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Old 07-14-2010, 11:07 AM
 
28 posts, read 107,919 times
Reputation: 31

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As a continuation of this thread, I have some updated information and more questions.

My current finanical status:
Balance/Payment
Mortgage $74,404.26/$548.73
Car $23,594.20/$437.15
Credit Card A $7,200.72/$144.73
Credit Card B $6,311.07/$143.00
Credit Card C $4,901.24/$124.03
Credit Card D $1,584.66/$48.00
Student Loan $1,334.67/$51.33
Medical Bill $221.09/$15.00

Total $119551.91/$1511.70

As you can see, my financial situation hasn't changed much. I have, however, taken some extra measures to increase my income: I've been working a lot of overtime and I have an additional very part-time job which brings in an extra $150/mo.

The good news is, my financial situation is going to drastically change with an inheritance of anywhere from $10,000-$20,000. I'm trying to plan NOW what I put that money towards.

My first thoughts were to send it immediately to credit cards. However, that would only knock out a few hundred dollars a month. When I'm already short by $300/mo., the most logical choice would be to sell my car and pay the deficit out of pocket (anywhere from $5-$10k). This will eliminate $437.15 in car payments and probably cut my car insurance in half. I plan on buying (cash) a used car for around $2,000.

Without regard to reprecussions on my credit (I don't need to be lectured about unsecured vs. secured debt--I already know this is going to look bad on my credit!), is selling my car and paying off the deficit FIRST a good idea?

FYI, the medical bill will be paid first, before anything. I has 0%, but I just want it gone. Also, I'm expecting the inheritance in 2 months or so, once probate is done.

Thanks all!
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Old 07-14-2010, 12:40 PM
 
Location: Pennsylvania
5,725 posts, read 11,662,183 times
Reputation: 9828
What's the rate on the car loan? If it's a good car, I'd probably keep it even though it is a big payment and knock out the credit cards instead. That would take care of a similar amount of monthly payment.
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Old 07-14-2010, 05:25 PM
 
20,793 posts, read 61,077,703 times
Reputation: 10691
Paying off the medical bill with 0% interest is not a good plan. Take the bill that has the highest interest rate (one of the credit cards I am assuming), pay that off, then move to the next and soforth. It will save you money in the long run to do this. If you get the $20,000 you can cut out $450+/month from your budget and have your CC's GONE. Take that extra $150/month and apply it to the medical bill and have that paid off in 2 months, then tackle your student loan, then your car.
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Old 07-14-2010, 06:20 PM
 
Location: Boise, ID
8,046 posts, read 28,358,788 times
Reputation: 9469
I understand the psychological benefit of paying off a bill and making it go away, but at 0% interest, the $221 you pay on that bill could cost you $400 by not paying on a high interest rate item.

Of the other options, either are possibilities. You could sell the car, pay the difference, buy a good used car and then put anything left over toward credit cards, or you could do what golfgod said, and pay off the credit cards, highest interest rate first, and work on down.

Getting rid of the car payment would cost, lets say, $10k to clear the debt + $2k for a used car, so $12000, and would save you $437 a month, and whatever the interest is in the long run, plus the savings on your insurance, which could be substantial. I just changed from full insurance to liability and my insurance cut from $600 a year to $300 a year. You could then put any additional left over inheritance toward credit cards to save even more.

Getting rid of the credit cards would cost right at $20k to clear them all (which means you might not get enough to make them all go away) would save $460 a month and whatever THAT interest is in the long run, which is probably more.

So if you get enough to actually clear all the cards, getting rid of the credit cards will probably save you more in the long run, but getting rid of the car will help you more in the short run and is more likely to be doable on the amount you receive.
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Old 07-14-2010, 06:39 PM
 
Location: In America's Heartland
929 posts, read 2,086,135 times
Reputation: 1196
I would without any hesitation, sell the car first, it's completely out of line. After you have killed the car and purchased a beater, I would then go after the CC debt with as much tenacity as possible. Student loan comes next and then medical. Good luck with it... just make sure that you don't clean this mess up with the help of the inheritance and then go right back into debt again.
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Old 07-14-2010, 07:46 PM
 
82 posts, read 494,647 times
Reputation: 170
How long until the inheritance?

If you can push a bankruptcy thru before you collect then:

Pay off credit card "D" and keep it in good standing (you won't get another for awhile).
Default on credit cards "A" "B" "C".
Use money you were paying for CC's ($411.76) on your car payment (pay on time every month rebuilding your credit score which will drop after bankruptcy). You can pay remaining $25.39 from your salary.
Pay Mortgage, student loan, medical from your salary (again, ON TIME rebuilding credit score).
They will allow you to keep your transportation and domicile so don't sweat that!
Keep working OT, making payments and BANK/INVEST the inheritance. Obviously, invest "low risk" until we see which way wind blows on the economy. Or, buy, precious metals with 1/2 and keep 1/2 cash handy for the next 18 months, again, checking how the wind blows. Oh, last point don't let your conscience "play" you to hard about this (the banks are shafting everybody). just learn your lesson and live a frugal life and remember DEBT IS SLAVERY. the $20,000 inheritance could serve you and yours well in the future.
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Old 07-14-2010, 08:08 PM
 
20,793 posts, read 61,077,703 times
Reputation: 10691
Quote:
Originally Posted by The Ghost of Tom Joad View Post
How long until the inheritance?

If you can push a bankruptcy thru before you collect then:

Pay off credit card "D" and keep it in good standing (you won't get another for awhile).
Default on credit cards "A" "B" "C".
Use money you were paying for CC's ($411.76) on your car payment (pay on time every month rebuilding your credit score which will drop after bankruptcy). You can pay remaining $25.39 from your salary.
Pay Mortgage, student loan, medical from your salary (again, ON TIME rebuilding credit score).
They will allow you to keep your transportation and domicile so don't sweat that!
Keep working OT, making payments and BANK/INVEST the inheritance. Obviously, invest "low risk" until we see which way wind blows on the economy. Or, buy, precious metals with 1/2 and keep 1/2 cash handy for the next 18 months, again, checking how the wind blows. Oh, last point don't let your conscience "play" you to hard about this (the banks are shafting everybody). just learn your lesson and live a frugal life and remember DEBT IS SLAVERY. the $20,000 inheritance could serve you and yours well in the future.
WHY??? So if the OP files bankruptcy and ruins his/her credit for 10 years, increasing interest rates on any future loans, how much you pay in car insurance, etc--how does that make sense. If the OP gets the $20K then the credit card debt is GONE, can pay down on the student loan and have the medical bill gone in 2 months. I agree with selling the car but not if you are underwater on it-that is just wasted money when you can pay off the rest of your debt and then afford the car.
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Old 07-15-2010, 07:47 AM
 
Location: Central Fl
2,903 posts, read 12,493,132 times
Reputation: 2900
Golfgal is 100% spot on here.

Bankruptcy?? That's the problem with this country..no sense of personal responsibility. You dig yourself in a hole, you work to dig yourself out.

But what do I know.....I'm one of those weirdo's who has always lived within their means, never paying a penny interest in my life except for a mortgage......paid cash for another house and have benefited from allowing the law of compounding interest work FOR me and not against me....

I commend the OP for wanting to get out of debt. You will be glad you did! Remember, once you pay off those cards, don't allow yourself to be a slave to them again. The feeling of being debt free is wonderful....!! Good luck!!

Frank
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Old 07-15-2010, 10:19 AM
 
Location: East Valley, AZ
3,849 posts, read 9,394,129 times
Reputation: 4021
Quote:
Originally Posted by The Ghost of Tom Joad View Post
How long until the inheritance?

If you can push a bankruptcy thru before you collect then:

Pay off credit card "D" and keep it in good standing (you won't get another for awhile).
Default on credit cards "A" "B" "C".
Use money you were paying for CC's ($411.76) on your car payment (pay on time every month rebuilding your credit score which will drop after bankruptcy). You can pay remaining $25.39 from your salary.
Pay Mortgage, student loan, medical from your salary (again, ON TIME rebuilding credit score).
They will allow you to keep your transportation and domicile so don't sweat that!
Keep working OT, making payments and BANK/INVEST the inheritance. Obviously, invest "low risk" until we see which way wind blows on the economy. Or, buy, precious metals with 1/2 and keep 1/2 cash handy for the next 18 months, again, checking how the wind blows. Oh, last point don't let your conscience "play" you to hard about this (the banks are shafting everybody). just learn your lesson and live a frugal life and remember DEBT IS SLAVERY. the $20,000 inheritance could serve you and yours well in the future.
Sorry, but that's the stupidest thing I've ever heard.

If you're fully capable of paying off debt (which it sounds like the OP is), why should they even THINK about bankruptcy?

He/she dug themself into this mess, it's up to them to fix it...not us or the government.
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Old 07-15-2010, 12:30 PM
 
15,632 posts, read 24,286,602 times
Reputation: 22815
I agree about the bad advice to file bankruptcy. And, in many states, if you come into any $$$ within six months of having filed bankruptcy (or maybe it's six months after the bankruptcy is discharged), you have to notify the court.
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