Overwhelmed, no way to pay off debt

[jawhite]

Hi everyone, I'm new to this forum but am in a desperate situation and need some advice from people who have been in my situation.

First, a little background. I'm a divorced mother of 3 teenagers who is up to her eyeballs in debt. My ex and I divorced 3 years ago and had a failing business at the time. Unfortunately a lot of that debt that was in my name because we had to constantly take cash advances to survive. I went back to work when things went downhill but he checked out and started drinking heavily and didn't work much. Years of a struggling business and then the divorce put me in debt about $20K. I have a decent job but it's salary and I can't increase my income there. I work about 45 hours a week but I'm also raising 3 teenagers who constantly have me on the run, leaving no time for another job. I try to keep our expenses down but with 2 kids in high school it gets out of control a lot. The ex and I have joint custody and are supposed to split certain expenses but he doesn't want to pay and I can't even afford to take him to court. All of this has left me with additional debt, including medical bills from surgery a few months ago. And to top it off I just found out that I had been accidentally claiming my children for EIC for the past 3 years when he should get the credit (we alternate child deductions). So now I owe the IRS $6K for that. He hasn't filed his taxes since we got divorced so it wasn't caught. I know it's my mistake but it could have been caught the first year if he would have filed.

So to make a long story short I'm struggling to make ends meet. I try not to eat out but sometimes it happens with all three kids in sports and I often go straight from work to games up to an hour away. I will post my budget on here but I don't have a lot of give. I have tried applying for debt consolidation loans and was denied because my debt to income ratio is too high. I'm scared of going through a bankruptcy but it may be my only other option. I'm always robbing Peter to pay Paul and now I can't even do that. Does anyone have any advice on even where to start? I do budget but it's often blown away but unexpected expenses for school, medical and sports. I tried predicting these things but with kids you can't always do that. The surgery was unexpected and now I owe $2400 for that. Has anyone else been in this situation and found help somewhere? I don't want to declare bankruptcy as I have maintained a fairly decent credit score even with all of this debt. Any advice???

Thanks,
Jennifer

[msomnipotent]

I have owed a lot of debt before. It takes years to pay it all off, but it can be done. There were a lot of times when I felt I was taking one step forward and two steps back, but it eventually gets paid as long as you keep at it.

I cannot offer you legal advice, but I can tell you that my sister's sister in law had a situation where her ex was taking all of the deductions for their kids when he shouldn't have been (because he wasn't paying anything), and my tax preparer said that she would have to prove to the IRS that she was providing for her kids by showing receipts and they would grant the deductions to her. To the IRS, the person who pays for the kids is the person who gets the deductions. They don't really care if you two worked out a deal where he gets them one year and you get the next (per the tax preparer). She also said that the IRS assumes that the person claiming the kids first is rightfully claiming them so they wouldn't question your returns, especially since your ex isn't disputing it. So personally, I wouldn't worry about it, at least for now.

Try to find a lawyer who will work pro-bono on your case to try to force your ex to pay. The lawyer can then sort out your EIC problem with him, too. Contact the billing department for your medical bill and ask for it to be waived, reduced, or make monthly payments on it. I would first ask if they offer financial assistance before asking about montly payments.

We really can't offer a lot of advice without knowing your budget, but I can say that one of the first things mentioned will be to cut out extracurriculars for the teens, and then having the older ones earn their own money for sports will undoubtly come up, too.

[Gailete]

I was very fortunate in my boys years at HS that they weren't in sports or extra activities, other than church youth programs which end up a lot cheaper than things like sports. I don't know how old your kids are, but they need to know and comprehend your financial status and what it means to them. You can also ask them for ideas. Durinf the point that my boys were in HS there step-dad came into our lives (HUGE mistake) and I went from having money in the bank saving something like 25-50% of my take home, to within a year having a much bigger car payment (my car according to him wasn't big enough when his son was visiting), a much bigger house and mortgage which downpayment was made from my worker's comp payout of $20K (my double wide mobile home wasn't big enough when his son was visiting and he swore years before that he would never live in a 'trailer' again), and every time he went to buy something from the store it always cost 3-4X more than what he said it would. In the meantime he had made an agreement with his ex that he would pay more than the court ordered child support, so now $500/month, because he was getting married. Why that had anything to do with it was beyond me and of course he didn't talk to me about this ahead of time. Withn about a year/year half we were $40K+ in credit card debt, my savings were completely wiped out from paying the child support that he couldn't afford, and then the son came to live with us, and he refused to ask her for child support although she could well afford it, Over the next couple years she sent us $500 three times and all his expenses other than what that money paid for was on our head. my son called him Mr. Big bucks. Finally I told him it was over. It was either that or file for bankruptcy! The sale of the house that I had put the down payment on cleared the bills and left me with $1K! But I had a chance to get on an even keel again.

I'm not in perfect financial health these days, but I have been hitting some financial goals over the last year, got the car paid off, got a rental property paid off, paid off the smallest credit card bill a week ago. It is tough and rough to have financial problems, but kids need to know and you need to be upfront with them. They may surprise you with ideas that they could come up with. But they have to understand that some things are just no longer on the tablefor them to have unless they earn the money for it themselves. Both my boys had part time jobs before they graduated. The youngest started work as a bag boy and eventually moved up to the frozen food manager over the 16 years he worked there before scoring a job in the area he has his AA degree. He is very frugal and refuses to even have a credit card!

Now hopefully, you won't feel so alone. I grew up poor, and so learned frugal living skills from my youth and they left me in good shape to handle life. I save money in areas that I don't even think about as I never got into the habit of some things. Like I might go through a roll of paper towels in a year, for most clean ups I use rags. I have an online store that helps bring in extra cash as I had to go on disability 16 years ago. And I try to find other ways to make money on line as well since physically I can't do much.

Give us your budget and let us see how we can help you.

[Smallsteps]

It can be overwhelming and even more so as you put numbers in writing.
It is hard to give specific advice because each place / state / country may be different but many hospitals have either payment programs or even forgiveness in hardship cases. some items like that many people do not sign up for simply because they do not know they exist.
The tax situation seems fixable I would think he would be in trouble for not filing taxes for years. If he did not make enough to require filing the IRS rules would consider the kids a deduction of the parent ( you) making the most money and Supporting them.
Many areas have low or no cost legal advice exactly for this type of situation with child support payments but even a judgement does not always equal payments. Divorce is a very messy thing especially when you were adding debt before the divorce. what happened after the business failed ? Did husband wipe those debts away while leaving you strapped from advances to keep family afloat?
I agree that in many cases trying to add on jobs is not always possible and being on salary means no OT. there are some people doing things on the side or in addition for extra but those ideas / plans do not work for everyone. Many of us here are making it out of debt one step at a time.

[Jluke]

List your debts from smallest to largest. Note the interest rates.

Highlight any that have an urgent due date.

prioritize by due date and then by smallest to largest.

It’ll be a long process but you just have to chip away at it.

[disneysteve]

Welcome to the site.

Here's my 2 cents.

You describe your situation as "desperate".
You say you are "struggling to make ends meet".
You say bankruptcy may be your "only other option".

HOWEVER, based on the information given, you haven't taken the necessary steps to improve your situation.
You are still eating out at times.
Your kids are still doing costly extracurricular activities.
You are spending money on gas to drive to games an hour away.
I suspect, once we see your budget, there will be other luxuries in there as well.

You need to sit the kids down today and lay out the situation. You're broke and buried in debt. And they need to know that their father isn't doing his part and isn't paying what he is legally obligated to pay, which is part of why the situation is what it is.

You can't afford for them to continue doing things that are costing you more money than you have. How old are they? If they are all teens, they can probably all start doing something to bring in money. And if you are only working 45 hours/week, that leaves plenty of time for you to work more and boost your income. I know plenty of people who work 60 or 70 or even more hours every week.

I would strongly suggest you go to the library and pick up Dave Ramsey's book The Total Money Makeover. Reading that can hopefully change your mindset and put you on the right path to improving your situation.

And please, come back and post your budget. There are times when bankruptcy truly is the only option, but we just don't know based on what little you've told us so far.

[jawhite]

Thank you everyone for the reply. Sorry I didn't have time to reply until now but my daughter had prom this weekend and my son had a game over an hour away and I spent the whole weekend running.

I will post my budget soon but in reply to someone who said I have too many luxuries, that is probably true but they aren't my luxuries, they are my kids. I know that's a problem but their dad loves to play this game where he doesn't want to pay legitimate expenses but will buy the kids fun things like video games. So he is the fun parent and I'm the strict parent who never has the money to do fun stuff. I'm a lot stricter than he is and kids being kids they can't see I'm barely holding my head above water trying to do everything I can to be present in their lives instead of buying their happiness. So another job isn't an option. I need to be there watching them at their games because at this point it's all I have to give.

I did sit down with the kids and told them about the tax bill. They all agreed to help cut back but we don't spend much money on extras except their cell phones. I will look into a cheaper plan when this one is up. I did get on a payment plan with the hospital so that helps but its $100 extra a month. I don't qualify for assistance, as I make too much money. More than anything I need to pay down the debt. I can't get a lower credit card apr or loan so paying so much on interest is preventing me from making progress. That's where I need advice the most. I think if I could change that it would help me pay them down. Any advice for that?

Thanks again,
Jennifer

[jawhite]

Here are my current debts and budget:
Hospital Bill 1 - $311.33/$25.00
Hospital Bill 2 - $321.90/$25.00
Hospital Bill 3 - $904.21/$50.00
Hospital Bill 4 - Son's sprained foot, no total yet but estimate $500/$25 payment
Chase - $2287.58/$49.00 (14.49%)
Chase - $3147.29/$91.00 (21.49%)
Citibank - $6983.49/$170.00 (16.49%)
Chase - $15914.41/$314.00 (12.74%)
Total = $749.00

Budget:
Income - $2328
Child Support - $500
Total = $2828

Expenses:
Church - varies between $100 - $280
Mortgage - $551
Electric - $75.00
Cable/Internet - $145.00
Auto Insurance - $78.00
Trash - $14.00
Cell Phone - $219.00
Natural Gas - $80.00
Water - $40.00
Waste - $32.00
Car Payment - $181 (Lease, up next May)
Food - $550.00
Household - $75.00
Gasoline - $80.00
Medical - Average $350/month OOP, going on payment plans this year but still close to $200/month - try to use tax refund for this
Sports - $45.00
Misc - $75.00
Total = $2340 not including medical

Short = $261

These are the monthly budgeted items. I use my tax return to pay for all others, such as kids expenses (school expenses, activities, etc). I average an additional $1200/year on those. Holidays and birthdays also come out of what's left of the tax return but I'm still coming up short. I didn't even include what I'll have to pay back in taxes and now my tax return will be about $2000 less than what it should have been since I did it wrong. I keep putting more on credit cards and am not getting anywhere. I am looking for a cheaper cell phone plan but with joint custody I need them to have a phone. He pays child support but I pay the insurance premiums.

[disneysteve]

in reply to someone who said I have too many luxuries, that is probably true but they aren't my luxuries, they are my kids.

Whether the luxuries are for you or for the kids, they are still luxuries and you can't afford them. They need to go.

they can't see I'm barely holding my head above water trying to do everything I can to be present in their lives instead of buying their happiness. So another job isn't an option. I need to be there watching them at their games because at this point it's all I have to give.

The kids are old enough for you to sit them down and explain the situation. Kids are pretty perceptive. They know something's up. They may not know the details but I guarantee they know there are problems.

I did sit down with the kids and told them about the tax bill. They all agreed to help cut back but we don't spend much money on extras except their cell phones.

That's a good start. And you all need to work together to identify every possible place you can trim spending.

Budget:
Income - $2328
Child Support - $500
Total = $2828

Expenses:
Church - varies between $100 - $280 What is this money paying for? Can any or all of it be eliminated?
Cable/Internet - $145.00 I consider internet a need, especially with 3 school-age kids, but cable is totally a luxury. Cancel it today. That should drop this bill to about $75 most likely. There is plenty of free entertainment online. You can watch almost every TV show for free on the internet.
Car Payment - $181 (Lease, up next May) What's your plan for this? What are you going to do for a car when May rolls around?
Food - $550.00 This is another area to work on. More store brands. More bulk buying. Less processed and prepared foods.
Sports - $45.00 Luxury item - needs to go
Misc - $75.00 What falls in this category?
Total = $2340 not including medical

Short = $261

These are the monthly budgeted items. I use my tax return to pay for all others, such as kids expenses (school expenses, activities, etc). I average an additional $1200/year on those. Holidays and birthdays also come out of what's left of the tax return but I'm still coming up short.

Why aren't these things included in your budget? Work them in. If you average $1,200/year, then your budget should reflect $100/month. The same for holidays and birthdays (both luxuries of course). The more detailed and accurate you can make your budget, the better able to track and deal with it you will be.

You're on a sinking ship. You aren't going to save yourself with a Dixie cup. You need to make some really tough choices and sacrifices for this to work.

Your math is also rather confusing. It looks like your expenses total $3,619 against an income of $2,828. That means you are short $791/month. Even if you do cut out the fat, you're still going to be short unless you boost your income. I understand that you want to watch your kid play ball, but you need to be devoting that time to a 2nd job. You need to earn another $200/week roughly, less depending on how many luxuries you cut out.

[james.hendrickson]

Jawhite,

First of all, I want to give you some props. You have everything down on black and white, as well as all your expenses, etc. Knowing what is going on with your expenses is the first step in getting financially fit. So good for you.

Here are a couple of thoughts.

First, at around $200 per month your cell phone bill seems high. A while ago I was paying about $140 per month, but got on a plan for $70. I bet if you look at it you could find some savings there.

Second, you are in an ideal situation to get a couple of early wins. You have a few smaller debts in the $300 dollar range. Why not pay off one or two of those and get a psychological win?

A lot of people will say no, pay off your highest interest rate debts first, but its also important that you stay motivated and on task in getting your debts discharged.

Also - don't doubt yourself. You can do it! A lot of people have paid off huge amounts of debt before so this is a totally manageable situation.

[msomnipotent]

I would explain to my church why I wouldn't be able to donate for a few months. They may be able to help you if they know you need help. Then I would call all of the credit card and mortgage companies and explain the situation. At the very least, the credit card co's should agree to lower the interest and they all might suspend your payments for a few months. That would give you money to pay off the medical bills plus some. Interest still accrues, but it sounds like you need the psychological boost of just crossing something off of your list. I would call the cable company and downgrade to an internet only plan. You might get someone sympathetic and give you something for free for a few months (like HBO Go), but don't count on it. I would also try to change the cell phone provider. Even if you are stuck in a contract, you can still call them and ask if they can switch you to a lower cost plan. Asking never hurt anyone, and people won't help if they don't know you need it.

If getting the kids to quit their sports this year is unacceptable, reach out to other parents on your kids teams and ask if they can drive your kids for a while. Explain that you are trying to earn extra money and offer to chip in for gas. Have a garage sale. Ask family members for donations. I'm sure some people would be glad to get rid of clutter and even happier to help you out.

I learned to not overwhelm myself by thinking of everything at once. Make a 3 month plan, or even a one month plan, and keep a ledger of your debts. Seeing the balances go down, even very slowly, still helps your morale. I'm also the type to pay off the smallest balances first, regardless of interest. It is too easy to miss a payment and then you have to pay a penalty and more interest.

[Thrif-t]

Exactly how old are your teenagers? Girls, boys? They need to get some kind of little jobs to pay for some of their own stuff to take the pressure off you. I have 3 kids too and they were involved in a ton of sports and I get that you can't just tell them to quit, even though you should. But you can tell them they have to start paying some of their own way if they're old enough to do so. They might have to get creative if they play sports that are time consuming, but usually babysitting, cutting lawns, things of that nature can be done on their own time. And summer is coming up so they can get summer jobs and save all the money so they can pay their expenses during the year.

I signed my kids up for a Sunday paper route when they were 7,9 & 11 and then they refed the youth soccer games when they turned 11, umped softball and baseball games after 8th grade, and my son started reffing youth basketball games in high school. My girls babysat when they could. Lots of little things that gave them their own money.

I agree with the others you need to drop donations to church until you get a better handle on your finances. Or give a token amount if you don't feel you can't quit all together.

Other than that keep a steno pad and write down every penny that you spend. Just like having a food diary helps with over eating, the same is true if you record all your spending.

[Petunia 100]

Is your budget realistic? Have you tracked what you are actually spending?

You say you spend $80 per month on gas, and also say that you are "always running", going to games an hour away. Those two statements don't match, unless you drive a very fuel efficient car (?).

Instead of trying to amend prior returns, why not just tell your ex to take one of your future years? Since he is not paying his share for all expenses, that is more than fair.

I will preface this next part by saying I am an agnostic atheist. It seems VERY unethical to me to consider filing bankruptcy while simultaneously giving away hundreds of dollars per month to a church. If you want to give your own money, that is one thing. But if you want to give money already owed to another party, that is another. It is your business of course, but I do think you should consider whether or not that is really an OK thing to do.

Being a single mother is hard, I know. Best of luck to you.

[jawhite]

I talked to an accountant yesterday and it looks like I will end up owing the IRS something around $6K so that's something I'm going to have to figure out. I'm hoping they take payments. I've also contacted the cable company about reducing my bill and it looks like I can save about $40/month if I drop cable. I'm also looking into dropping some coverage on my car but it is a lease and I have to have full coverage. And to answer the question about how much I spend on gas, the $80 is correct. I have a Hyundai Elantra and it's 45 mph on the highway. That's why I got the car, because it saved me $150/month on gas from my previous vehicle. Plus I work only 2 miles from home so I don't spend as much.

I think if I can get my debts consolidated into a lower interest rate I could make some progress on them. I will call the CC companies and see what they will do but I can't get approved for a consolidation loan through any bank. I have tried numerous times and I'm afraid it's going to hurt my credit score every time I apply. I almost got approved for one but my credit score was 6 points too low. Maybe if I can raise it I can get that loan at 7.99% and that would help tremendously.

As for the kids and sports, I am not asking them to stop playing. I truly believe it keeps kids out of trouble and my kids work very hard in school and are straight A students and I'm not taking that away from them. This summer I will try to find them part-time jobs but none of them drive so it will be hard to manage. I live in a very small town and there aren't too many jobs within walking distance. And to the question of their ages, my daughter is 17, son is 15 and youngest son is 14. My daughter isn't driving yet because I can't afford drivers ed so she might wait until she's 18 to get her license.

I am looking into another part time job. It may kill me but I have to do something different. I don't have much to sell as we never had a lot of stuff and always struggled, even when I was married. He will not help with certain expenses but I will keep pushing on him to help out. But I can't enforce it unless I take him to court, something I don't have the money for. And the kids don't understand what's going on because he is very manipulative and a pathological liar. He straight up lies to their face all the time, part of the reason we are divorced. Hopefully someday the kids will realize the truth but for now I have to accept the fact that he will get his way and I will have to manage these expenses on my own. I guess I consider myself lucky I receive any support at all because a lot of single parents don't.

I truly appreciate everyone's advice and encouragement. I will find a way out of this and will keep trying to find ways to save money. I used to be extremely frugal when I was married and worked from home but since going back to work I have let some things slip. Time to get back to that way of life.

Jennifer

[disneysteve]

none of them drive so it will be hard to manage. I live in a very small town and there aren't too many jobs within walking distance.

Do they have bikes?

I'd suggest they each make a flyer with all the sorts of things they are able to do and put one in the mailbox of every house and business in town. And the more people they can speak to in person, the better. Offer to do pretty much anything: baby sitting, dog walking, house sitting, watering the plants, cleaning the yard, being a companion for an older person, helping with a home improvement project like painting, helping clean a store, take out the trash, stock the shelves....

Pretty much anything and everything a person could possibly pay another person to do for them or help them with.

Are any of them artistic? Maybe somebody needs help with an art project or designing a business card or a poster. Do they have computer skills? Can they make anything to sell like a craft or baked goods? You just need to get really creative.