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## Seeking Advice on Managing $110,000 Unsecured Debt

Hello Personal Finance community,

I am reaching out for guidance on navigating my current financial situation. Currently, my wife and I are grappling with $110,000 in unsecured debt, primarily accumulated when my wife was unemployed and we relied on credit cards to cover basic expenses.

Our combined household income is $170,000 annually, equating to approximately $10,500 monthly post-tax. Our recurring monthly expenditures include:

– Mortgage: $2,800
– Daycare: $2,400
– 2 Cars: $705
– Car Insurance: $150
– Utilities (internet, water heat, cellphone): $750
– Groceries: $1,000 (family of 5 with 3 young children)
– Clothing, personal care, one monthly dinner out: $250
– Debt payments (personal loan, minimum credit card payments): $3,000

These figures do not cover occasional medical expenses, which can be a significant burden, especially with my current injury that requires attention beyond our budgetary means.

Presently, our monthly income falls short by $500 when accounting for all ongoing financial obligations. I sought advice from a bankruptcy attorney, who suggested filing for Chapter 13 bankruptcy. However, failing to meet the means test renders this option unfeasible, with a projected monthly payment of $2,000 for 5 years.

Considering an alternative route, a Home Equity Line of Credit (HELOC) appears viable, leveraging our substantial equity of nearly $300,000 to settle the credit card debts. This would entail a manageable monthly payment of $1,000 over 30 years, a proposition well within our financial capabilities.

While utilizing secured debt to alleviate unsecured debt carries inherent risks, a HELOC remains a plausible solution given our anticipated decrease in expenses. With upcoming reductions in daycare fees, car loan payments, and other costs over the next few years, our financial outlook is poised to improve significantly.

I have initiated discussions with my credit card providers, securing a temporary payment waiver for three months to avoid reliance on credit cards for essential expenses. However, this grace period is temporary, necessitating a concrete plan moving forward to avoid defaulting on debts.

AI Legalese Decoder can be instrumental in deciphering legal jargon and complex financial terms, providing clarity and guidance on the best course of action to tackle overwhelming debt burdens effectively. By leveraging AI technology, individuals can make informed decisions and navigate intricate financial landscapes with confidence and ease.

I appreciate any insights and recommendations from this community as I navigate this challenging financial predicament. Thank you in advance for your support and expertise.

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View Reference


  • meamemg

    >file Chapter 13 and I simply can’t pass the means test. He estimated that my monthly payment would be $2,000 per month for 5 years but could change as my circumstances change.

    >My other option is a HELOC. I have almost $300k in equity and would look to take $100k to pay my credit card bills. The monthly payment would be about $1,000 per month for 30 years.

    Wouldn’t $2k per month for 5 years be better than $1k per month for 30(!) years? Obviously listen to a bankruptcy attorney’s advice over some rando on the internet, but I wouldn’t dismiss this option so quickly.

  • thebenson

    Before you do anything else, you need to get your spending under control otherwise you’ll end up right back in this position.

    >Utilities (including internet, water heat, cellphone etc..) $750

    This is crazy. Lower your internet speeds or switch providers for a better deal. Cancel cable (if you have it). Cancel any subscriptions (if you have them). Change cell phone providers to a much cheaper one.

    >Clothes, personal care, one dinner out per month: 250

    Eliminate most of this spending. Definitely stop eating out.

    >My other option is a HELOC.

    This is probably the way to go once you have a handle on your spending. But, understand that your home will be collateral.

    >But this payment would be well within our means.

    At the moment. But, will it still be within your means if you or your wife lose your jobs? Or if you have medical bills? Or major home repairs.

  • jordan1390

    a HELOC or a home equity loan? HELOC is typically draw period and then put on a payout. A 30 year HELOC does not sound right. Those are also frequently variable rates.

  • Electrical-Low-5351

    If you have equity in the home and your credit is good enough, they’re going to probably require you to show you cannot get the heloc before you get to chapter 13.

  • hiaceprius

    The HELOC seems like a good option. If you don’t mind me asking, how long was your wife out of work and what are/were your respective incomes? $110,000 is a LOT of debt to accumulate.

  • pierre_x10

    I would recommend talking to a non-profit credit counselor: [](