you are only at $75K?

 

I get that you are the business but bringing on an investor, partner, and/or venture debt seems like the only way out unscathed.

 

If you haven't already. Open up a backup checking account or two somewhere so if the chocolate hits the fan you will have options preset for the rebuild.

 

I just get the feeling that you are just gonna have to suffer a few 30 day lates. Might as well be prepared for the worst and plan for the best.

 

At least Salvation is around the corner with the new contract. Maybe offer your customer a discount or incentive for an advance on your upcoming contract.

[dice727]

What type of work do you do?

 

Do you know what I meant by factoring? Are you saying including factoring your AR you are only at $75K?

 

I get that you are the business but bringing on an investor, partner, and/or venture debt seems like the only way out unscathed.

 

If you haven't already. Open up a backup checking account or two somewhere so if the chocolate hits the fan you will have options preset for the rebuild.

 

I just get the feeling that you are just gonna have to suffer a few 30 day lates. Might as well be prepared for the worst and plan for the best.

 

At least Salvation is around the corner with the new contract. Maybe offer your customer a discount or incentive for an advance on your upcoming contract.

I'm in B2B tech services.

 

I misread your previous post. I looked into factoring. my current deals are just smaller ad hoc deals where they pay me quickly once the work is done, so factoring wouldn't be an option. but that might be a solution to help me get payment on this new contract almost a month sooner, which could be the difference in the short term.

 

I'm already in the process of switching my banking over to a new bank where I have no previous relationship.

 

I appreciate your line of thinking and it's helping confirm what I've been thinking, which is an influx of capital in some manner in the next 30-45 days is the only way to keep things current and get out with my credit intact.

 

and in the long run if I do manage to keep everything current, paying 12-23% interest on these cards is a death sentence so I need to find a way to refinance down to a reasonable interest rate for the long term.