I am married and have an 11 month old daughter. I have spoke to a lawyer and we qualify for Chapter 7. We own a home, but it is a struggle to make the monthly payments. It is mortgaged for about $10K more than it's worth. We also owe $38,600 in unsecured debt, not including $20K in student loans (which I know can't be included in the bankruptcy). I am behind with all my creditors, some 120+ days. We have about $900 in medical debts. My husband brings home about $3000 per month - more than half goes to mortgage, quarterly real estate taxes, and homeowners insurance. I'm a stay-at-home mom, but I'm starting up my own business, plus my husband is trying to make add'l money on the side. We don't qualify for consumer credit counseling because our budget is short by about $1800 according to them. A debt negotiation company has said they can reduce our unsecured debt by negotiation to around $21K and we can have that paid off within 3 yrs with $600 per month pymnts, which is $271 dollars less a month than the credit counseling pymnt. If we don't claim bankruptcy, we will continue to experience financial hardship for several more years. Can you offer some advice? Thank You!
Lori
You are in a tough spot. I can see how bankruptcy would seem attractive at this point, but I don't believe it will solve your problems. Your income does not cover your expenses, and after bankruptcy it still won't cover your expenses. Many people find themselves in just as much debt soon after bankruptcy because the underlying problem - expenses that exceed income - is still there.
Debt negotiation is a great idea, but don't pay anyone a dime to do it for you. As MP Dunleavy puts it in her great article http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P36230.asp "Your 3 worst debt consolidation moves," "This is the fairy godmother fantasy. This Nice Big Debt Consolidation company comes along and swears they'll make your life soooo much easier." Reality: They'll take their substantial cut off the top, and they can't do anything for you that you can't do yourself. Skip the debt negotiators and call or write to your creditors yourself.
Have you contacted the National Foundation for Credit Counseling (http://www.nfcc.org/)? They are nonprofit and at least won't be out to get your money.
You're going to need more income to get back in the black. Side businesses are great, but make sure they are low risk and deliver positive cash flow quickly in your case. You are better off providing a service like child care, lawn maintenance, or tutoring - anything for which you get paid immediately - than trying to sell something or make any more investments until you get your feet under you. In the Seattle area, the going rate for house cleaning is $25 an hour. Cleaning a couple of houses a week could make a good dent in your bills. Or perhaps one of you take an evening shift one or two nights a week at a restaurant, store, or delivery service. Every dollar you earn and use to pay off debts saves you much more than that in interest and late fees.
You still have a lot going for you - you have a stable family, a house, and your husband's job. Apparently you are all healthy. And you are seeking answers. You can make it through this!