Divorce - floated for a while, but now drowning in debt

[Jenemone]

Hi. Where to start.....My divorce was final in January 2013. I wasn't in horrible shape afterward, but nowhere near good. At least I had credit cards to keep me afloat on tight months. All of that has caught up with me. I'm drowning and have no idea what to do.

My stats -
I bring home $2300/mo. I rent for $575/mo, but still own my house that I got stuck with in the divorce. I had to move closer to work to avoid the $400+ in gas I was spending every month. House was rented out, but now my renter is leaving and it's in a bad location (not near anything). Will be difficult to rent again. Mortgage is $365 NOT including taxes and insurance. I'll put it up for rent, and hope for the best. A real estate agent told me he might could get 80% of what I owe if I sell it.

Auto loan is $375/mo.
Insurance for homes and vehicle is $180/mo.
Student loans are $95/mo.
Power bill runs between $100-200/mo.
Water is usually $60/mo.
Cell phone (no landline, and it's my only internet) $88/mo.
Discover card is almost $200/mo min.
Chase is about $130/mo min.
Small personal line of credit at bank is $175/mo.
Gas is about $180/mo.
Property tax on the home will be $700 due in December.

As you can see, my monthly expenses equal my monthly income. This doesn't include food, items like personal care, medical and prescriptions, auto expenses like oil changes, dog food and cat food, flea and heartworm meds for the 2 dogs, etc.

My mother and I started an antique business a year ago. Monthly income from it varies, and we're getting better at clearing more. I may make from $150-250 dollars after expenses from it each month. Not much.

I have no idea where to go from here. Credit score was 100% perfect prior to the divorce. NEVER a late payment in my life (I'm 39) until he left.

Here's my thoughts. Please tell me what you think. I make enough to easily cover home, vehicle, insurance, student loan, utilities, and phone. The line of credit has a balance of $2500ish, decent interest rate, and if I renew it, I can borrow $175 from it every month to pay it and kindof keep it in a holding pattern. That would free up $175/mo to pay on possibly the Chase credit card. I've paid about $2600 on the Discover the past year and have knocked the balance down $160. They won't lower the interest rate (20%). Stop paying it and negotiate a settlement because I have an antique show car that I can sell and clear about $8-9000 (my last asset).

The mortgage - not sure. I don't want a foreclosure. I struggle to get the rent from the tenant every month. I've given him notice to leave, and it'll be for rent August 1st. If it doesn't rent, I can't afford the payment.

There's nowhere else that I can cut. I don't shop for clothes and shoes. I get my hair cut maybe 3x per year. Don't go out on weekends anymore with friends. I eat as cheaply as possible without resorting to ramen noodles. I've done all I can to lower the power and water bills such as not using the a/c and only washing clothes when I have a full load. No vacations. Not paying bills on time is a HORRIBLE stress on me since I've always been perfect at that. It depresses me. Taking my dogs to the park for exercise and their smilng faces are my reprieve from all of it. WHAT DO I DO????

[Jenemone]

Also - I wanted to sell the house, but an agent told me he *might* could get about 80% of what I owe.

I can't lower my utility bills any further. I've taken steps to use as little power and water as humanly possible. Nowhere else to cut except to stop paying something.

[bjl584]

I'd move back into the house. How does spending $575 a month in rent save money versus spending $400 a month in gas? That move will pocket you $175 extra a month.

You can't finance your way out of debt. I absolutely would not take out a line of credit.

You need to get rid of your car. What kind of car is it? How much do you owe? I'd sell it and downgrade to a cheaper car that you can pick up for cash or for a much lower payment.

Can you pick up a part time job? I'd explore this.

[JoeP]

About the personal line of credit: what is the interest rate? If you have $2500 there and the interest rate is lower than that of your Discover and Chase, you would be better off writing checks from that line of credit to pay off those cards. We did this using our 3% LOC to pay off our 9% CC. It helped us consolidate and pay less in interest.

Get more aggressive about renting. Is there a friend who can use the space? Try networking with friends and your hairdresser, word of mouth helps a lot here.

Finally, can you sell the car and get something cheaper that you can pay for with cash? Maybe it is my area, but I am seeing a lot of cars under $4000 that could probably serve someone well for a few years, with a mechanic's blessing first.

[Jenemone]

Moving back to the house doesn't save me any money, and my commute goes back up to nearly 2 hrs a day. Mortgage is $365, plus ~$400 in gas is ~$765. Rent is $575 plus ~$180 in gas, so $755, and saves the wear and tear on the vehicle. It's a nice house, so I'm hoping I can rent it for rock bottom with a 1 yr lease to entice someone. It's 10 miles from the nearest tiny town, and 30 miles from where most everyone works in the bigger town.

The part time job is the antique business, which also helps with tax write offs.

The vehicle is close to being paid off, so I'd rather keep it and know that it'll be fine for a few years while my credit recovers from all of this. If at all possible I'm trying to hang on to it because I need something dependable.

I wouldn't be taking out a line of credit. It already exists, with a 12% interest rate. It expires every 3 yrs, and I didn't renew it last year because I wanted to pay it off. I owe $2500 on it. If I renew it, assuming they will, I wasn't planning to do it for anymore than $3000. Intending to borrow from it and pay it back with that money every month to free up $175 and to give me something else that I'm paying on time and hopefully helping my credit.

Credit score is now 526, down from 780. I won't be buying anything for a couple of years on credit.

[Jenemone]

I could also sell the show car and pay off the vehicle, freeing up $375/mo.

[bjl584]

Moving back to the house doesn't save me any money, and my commute goes back up to nearly 2 hrs a day. Mortgage is $365, plus ~$400 in gas is ~$765. Rent is $575 plus ~$180 in gas, so $755, and saves the wear and tear on the vehicle. It's a nice house, so I'm hoping I can rent it for rock bottom with a 1 yr lease to entice someone. It's 10 miles from the nearest tiny town, and 30 miles from where most everyone works in the bigger town.

The part time job is the antique business, which also helps with tax write offs.

The vehicle is close to being paid off, so I'd rather keep it and know that it'll be fine for a few years while my credit recovers from all of this. If at all possible I'm trying to hang on to it because I need something dependable.

I wouldn't be taking out a line of credit. It already exists, with a 12% interest rate. It expires every 3 yrs, and I didn't renew it last year because I wanted to pay it off. I owe $2500 on it. If I renew it, assuming they will, I wasn't planning to do it for anymore than $3000. Intending to borrow from it and pay it back with that money every month to free up $175 and to give me something else that I'm paying on time and hopefully helping my credit.

Credit score is now 526, down from 780. I won't be buying anything for a couple of years on credit.

I wouldn't worry about your credit score. It's irrelevant right now. It will fix itself later.

Why don't you sell the house then? What's it worth?

As far as the car, what type of car is it? Can it reasonably be expected to last 10 more years?

You may want to get out of the antique business and try to pick up part time work in retail or something similar. You could probably clear $500 or more per month depending how many hours you work.

Is getting rid of one or more of the pets an option?

I'd probably sell the classic car and put the money toward debt. What kind of car is it? Are you sure it's only worth $9000? That seems low.

[breathemusic]

You absolutely need to sell the show car. I'd take that money and definitely pay off the regular car as well as the discover credit card since that is almost done anyway. While the car loan may be one of your lowest interest loans, it's taking a pretty large chunk of your cash flow and that would free up enough funds to cover some of the every day expenses that you weren't even considering in your budget.

Also, the antique business doesn't sound like it's really generating much income for you. How much of your time is it eating up? If it's taking a lot of time but not making you any money, you need to consider finding other part time work instead of that so you can actually make a real side income.

Do you think you could rent out your house at enough to cover the mortgage and annual taxes/insurance? Sounds like you need to list it now and see if you can post fliers and whatever else to get it rented as quickly as possible.

[JoeP]

OK, forget about the line of credit. I thought it was something more sane, like 3% to 5%. That 12% is borderline criminal IMHO.

[Jenemone]

A year ago the real estate agent told me he might could get $50k out of the house, and I owe $63k. Totally remodeled house that was taken down to the floor joists and wall studs, but in a location wayyyy out in the country. I'm waffling between renting and putting it on the market. He said he'd list it for what I owe and see what happens. I've had it rented for $525, which covered everything and made me about $100 a month. IMO, trying to get a 1 yr lease for a tenant might be a good idea because it buys me more time for the market to recover. I figure $425 with a 1 yr lease (dirt cheap). I'd be breaking even. My renter is there thru July. If it goes on the market, it's empty and I can't pay the mortgage out of my own pocket, plus it's a death sentence in that area. It'll be stripped of everything worth half a dime by redneck meth heads who refuse to work.

The show car has been for sale, but it's just now show season, so it'll get more exposure now. It's a 1970 Impala Custom. Their values tanked like homes did. Asking price will be dropped to $11,000, but I'd take a reasonable offer at this point.

I may have been confusing about the Discover card. I owe $9300, and it has been about at that balance since before the divorce (yay me...got the show car but got stuck with the credit cards and house). I'm paying $200 a month and about 8% of my payment is actually going to principal. So selling the show car either pays off my daily driver, or the Discover, but not both. Daily driver frees up $375. Frankly, I'm pissed at Discover because they won't lower my rate despite 2 yrs of on time payments. I've had the account for almost 10 yrs and was 2 wks late 2x when my ex left, and they upped my interest rate. Two weeks late.

JoeP - yes that rate is ridiculous, especially for a credit union. That's my excellent credit rate from 5 yrs ago when I opened it.

[Eagle]

So sorry you are going through this Jenemone. My sister went through a similar experience last year. The good news is you will make it and you will be stronger for it.

*Rent
Is $575 a month for rent with a roomate or do you live by yourself? If by yourself have you considered a roomate? What about moving in with your mom for a while to save money on rent? How far away does she live from work?

*Work
Have you applied for other positions in the area? In other words how much do you like your job? Is your schedule pretty constant to where you could get a 2nd part time job say delivering pizza's, flipping burgers, or something else for $500-600 a month? That was a good suggestion by bjl584. You can either increase your income or decrease your expenses.

*Cell Phone
$88 a month seems high. What service do you use?

Looks like increasing your income may be a better option for you right now. But preferably do both.

Hang in there. We're here to help and you will overcome all this!

[snafu]

I hope you'll get very aggressive in getting the house rented without missing a rent cheque. You need a tenant to move in August 1st with current tenant out and the place cleaned up July 31 even if you have to take the day off. Put up photos and ad in Craig'sList and every free outlet available in the area of the house. I remember reading that 'price fixes everything.' If you don't get the response you need you will need to reduce the rent to meet market value. Do you have a good lease document? Do you ask work and income details? Someone mentioned as tenants enter the house, they carefully look at their car concluding that a dirty, messy car suggests the people don't take care of their most expensive item before quickly rejoining the people in the house.

Unfortunately, that credit score reduces your ability to move debt to a 0% balance and 20% interest is outrageous when savings accounts are paying slightly less than 1%.. Could you please list debt from highest to lowest accompanied by monthly payment and interest rate? That might help identify an efficient way of using the 'snowball' theory.

While your antique business sounds like fun, can you ramp it up?

[cardtrick]

What I see is that you're not in that bad of a situation. You an clear out your debt in a fairly short period of time.

You have to either cut bills or bring in more money or both. No way around it.

The only thing I can see you cutting at this point is the cell. $40 a month buys you unlimited everything plans these days. No reason to spend $88. You can sell the car too and buy something cheaper but since you want to keep it, just keep it.

Your best bet would be to get a part-time job. And look for a full-time job that pays better.

Also, if you can't afford the dogs and cat(s), try to find a good home for them. I understand that they make you happy and ease your stress, but you can't have what you can't afford.

If I were in your shoes, I'd forget about cutting costs, since you have very little to cut. I'd go out and get a part-time job tomorrow. And once I'm settled in, I'd find a full-time job that pays better. Then, I would be frugal for the next couple of years and pay off all my debt. Then, I'd ease up a bit but still focus on saving money so I never have to be in this situation again.

I was in a similar situation once. I had no money for food. That taught me that being poor is awful and made me determined to never be "poor". Poor to me is when you are unable to save even a bit of your cash inflows. It doesn't matter how much you make.

[cardtrick]

BTW, that default interest rate is killing you. Can you ask family to finance that debt or perhaps get you a loan from a p2p loan site?

I know people here usually frown upon that, but what's the point of having family if they can't help you when you need them the most?

You don't have very many options but you the few you have are pretty likely to succeed. Good luck!

[Weird Tolkienish Figure]

Hi. Where to start.....My divorce was final in January 2013. I wasn't in horrible shape afterward, but nowhere near good. At least I had credit cards to keep me afloat on tight months. All of that has caught up with me. I'm drowning and have no idea what to do.

My stats -
I bring home $2300/mo. I rent for $575/mo, but still own my house that I got stuck with in the divorce. I had to move closer to work to avoid the $400+ in gas I was spending every month. House was rented out, but now my renter is leaving and it's in a bad location (not near anything). Will be difficult to rent again. Mortgage is $365 NOT including taxes and insurance. I'll put it up for rent, and hope for the best. A real estate agent told me he might could get 80% of what I owe if I sell it.

Auto loan is $375/mo.
Insurance for homes and vehicle is $180/mo.
Student loans are $95/mo.
Power bill runs between $100-200/mo.
Water is usually $60/mo.
Cell phone (no landline, and it's my only internet) $88/mo.
Discover card is almost $200/mo min.
Chase is about $130/mo min.
Small personal line of credit at bank is $175/mo.
Gas is about $180/mo.
Property tax on the home will be $700 due in December.

As you can see, my monthly expenses equal my monthly income. This doesn't include food, items like personal care, medical and prescriptions, auto expenses like oil changes, dog food and cat food, flea and heartworm meds for the 2 dogs, etc.

My mother and I started an antique business a year ago. Monthly income from it varies, and we're getting better at clearing more. I may make from $150-250 dollars after expenses from it each month. Not much.

I have no idea where to go from here. Credit score was 100% perfect prior to the divorce. NEVER a late payment in my life (I'm 39) until he left.

Here's my thoughts. Please tell me what you think. I make enough to easily cover home, vehicle, insurance, student loan, utilities, and phone. The line of credit has a balance of $2500ish, decent interest rate, and if I renew it, I can borrow $175 from it every month to pay it and kindof keep it in a holding pattern. That would free up $175/mo to pay on possibly the Chase credit card. I've paid about $2600 on the Discover the past year and have knocked the balance down $160. They won't lower the interest rate (20%). Stop paying it and negotiate a settlement because I have an antique show car that I can sell and clear about $8-9000 (my last asset).

The mortgage - not sure. I don't want a foreclosure. I struggle to get the rent from the tenant every month. I've given him notice to leave, and it'll be for rent August 1st. If it doesn't rent, I can't afford the payment.

There's nowhere else that I can cut. I don't shop for clothes and shoes. I get my hair cut maybe 3x per year. Don't go out on weekends anymore with friends. I eat as cheaply as possible without resorting to ramen noodles. I've done all I can to lower the power and water bills such as not using the a/c and only washing clothes when I have a full load. No vacations. Not paying bills on time is a HORRIBLE stress on me since I've always been perfect at that. It depresses me. Taking my dogs to the park for exercise and their smilng faces are my reprieve from all of it. WHAT DO I DO????

First goal would be to move all your debt to the lowest interest rates possible:

http://www.nerdwallet.com/blog/top-credit-cards/nerdwallets-best-low-interest-credit-cards/

You are in a very tough spot. Any way to increase your income?

If you have no assets might want to consider a strategic default? If you have nothing of value (which is what it sounds like), then the bank won't be able to come after to you. I hate to recommend walking away from the house but hey, life is too short to live like this.

Just my perspective.

Just prepare for a decade long period of having no credit, but then again, maybe having no credit will be a good thing?