Monday, November 29, 2021

We Are Stuck in a Debt Rut and Can Never Get Ahead


Dear Steve,

Spinning wheels, getting nowhere.

My wife and I are $ 65K in credit card debt. I have predictable, steady income ($ 70K/yr). Though my wife’s income potential as a truck driver is greater than mine, her income is not steady or predictable. For the last 3 years we go through the same cycle over and over: catch up, fall behind, wipe out anything we’ve saved, max out cards again to survive, catch up, etc. The frustration is tearing each of us apart.

Own home but not enough equity for loan. Continual cycle of catch up, fall behind, wipe out savings and re-max our cards to survive, catch up, etc.

We arrived at our current situation by starting a business that failed, taking in family who would have been on the street otherwise, and poor financial decisions. Ultimately, the only one that really matters is the last one. We learned our lesson (I hope) but are trapped in this endless cycle.

Our income to debt ratio is too high so are unable to get a debt consolidation loan. Not enough equity in our home for a second mortgage. No other resources we can call upon. We considered a debt reduction program. The “counselor” we talked to over the phone made it sound good at first. But, when we balked on some issues he became extremely pushy so we abandoned that avenue. We’ve thought about credit counseling and bankruptcy. But with the unpredictability of her income plus two special needs boys, we must live near their school. There are other factors as well. Child support, two car loans, age (I’m 54, wife is 45), house needing repairs, etc.

Any advice you have for us is welcome.

Thank you.



Dear Bill,

Well you’ve been an above average consumer and churned the wheels of finance and commerce, slowly moving backwards.

You summed up your entire situation when you said, “Continual cycle of catch up, fall behind, wipe out savings and re-max our cards to survive, catch up, etc.”

Debt problems are best resolved with math and logic, not emotion and wishes. So let’s see what the math tells us.

From what you shared it appears your life is chowing down on every penny you can harvest. The cycles of getting ahead and falling behind are the function of two issues. The first is the inadequacy of your emergency funds and/or savings account, whatever you want to call it.

The second big issue is you are probably behind on life maintenance. What I mean is when you don’t have enough money to properly care for your stuff, like homes, vehicles, and other things, then when something fails and needs attention it is much more to fix. These emergency expenses hit people without savings, the hardest.

A debt reduction or credit counseling program isn’t going to make much sense if you are already living ahead of your income. We are going to have to change the equation in some other way.

So what do we do to move forward? Well from my point of view the answer is simple. You are either going to need to increase income, reduce expenses, or a bit of both.

And what should a healthy set of expenses look like? With the income you have coming in each month you should pay your bills, save some, invest some, and have fun with the rest. It doesn’t have to be complicated.

By the time people reach the point you are at they’ve typically reduced expenses down to unsustainable levels. The first thing people typically do is start trying to budget their way out of debt. The problem with that is budgets suck. Even I hate to budget. But you can track the spending and develop a greater awareness where your money goes and then decide if there is any room to cut.

So how are we going to get you back on track and back to saving again? Logically the least expensive and fastest way is typically through bankruptcy. And I would not make any determinations if you are or are not eligible for a Chapter 7 bankruptcy until you have met with a bankruptcy attorney who is licensed in your state. You should read How to Find a Great Bankruptcy Attorney.

In a situation, as you describe, bankruptcy should be your first option to explore, not the last.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

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