I have $50,000 in debt and I need advice!?

Question

I have accumulated $40,000 in debt, mostly credit cards and I also owe the IRS $11,000 in back taxes. My debt is a result of losing my 20 year job and being out of work for 2 years. I moved 1200 miles to find another job, and eventually took another job that pays $10,000 less than my previous job. I can barely afford to make ends meet, and I am paying the IRS $163 a month per my installment agreement, but I am even having a hard time paying that. I can barely afford the minimum payments on my credit cards, and I am not behind or late on any payments as of yet, but the inevitable will happen. I already work 60 hours a week and with my schedule it's difficult to find a part time job to work around my hours. I don't want to file bankruptcy. Since the IRS has a lien filed against me, my credit score has dropped from 750 now down to 650. I don't know what else to do. Any suggestions?

Answer 1

I am a former financial counselor and don't worry because there are other people in similar situations to your own. I was suprised though, to see so many people recommending bankruptcy. You yourself state that you don't want to file, and you are correct in assuming it is the LAST thing you should do. The good thing from what I see in your situation, is that you ARE making minimum payments, but barely. So I am assuming that you obviously want to rid yourself of all your high interest debt, without bankruptcy. The good news is that there are solutions out there to help you escape from the burden of your debts.

In my opinion, you should begin by contacting a debt counselor in order to arrange a plan of action for paying down your debt over the next 4-5 years: Debt management programs have come a long way since they first were developed. More and more creditors are accepting this method as a true form of debt reduction and repayment. Basically here's how the system works:

1) You have lots of high interest debt. Perhaps the high interest rates are making it very difficult for you to make any progress. So what do you do?
2) You call a credit counseling company. I can't speak for all companies, but the ones interested in the consumers show care and compassion because they understand you are in a difficult situation. If the counselor finds that a debt consolidation WILL help your situation, then they will walk you step by step through the program. Okay so you qualify now what?
3) You enroll your high interest debt into the program and the company will begin contacting your creditors to negotiate lower interest rates on most of your accounts. This is a tremendous help because interest consumes most of your monthly payment anyways. Another important thing that you have to remember is that the creditors also CLOSE your accounts. This is to further help you along in paying off your debts. But what do you have to do?
4) You stay in contact with your consolidation company and creditors. But you only make ONE payment to the consolidation company, who in turn forward it to your creditors. Then what?
5) Sit back and watch your debt slowly disappear! Regardless of the debt, it typically takes a person 4-5 years to pay off your debt. As each account is paid off, your payment is then redistributed among the remaining accounts. It's a snowballing effect, where the payments to your creditors get larger as each account is paid off.

In choosing a company you also want to look for these things:

1) A company who is genuinely trying to help consumer. A company who is looking for the consumer's best interests will not only counsel you, but they may take you through a budget, analyze your situation, provide free financial material, etc. In other words they don't just try to enroll you. You should never feel pressured.
2) A company who is non-profit, certified, and has a good track record with the BBB. A company who is non-profit may ask for a donation but it is purely voluntary. All your payments should go to your creditors. Also there are regulation agencies in place to weed out the "shady" companies, so you should make sure they are certified and a responsible member of the BBB.
3) A company that answers all your questions and whose counselors are also certified. You probably have lots of questions, but a caring and knowledgable counselor will walk you through step by step, and explain thoroughly every step of the process and its affects on your credit.

The reason I am a big fan of this method is because I myself am on a debt management program. My overall experience is a smooth one and it probably has something to do with the fact that I saw how the DMP (debt management program) worked behind the scenes. As far as my debt goes, in about 18 months, I have gone from $14000 debt, to about $8500. That's a big leap for me, and it's only going to get better as the payments get larger when accounts begin to close. It's a great system and more people need to take advantage of the great opportunity creditors have given consumers through the DMP. My credit score wasn't bad to begin with but it has increased from 695 to 723.

So if you are interested in the company I worked for, it is http://www.incharge.org . It is based in Orlando and has a great relationship with the Defense Department, who regularly refers its soldiers to the company for financial counseling. If you are interested in the company I have an account with, it is http://www.careonecredit.org/ . Both of these companies are registered with the BBB and have outstanding reputations.

The DMP does have some drawbacks also:
1) You can't apply for new credit or loans while on the program. In other words don't even think about getting a new car or buying a new house while on the program. It will be very difficult to get approved because of your "credit counseling" status.
2) All your credit accounts are closed. You may be allowed to keep one emergency account but overall if you ever needed to make a large purchase, and you're used to using your credit cards, they won't be there to save your day anymore! At least not while you're on the program.

So I know this may be alot of information to process. But I feel this method will help because the payments are generally less than the minimums you are paying today. The important things is you keep an open mind to all your options and stay patient, as paying down debt that has interest attached to it can take years to pay back. I admire the fact that you want to do something about it instead of ignoring it. Whatever you choose, just make sure you act today because the sooner you get started the faster you will become debt free! Good luck with your adventure.

Answer 2

file bankruptcy. I didnt want to either but it was the best thing I ever did. If you dont' want to, then you are probably honestly in need of it. That's what BR was invented for. Why does our goverment allow it? So people like you could have a 2nd chance. Your credit is already messed up. It will be a HUGE weight off you, and you may have to pay some back anyways, so let a Ch. 13 help you do it. You can get your credit back in about 1-2 years if you clean your credit reports up to be accurate and work on your score again. Other than that you will just be killing yourself and working for nothing. Get a fresh start and learn from the past.

Answer 3

Take all your credit cards except one. and consolodate them. You will end up paying a lower minimum payment on just the one card. after that is done put the card away except to make payments on it and only then!!!!. yes it is hard but doable. Next thing you should do is find a real financial planner to help you. They will do the best for you with out you claiming bankruptsy. When you end up filing you end up screwing up the rest of your credit history. They say only for seven years but that is not true. Only on paper is that true. Once any company finds that you have filed you will be black listed. the next step will be the hardest. If you are really serious about getting out of debt you have to cut out the little things. Things like cable and long distance phone calls. Get only one phone and make it the cheepest of the two. by that I mean either your cell phone or your land line. NOT BOTH!!!! Stop ordering take out and going to restaurants except maybe once a month. There are other forms of entertainment that doesn't cost money or very little money. Like going to the park or just watching a rental. or watching a movie that you already have. there is also the gas milage in your vehicle. Unless you absolutly must drive it to work I suggest you get rid of it if you are still makeing payments on it. Bus passes are much cheaper and better for the environment.

Answer 4

Don't file for bankruptcy, try not paying your credit cards at the moment cut every single one of them up call the company and tell them to cancel each and every card ask the government if you can cut the payments in half at the moment. Pay the government first after you have finished paying the government start paying off your other debt. Don't eat out, don't go to entertainment that you have to pay for, don't buy people gifts at the moment when people ask why tell them the story if they can't understand or don't want to acknowledge your problem then don't associate with them they just will help you to bring your debt even up more. Cook cheaply like creamed tuna (tuna, cream of mushroom soup, and mixed vegetables dumbed the vegetables and it's liquid in), corned beef patties (half a can corned beef put the other half in a plastic container or bag and freeze, and two or three boiled potatoes, and one egg boil the potatoes until soft enough to mash, mash the potatoes added the corned beef and egg (not the shell just the yoke and mix with your hand and fry serve with rice and peas and mayonnaise), mac and cheese and one can of tuna, tuna sandwhiches and other types of sandwhiches, eat oatmeal for breakfast and the above for lunch and dinner.

Answer 5

You need to go an austerity program. See if you can share an apartment with someone else, and then beyond that you must try to survive with using what you have in terms of clothing, etc., and only purchase food with no frivolties.

Eventually, you have to try to pay off the IRS and the credit card companies and they start afresh. You have already spent somebody else's money - borrowed, or not paid your timely taxes. These people - the banks, the government, etc. will want their money one way or the other.

Answer 6

Cut up the credit cards immediately. Keep working hard and paying off your debts. And hope you enjoyed it while it lasted. Stop living above your means. You don't have to have that luxury car or those designer jeans. Being dragged down with debts is a much bigger problem then Levis and an old Ford, Isn't it???

Answer 7

Hello Kimberly, terribly sorry about your predicament. Overcoming financial trouble means securing a steady income or very large cash injection... and in your case, due all respect, I'd assume the former to be the more realistic. What exactly does your professional/vocational experience make you? ie. 20 yrs in one organization is definitely worth something to many potential employers. It also says that you're dependable - nobody keeps you for 20 yrs unless you're good. Can you coach? I mean tutor would-be job applicants or those thinking of changing careers. College students in most cases could be a good source of income if you offered tutoring for job interviews - for part-time or full-time jobs.
In business I find that sometimes the one you're fighting is the one that holds the answer to your queston. In your case the IRS. Have you tried them for a job? The government is one of the last places people think about for employment.
There is also the business start-up. Think small, as in small operation and small money, but in a service that people take for granted. You can start a business with less than a thousand dollars - franchise it. Deliver legal papers, property flyers etc. Keep your focus on the money you can take-in rather than on the money you have to send out. Either money you don't have, but it will be easier on your mind if you concentrated more on the money you'll take in and keep for yourself, rather than on the money you'll take-in and send out immediately. There is so much you can do that people will pay for - cooking - go to cooking school, clothing designing for children - the far east is big on US styles, knitting for brand stores - a dying art that will bring you a lot of cash, catering for childrens parties, office lunches and home meal delivery for working parents... the options are endless.
And what ever you decide to do, start saving through the best method available - CERTIFICATES OF DEPOSIT!!! I wish you all the very best of luck. If my advice hasn't helped you, you have my apologese Kimberly.

Answer 8

Be a to blame man or woman and pay your charges. You owe the money PAY IT then next time imagine two times in the previous you purchase belongings you may't have sufficient money. strolling far off from this gained't remove it it really is going to keep on with you. you'd be sued. i'm no longer effective in case your usa has a borrowers penal complex or no longer although the economic corporation will sue you and also you ought to get your paychecks garnished. filing financial ruin will keep on with you for 10 years and make your existence depressing. In those similar 10 years you ought to quite pay this debt @ 420 a month.

Answer 9

I strongly suggest you to sell everything you have (Including your bed) and pay the IRS as soon as possible before they arrest you.

This is not a joke. If they charge you with Tax Evasion you could be convicted for several years.

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Answer 10

Get rid of your credit cards. Play the lottery. BTS on mlb.com

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