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I lost my job last October, since then we only have my wife's income. We are short about $1800 every month to pay all of our bills (including CC bills we used to start a small business that failed).
We have been covering my lost income with money we had saved for a situation like this, but I am down to about $12,000 left in savings.
My question is, do I keep using my savings to cover the credit card bills hoping I can get a job? Or do I stop paying now and save this money in case the storm turns into a hurricane (let's say if my wife were to loose her job).
What happens when you stop paying your CC bills?
Any comments/suggestions will be appreciated.
How much is the minimum payment for the CC's? - Just pay that! Because if you don't they jack up the interest rate to 28% and force you to pay it all with no leniency on the rate... - That's what happened to my brother with AMEX.
How much do you owe on the cards? I might consider bankruptcy to get rid of that debt. I'm thinking it's a high balance since you were using them to start a busines.
Is the cc debt from the failed business only or is it combined business/personal? Is it possible that at least one of your cards can be said to have been for the business only?
If any of the credit cards were issued in the name of your business, or your name for business purposes only (does not include any personal debt) you may be able to file to have that debt explunged as part of the business closure. This option usually requires that you kept careful and absolutely separate financial records on behalf of your business. If you still have financial records that pertain to your business , you should contact your state small business dept. (usually found on your state house website) Every state has some kind of advocacy services for its small business owners. If the state house offices can not help you, ask them for information on how to contact your local representative directly that is what they are there for. You would be suprised at how many services are available in cases like these that are never used because people in your exact position do not know about them. Many small businesses (including my own) have been where you are right now. I know it seems like 2 full time jobs just dealing with it all, hang in there. This option could eliminate or downsize at least the business debt while having a much less damaging effect on your personal finances.
Best of luck..
I am in a similar situation. I didn't start a business however. I lost my job and owe around $18,000. I haven't been able to find a full time job with comparable pay. I found part time work, but I can't make the minimum payment so the fees keep piling. Credit card companies could care less if you are unemployed and looking for work. If you break their terms, you pay the penalties. Realistically, if you think you can't dig out, you should consult a bankruptcy attorney. People give me the advice that you made the debt you should suffer. The bankruptcy code was put in place for a reason and people do make mistakes in life. I have found out the hard way that you should never get in this deep. On the other hand, I don't think a person should have to suffer for the rest of their life because they got in over their head.
As to the original poster, have you contacted a consumer credit counseling agency? I attempted this, but you seem to be in a better situation financially that I am in since you have some income. I have none at all. These agencies work directly with credit card companies to reduce your interest charges and to stop overlimit fees. They really do have a purpose when things get tough. If you chose to pay nothing and don't work with anyone, the CCC's will turn your account over to a collection agency after around 6 months. They will hound you constantly and may eventually sue depending on how much you owe. I heard that normally the lawsuit will attach a garnishment to your wages based on your income level. I would contact your CCC's first though to see if they have a hardship program for the unemployed or go the credit couseling route to avoid a lawsuit.
My advise to anyone out there who has lost a job and cannot meet all their expenses is as follow:
pay first your home morgage or rent
Utilities
food
if you have medical insurance pay for it
and the last thing you pay if you have enough is your credit cards.
If you are not able to pay them and you have a balance of over $10,000...file bankruptcy.
If you do not pay you CC and you are late just 1 month..your interest rate is going to be raised and it will show up in your credit report anyways....
Credit cards company push you into debt...they send you credit cards even if you do not asked for them..so now let them eat all the bad debts created by their pushing them down everyones throats and making people addicted to CC.
My advise to anyone out there who has lost a job and cannot meet all their expenses is as follow:
pay first your home morgage or rent
Utilities
food
if you have medical insurance pay for it
and the last thing you pay if you have enough is your credit cards.
Food 3rd???
When times get tough you have to do whatever you have to do.
I would definetly NOT make paying the mortgage a priority. Going broke to save a house is dumb. If I were unemployed and down to only 12K with amonthly burn rate of $1800 I would be hitting the panic button. That's only 6.5 months assuming nothing unexpected happens and you've been out of work 8 months.
If it were me I would start cutting costs with a chainsaw. If you don't absolutely have to have it don't buy it. If I owned a home I would stop making the mortgage right now. It would be 6-8 months before I hit foreclosure and if I haven't found a job by then foreclosure would be a relief. Stop paying the credit cards, the student loans and anything else that you don't absolutely have to have.
If I rented I would look for aless expensive place ASAP. You have to cut $1800/mo out right now! It's survival mode.
Think necessities first. Food, utilities, rent or house payment, transportation and insurance. Pay just the minimums on the credit cards and cut your lifestyle in anyway you can to reduce that $1800 shortfall. When you get a job, attack the credit cards and pay them off as soon as you can. Continue to cut your lifestyle until these bad boys are gone. As you have learned, credit cards are not a good way to start a business. Your first priority is to hit the bricks and find that job. Good luck!
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