I have to admit that I was raised with a silver spoon in my mouth. My parents paid for everything, and I was never taught or expected to support myself. I won't bore you with details about how I got into my current mess, but at the ripe old age of 38, I'm in dire straits. I owe approximately $100,000 (all on credit cards), all because I basically charged everything I needed and, yes, also wanted. I am a high-level public relations executive, but at this juncture, I can afford only my minimum payments. I know that I will get an inheritance that will more than cover my debt. However, my mother is healthy. Should I declare bankruptcy now and start over later? Or should I plow through and wait until I get my inheritance? – Gina
It's not too late to become a credit master. All you need is a desire to learn and a commitment to change. I'm glad your mother is in fine health, too, as it's not a good idea to continue to rely on her for support. I've seen too many trust-fund babies grow up to become weak and indebted adults. It's time to declare your independence, Gina!
A hundred grand in the hole is major, but it appears that you do have a decent income to pay for it all. I did a little research about how much an experienced public relations executive might earn in your area (Chicago, according to your contact information), and it can be as high as $100,000 up to $200,000.
Can you afford to pay for your debt, or is bankruptcy your only option? You probably earn far more than your state's median income limit, so in order to file, you'd have to prove that you have no money with which to cover your liabilities. In the initial paperwork, you would have to list what you earn, your essential expenses and all your obligations.
The word “essential” should give you serious pause. What you may currently spend on things such as manicures, vacations and other fineries will be excluded. Eliminate of all those extras, and you very well may have enough left over to send to your credit card companies. If so, your bankruptcy case would be closed before it ever opens.
Now let's look at getting you out of debt on your own. If your interest rates average around 18 percent and you could swing a fixed payment of about $5,000 every month (and did not add to your balances at all), you'd be in the clear in just two years. Sure, that's a lot of money to send on a regular basis, but you borrowed it and ought to repay it. In fact, owning up to your duty is the first and most crucial step you can take toward growing up financially.
Suffering through some tough times to pay it all down is the second most important step. Maybe you can afford more than $5,000 a month. Maybe what you can afford is much less. To know, you've got to design a realistic budget. No offense, but I don't think you can do this without expert help. Clearly you need perspective on how most people in this country really live. You may have to eschew boutiques and instead buy in bulk, question each purchase for value, say “no” to weekends in Paris and downsize a big home and pricy vehicle. Visit a credit counseling agency near you to sit down with a professional who can help you pare your spending down to reasonable levels.
The credit counselor may also present you with a way to pay off your debts more quickly. For example, the credit counseling agency may be able to negotiate on your behalf with your creditors to reduce your interest rates. If you want to do that, go ahead. Still, I would recommend that you take this challenge on yourself. When you write the very last check to those you owe, you'll be able to hold your head up high and say, “I did it.”
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