First, this forum is fantastic. I've been glued to it for the past two days.
My debt situation:
Around 15k on 5 different cards - (2) Chase, Discover, Bank of Am, and Wells Fargo. Each are in the 2500-3500 range and all with rediculously high interest rates (think upper 20s). I also have 13k on my parents card that I pay each month with an automatic transfer, but it will be excluded from the settlements because its not technically in my name.
Only 7 years ago, I was debt free right out of college, save for my student loans. Through a series of bad choices, moving, things out of my control and combining with my wife's past debts when we got together, we're now around 28k in credit card debt. In fact, we saw a credit counselor last year around this time with approx 18k in debt, we've somehow added 10k to that in less than a year - it's disgusting.
My wife's new job has far fewer hours than her current position. She took this position to allow her to go to school to pursue a degree - she's been bouncing between jobs for three years and at one point was unemployed, so we need more stability in her career. The instability has lead to a lot of this mess because we relied on cards to get by at one point. Long story short, we're heading straight for a cash flow mess. She'll get student loan refunds for living expenses, but paying debts with proceeds of student loan isn't really getting us OUT of debt, just transferring to a long term vehicle. Regardless, we will be using the refunds to supplement our income while she's in school.
We're not behind on any of our bills, but we've had plenty of issues when she was unemployed, so our credit is already shot. I could care less what happens to the score at this point. Our debt to income ratio is too high to qualify for any loan. Also, we took out a home equity loan to bail us out of tight spot a while back, so there's no equity to play with in this equation.
I REALLY want to avoid Chapter 13 - it just doesn't seem worth it and I would like to honor my commitments as much as possible, so I'm reading about DIY debt settlement as a viable option. Based on my situation, I would need around 7k in 6 months if we're assuming the "have 50% of the total debt before beginning settlement" rule. So that means I'll need to put away $1100-ish each month or about $600 more than I'm currently paying in minimum payments. For obviously reasons, this just isn't feasible. Am I missing something?
I am looking into getting a second job to help fund the settlement war chest, but I'm guessing at best, we could put $3-400 in each month, a little more if I get another job. We'd be able to start negotiating with ONE of the cards after a few months, but what about the others? Can you just fend off the other accounts for 12-18 months while you settle the first couple? Is there any reason you can't drag them along for the next 3 years?
Again, my biggest fear is not being able to quickly and consistently fund a settlement savings, thereby really putting us in a bad place. And of course, facing judgments for garnished wages. Also, I'd really rather tackle this myself than pay someone a couple thousand to do it for me. I do have an appointment with the local consumer credit counselors, but I have gut feeling we'll be denied for their credit management program because her loan won't be considered "income".
So, can someone clarify the math for me? Thanks in advance.