Board Topic: Credit counseling decision
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Credit counseling decision

Posted by: John P. Jul 20 2003, 12:18 PM
I am not sure if this is the right place to ask, but I am having problems paying my debt and want your opinion on using a debt management nonprofit agency. Total debt is $65,000 including a $24,000 car loan, $20,000 in student loans, and the rest in credit card bills.

Not sure if debt consolidation is what I need or maybe credit counseling. Should I consider bankruptcy? I am only 23 years old and feel that filing BK would prevent me from buying a house in the future. My salary is only $32,000 and have only had this job for a year since I graduated. Sometimes it feels like I am in a hole, but when I look around some of my friends that got their degree at the same time that I did are still looking for work or working at Super Wal-Mart unloading trucks.

Would debt consolidation work?
My payments are $489 for the car, $200 for the credit cards and I have several bills for small student loans that total $20,000.

Any advice would be greatly appreciated!

Posted by: loanuniverse Jul 20 2003, 01:09 PM

Your situation is not very good. By my calculations, at your salary you are taking home about $1,800 a month and you have in debt service alone about $800. This leaves you only $1,000 to pay for rent, car insurance {which are your age can be steep}, utilities and groceries. The first thing I would do is get a complete breakdown of your debts and debt payments. I assumed only $100 for student loans since you did not provide figures. Please take into consideration that I am not a credit counseling expert nor do I know much about debt consolidation.

First, I donít want to preach, but buying a $24,000+ car right out of college does not sound like a good idea specially at your salary range. In addition, you have accumulated over $20,000 in credit card debt. That is just a huge amount of debt. It makes me wonder if the $200 you quoted in credit card debt payments is accurate, even at 2% of the balance that figure should be a bit higher. I have to say that the first thing you should do is sit down and make a complete accounting of debts, followed by a list of assets and liabilities.

I think you could approach your situation in three ways:

1) Credit Counseling and Debt consolidation:

Consumer Credit Counseling is a good tool for getting out of trouble when you have serious problems. The agency will help you set up a budget, ask you to get rid of all your cards and consolidate all of your payments into one bill. The danger lies in that there are many scam agencies and sometimes there are creditors who do not accept the terms. It will work great if it is properly handled. Take into consideration that entering into a debt management program will affect your credit adversely.

2) Bankruptcy:

This is not the end of the world as some people make it out to be. It truly is a fresh start and would effectively wipe out all your debts except your student loans. However, It would be extremely difficult to get credit afterwards and it might reduce your employment possibilities. I seriously recommend that you consult a bankruptcy attorney for specific advice.

3) Do it alone:

Your biggest payment is the car payment followed by credit card debt. If I were you, I would see about getting rid of the car, selling it or working an arrangement with the dealer. Look around at your assets or family that could help. Take a look at the interest rate that you are paying in the credit cards, and get into a budget quickly.

I hope this has helped some.

Edit: I also would like to point you to this message board. There are a lot of people well versed in personal credit problems there that can help you.

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