Too much debt?
Date: Mon, 06/25/2012 - 19:48
I have a friend who is considering bankruptcy and I was wondering if any of you have any advice.
Let's start with the debt - he currently has about $40k in student loan debt (payments are deferred), $17k in credit card debt at 30%, and $6k in debt from the Lending Club at 15%. He is just about maxed out on his credit limits aside from $200-300 of space that moves around between the cards.
Income - He is currently unemployed and collecting $1,580 a month from state unemployment benefits. He also is able to attend county college for free as a part of the unemployment benefits, which he is taking advantage of.
Expenses - The minimums due on his credit cards and loans add up to about $1,040 per month. His monthly expenses are basics - $100 a month on gas, $40 a month on tolls, $20 a month on a gym membership, and $200 on a cell phone bill. The cell phone bill is actually for him, his mother (who he owes money to so this is a way of paying her back), and his fiance (who pays for other things, so this is a way to "pay her back" as well). This leaves him with $180 a month for food, etc. $6 a day. He lives at home with his parents still, so there are no housing expenses. $6 a day is not much to live on in NJ, so any additional cash needed is financed with the small room he has left on his credit cards.
Assets - He has almost no assets. Lives at home with parents. Has an old car that he is hoping does not break down. If a major repair was needed, he would have no ability to pay for it and that would be a major problem.
We called up his credit cards recently and asked them to lower the rates - all of them said no except for one, which reduced it down from 30% to 15% - but this was only on a balance of $2500. We asked if they could increase the credit limit of that card (to move some of his higher APR debt on to this lower rate) but that was instantly denied.
He has been looking for a job, but any job he gets would have to pay more than unemployment and college to be worth it. He still has not found anything at all he would be qualified to do that would pay enough to be worth it. He was scheduled to get married this year, but they decided to postpone it due the the financial situation he is in and the inability to pay for a wedding, rent, living expenses, etc. He has chosen not to go to doctors when he has medical issues to avoid the expense, but would not know what to do if something major happened since he has no money to pay for it.
He knows that student loans would not be discharged in a bankruptcy, but eliminating $23k of debt and freeing up the $1040 a month on debt service expenses would obviously help out tremendously. Do you guys have any advice for him?
Let's start with the debt - he currently has about $40k in student loan debt (payments are deferred), $17k in credit card debt at 30%, and $6k in debt from the Lending Club at 15%. He is just about maxed out on his credit limits aside from $200-300 of space that moves around between the cards.
Income - He is currently unemployed and collecting $1,580 a month from state unemployment benefits. He also is able to attend county college for free as a part of the unemployment benefits, which he is taking advantage of.
Expenses - The minimums due on his credit cards and loans add up to about $1,040 per month. His monthly expenses are basics - $100 a month on gas, $40 a month on tolls, $20 a month on a gym membership, and $200 on a cell phone bill. The cell phone bill is actually for him, his mother (who he owes money to so this is a way of paying her back), and his fiance (who pays for other things, so this is a way to "pay her back" as well). This leaves him with $180 a month for food, etc. $6 a day. He lives at home with his parents still, so there are no housing expenses. $6 a day is not much to live on in NJ, so any additional cash needed is financed with the small room he has left on his credit cards.
Assets - He has almost no assets. Lives at home with parents. Has an old car that he is hoping does not break down. If a major repair was needed, he would have no ability to pay for it and that would be a major problem.
We called up his credit cards recently and asked them to lower the rates - all of them said no except for one, which reduced it down from 30% to 15% - but this was only on a balance of $2500. We asked if they could increase the credit limit of that card (to move some of his higher APR debt on to this lower rate) but that was instantly denied.
He has been looking for a job, but any job he gets would have to pay more than unemployment and college to be worth it. He still has not found anything at all he would be qualified to do that would pay enough to be worth it. He was scheduled to get married this year, but they decided to postpone it due the the financial situation he is in and the inability to pay for a wedding, rent, living expenses, etc. He has chosen not to go to doctors when he has medical issues to avoid the expense, but would not know what to do if something major happened since he has no money to pay for it.
He knows that student loans would not be discharged in a bankruptcy, but eliminating $23k of debt and freeing up the $1040 a month on debt service expenses would obviously help out tremendously. Do you guys have any advice for him?
Is the student loan federal or private? If your friend is seri
Is the student loan federal or private?
If your friend is seriously considering bankruptcy, ask him to consult a bankruptcy attorney immediately.
