Need advice on my debts

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Isle_of_Avalon

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I need some advice, I’m not sure if I’m doing the right thing…

I own a 5 year old Honda Civic that has been paid off, it’s my only form of transportation to commute to work. I live and work in central New Jersey where nothing is close to home or work. Although there is a bus line that I could possibly use to get to work, it would involve a lot of walking to get to the bus stop and includes crossing a highway with no pedestrian sidewalks.

I have a lot of bills and debts amounting to $12,000+ and I’m having trouble keeping up with payments, two bills already transferred over to a collection agency and I’m living paycheck to paycheck. I have no savings. I can’t apply for any more bank loans and my credit rating is not good and getting worse. I’m seriously thinking of selling my car to pay off some of that debt, I think I could get around $5,000-$8,000 for it. I don’t own anything else of value that I could sell to make a real dent. If I sold the car, I would rely on using the bus and also a car sharing service called Zipcar which I recently signed up for and became a member.

I could pay off a good portion of my outstanding debt which would give me some financial breathing room to finish paying off my remaining bills. I haven’t revealed my money problems to any family or friends because of embarrassment and I don’t know anyone I could borrow that kind of money from anyway. What do you think? Is this a good move to make? I’m desperate to get this debt off my back. Please help.
 
Some thoughts:

–If you can’t safely or reliably access the bus, IMHO it’s not a good option to try & rely on the bus.

–Could you give some idea as to how/what the $12,000 debt is? Is it a student loan? Medical bills? Is it 2 creditors or 10?

–Can you share any other details re: your situation, i.e., are you married; kids; etc.? The answers to those may pertain to how you go about dealing with this.

Don’t despair!
 
I did that for awhile: sold the car, took the bus, paid off bills. Its a bit of a hassle, but it worked. I also started riding my bicycle a lot. Got healthier. After a few years, someone gave me an old car they didn’t want. I put a new battery in it, had it detailed (it had moss growing on it) got insurance and now buzz around in it. But I could live without it.

You might be happier if you get your debt off your back, even if it means no car for a few years.

If you belong to a credit union, you might ask them if they offer credit counseling advice or money management sessions.

Good luck!
 
If you are anything like me ‘Taking a bus to work means being late most days for work’

I went years without a car because all I had to do was walk out of my building, jump on a bus that came every 15 minutes, get off in front of the office and had flex hours so if I was 30 minutes late, all I had to do was stay 30 minutes longer

I now work 3 buses away. It would mean taking 2 hours to commute one way (as opposed to 20 minute drive) and if I miss my first bus, by the time I would get to my last bus, it has stopped running for the day.

If you loose your job for being late, then you will REALLY have financial problems. My advice is DON"T do it.

However, if it will save on gas, there is nothing wrong with taking the bus to work and on the mornings you are late, jumping in your car. That may save some money. Also, it will help clear up if giving up your car is a solution

However, I would also like to mention there are SEVERAL other ways to save money. Watch the flyers and buy things you would normally when they go on sale, buy cheaper cuts of meat, buy second hand clothes, make instead coffee instead of those K cups. Unless you are already living as frugally as possible, I am sure there could be other ways to save money
 
This is hard to answer without more information. $12,000 is not a heavy debt load for most people. What is the interest rate? What do you earn? Can you cut your living expenses? Can you get a second job?
 
You could speak to the bank if you owe them, to ask to stretch out your payments so you have smaller payments over a longer period. its bad to get into a crisis where you cannot pay them, they would prefer to hear from you and work out a better plan so you are not under pressure and their money is safe. the money you would save could pay off the most urgent bill.
about the car, if you are fit enough for the bus, and if it is not expensive, try that or cycling or a combination.
i would keep the car for now, if you are that stretched it will take a long time to save another 5 or 8 thousand for the next car which you may need urgently if circumstances change.
you could take the car off the road for a year or two and save on tax, insurance fuel and repairs. The expense of a car, which has been paid for already, is running it and tax, insurance, repairs, fuel. if you arrange to have it off the road you could save 50 - 100 dollars a week depending on fuel use, or more, for you bill repayments. which would mean in a couple of years most of your bill would be paid off. and theres always part-time work.
 
Are you familiar with Dave Ramsey? A lot of people find him helpful in situations like this. I think with so many things going on, prioritizing is key:

He also recommends calling the creditors and explaining the situation, and making an offer to pay what you can even if it’s not what they’ve stated they want. A lot of times, the creditor just wants something. Making an effort to pay something, anything, can show that a lot more than erratic or non-existent payments.

I think your car idea is a good one.

If you are single and don’t have kids,I agree with PaulfromIowa that your debt load is not incredibly high. Even in a place like NJ I would take a hard look at your expenses and see how to cut them.
 
yes Dave Ramsey is good. He talks about paying off smallest debts first I think. I have had similar problems after the real estate recession and stock market collapse 7-8 years ago, then I broke my ankle really bad in 3 places and couldn’t work! It just kept getting worse. Debt is terrible when it gets out of control. I was embarrassed to ask people for help too. It is good you are wanting to attack it now and confront the problem.
There are credit counseling companies out there who help you combine all your debt and work out a program, but I don’t know how honest they all are.
If there is a family member you look up to and trust I would go to them for advice.
 
Dave Ramsey has a terrific “system” that is much more than just paying off the smallest debts first. The system isn’t easy (nothing in life that’s worth anything is), but it works. His financial ministry is also VERY Christian based.

He has a daily radio show at 5pm eastern, and you can catch his show 24/7 on his website daveramsey.com/home/ or on IHeartRadio.

Also try everydollar.com/
 
I agree with the advice to try Dave Ramsey. Listen to a show or two and you’ll start seeing the principles at work. I believe St. Vincent de Paul also does financial counseling.

I have a lot of concerns about the idea of selling your car, because a paid off Honda sounds like it’s one of the few bright spots in your financial life. I remember talking to a friend who had sold an older Toyota or Honda some years ago, and he still regretted it. That car is a very precious resource. Don’t sell it until you have to. Oh, and make sure it’s insured so that if it were lost to an accident, you’d be able to immediately purchase an inexpensive car.

It depends on your income, but $12k is not actually a lot of debt. It may just be that the forms you are carrying are particularly nasty. ($12k in payday loans would be frightful–even $4k would be.)

Here’s an explanation of the “debt snowball” method that Dave Ramsey is famous for.

en.wikipedia.org/wiki/Debt-snowball_method

Another link that may be helpful to you is the one on what to do when your basic living expenses plus payments exceed your income:

daveramsey.com/blog/4-things-you-must-budget

The DR approach is to first budget for the “four walls” (food, shelter/utilities, basic clothing and transportation). Any payments to creditors come AFTER taking care of your basic personal needs.

"By maintaining the Four Walls, you stabilize your situation so you can begin to find margin in your budget to attack your debt.

“Remember this: Your creditors don’t care about you. They just want to get your money. So focus on the important over the urgent. And that starts with taking care of your Four Walls first.”

So, figure out what your basic expenses are and then and only then start thinking about how much is left over to pay creditors. Having a financial counselor to look over your shoulder could be very helpful.

I suspect that living in NJ, your housing costs may be the killer. Trimming that down (if possible) and getting your income up will be your escape route from your debt situation. You haven’t explained what kind of debt it is, but if it’s due to low income, selling your car will not get you out permanently–you’ll still have the same basic mismatch between your financial needs and your income, plus selling your car will impede your ability to take a second job. So, I would suggest holding onto the car but getting a second job and using all of the second job income on debt repayment.

Best wishes!
 
Xantippe raises a good point about keeping your car in order to get a second job. I would suggest if you keep it you ditch the Zipcar subscription pronto. I don’t understand why you would add another bill if you still have the car. :confused:
 
Don’t sell your paid off car unless it has serious mechanical problems that you cannot afford. I also am puzzled by your addition of another expense in the Zipcar subscription. Get rid of that.

Get rid of all non essential expenses, and cable is non essential as is Netflix and such, and find ways to lower expenses such as a roommate or moving home with family for a while until debt is paid off.

Some Catholic Charities affiliates do credit counseling, some do not. If your local CC does not, then find a credit counseling office in NJ and call them if your debt is credit card debt.

If it is student loan debt, or you have that in the mix, look at the new REPAYE option that just went into effect. It can lower your SL payment to help you get your other debt under control. Or look at deferment or forbearance if you qualify. And then you can switch back to a standard plan when you can afford to. It will cost you more in the long run, but may give you breathing room on your overall debt situation.

There are two things you can do to change your situation: decrease expenses or increase income. Or a combo of both.

So yes start looking at a second job or freelance work on the side to increase your income. I tutored math for years when I was starting out to get extra income.

You are going to have to be disciplined, but you can do it.
 
Selling the car may be an option but I don’t think it’s the only one. If the car is paid for, maintaining it is not a huge expense, likely it’s less annually to maintain the car then it is for public transit costs.

I would think that you should look at your monthly cost and income and look for ways to trim what’s going out.

For most people the largest monthly expense is housing, followed by food. Have you looked into a cheaper housing situation? Have you cut your food and entertainment budget to a minimal level, allocating all savings toward debt payments?

Also, secondary employment can sometimes be an option.

Also, I believe Dave Ramsey advocates an emergency fund of $1000 initially even before paying off debt so you have some breathing room. (Ramsey followers correct me if needed on that).

All that to say, I think the answer is in creating a concrete multi faceted plan.

My ex wife had $4500 at a collection agency and they were really hounding her. I offered them $2000 to settle the matter and they accepted it. It was smaller than the original credit card purchases before the interest but they took it…they probably would have even taken less frankly.

The way collections work is

Phase 1 - they try to get something…anything. They keep a percentage and give the rest to the company that holds the debt.

Phase 2- the debt holder sells the debt to a collection company. At that point the company wrote off the loss and the debt company is looking to recover the cost of buying the debt and making a few bucks. Likely they bought your debt for 10% or even less of the balance.

So keep that in mind when negotiating with them.

Good luck! It can be done.
 
Jon_S said:
Also, I believe Dave Ramsey advocates an emergency fund of $1000 initially even before paying off debt so you have some breathing room. (Ramsey followers correct me if needed on that).
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The $1,000 emergency fund is a very, very good point.

(Although, for a person with a family, I think it’s not quite enough.)
 
Xantippe said:
The $1,000 emergency fund is a very, very good point.

(Although, for a person with a family, I think it’s not quite enough.)
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Yes I think he says start with $1000 and then at some point increase it to $5000.
 
Jon_S said:
Yes I think he says start with $1000 and then at some point increase it to $5000.
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The $1000 is just a baby step. After that, the amount should be something like 3-6 months of expenses. Not something most people have.

I 2nd (or 5th or whatever) Dave Ramsey’s advice. He breaks things down into simple steps so even someone like me can understand. 🙂
 
Jon_S said:
Yes I think he says start with $1000 and then at some point increase it to $5000.
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Not quite - $1000 is before debt is paid off, then after paying off all debt except mortgage, it’s 3-6 months of expenses.
 
I think if it’s something you feel called to do, you should do it. Definitely pray about it.

Like others, I would do it but I would feel too self conscious. A few woman at the parish I attend on weekdays veil, but no one at my regular parish does.
 
DeniseNY said:
I think if it’s something you feel called to do, you should do it. Definitely pray about it.

Like others, I would do it but I would feel too self conscious. A few woman at the parish I attend on weekdays veil, but no one at my regular parish does.
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I think this belongs on the thread about veiling.
 
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