Need serious help

[onestopmom]

We're in a bad financial situation and really don't know what to do from here.

We bought our first house in August of last year and a new car in the same month. We had to trade in our old car due to engine problems but we were upside down so we had to go into a higher priced car. We had enough money to pay sales tax in the bank at that time. When closing on our house the sellers agreed to pay the majority of closing costs but the total was much higher than anticipated. We had to use the money for sales tax on the car to pay the rest of the closing costs. No we did not receive a good faith estimate.

In September my husband was laid off from his job. This was very unexpected and we had no backup in place. We had to live off of my income until January when he finally found another job. However, his pay is about half of what he was making.

So...my dilemma is this. We have a car that we owe $4000 on before we can put plates on it. We have $12000 in credit card debt & $4000 in hospital bills. Our monthly bills come to around $3500 plus gas (roughly $500) and food (about $400). Our total monthly income is a little over $3600.

We have never been late on a car or mortgage payment but our credit cards are 30 - 90 days past due. My husband has been looking for a part time job but he isn't getting anywhere. I work out of the home so there is no traveling expense for me.

We can't take a home equity loan out (even though we have $40000 in equity in our house) because our credit is so bad. We have no family members to ask for a loan. We are stuck and need some advice.

Any takers?

[maat55]

Do not panick. Set up a budget that prioritizes your needs.

Mortgage, food, Electric etc. and pay in that order. You need to buy a cheap car of about 1k to 2k and then attempt to sell the other and borrow the difference. Get on a very tight budget of beans and rice so to speak.

Begin to pay the minimums on any outstanding debts and use any extra funds to pay towards the lowest debt you have paying it off then moving to the next.

Remember, pay your needs first(This does not include ciggarettes or beer or any other luxuries). Get rid of any credit cards and concentrate on nothing but paying off existing debts. Have a garage sell, get a second job for a while, you can do this, good luck.

[rob62521]

To go along with maat's advice...where we live, as long as we pay something to the hospital, they can't send you to collections. Call them and talk to them and explain and pay something each month, even if it seems like very little. Most places would prefer to receive a little than nothing at all.

Good luck!

[onestopmom]

Thanks for the encouragement. I would love to buy a cheaper car but that is not an option for us. We've looked at cheaper cars and with the amount of driving my husband has to do for his work and the size of our family it just isn't possible - we need something reliable that will last us for a long time. We don't have anything fancy but it was the smallest amount to fit our needs (not wants)

We do pay the important bills first and we'll continue to do so. Like I said my husband has been searching for another job. I would love to get one and I've tried but then we would have to pay for childcare at night and the expense out weighs the bring home amount.

Keep the suggestions coming please!

[maat55]

Thanks for the encouragement. I would love to buy a cheaper car but that is not an option for us. We've looked at cheaper cars and with the amount of driving my husband has to do for his work and the size of our family it just isn't possible - we need something reliable that will last us for a long time. We don't have anything fancy but it was the smallest amount to fit our needs (not wants)

We do pay the important bills first and we'll continue to do so. Like I said my husband has been searching for another job. I would love to get one and I've tried but then we would have to pay for childcare at night and the expense out weighs the bring home amount.

Keep the suggestions coming please!

Your wrong, I look on graigs list everyday and find low cost cars that can get you by. Don't think for a second that because you can't sell your car for what you owe that you are stuck in it. You need to change the way you think. Most times prospering means you have to take a step backwards to find the right way forwards. The reason you are where you are is becasue you don't think right, plan for the worst and prosper the rest of the time.

[scfr]

Am I reading correctly that the sales tax alone on your new car is $4,000?
If that is correct, then I would also suggest you reconsider a less expensive car. Also, you have just one car, right? If you have more than one, I'd suggest selling one.

Beyond that, I'd suggest the following:

- Double check the withholding on your husband's salary, and make sure you aren't having to much withheld. You don't need a refund next year. You need as much money as possible each month to pay the bills.

- If gas and food are your only non-fixed expenses, then you are going to have to look at what you can do to cut back in those areas. Can your husband take public transportation or carpool to work? As far as cutting back on the grocery bill, there are lots of tips on this site. (And I did not mention non-essentials such as cable and cell phones because you did not mention them, but if you have those expenses you really need to think about eliminating those too.)

I know my advice must sound harsh to you, so I just want to say to you that I applaud you for realizing so early on that you need to make some changes. It does not sound like your hole is terribly deep, so you can certainly turn the situation around if you are willing to make some tough choices. Good luck!

[LivingAlmostLarge]

I'd pay the car first so you can sell it. Get it where you don't owe so much so you can sell it for a loss and get something cheaper.

You can get a used/older minivan. And because your credit is so bad, you won't get a loan for the difference. Well consider paying it down enough to get out from under it.

[disneysteve]

Welcome!

Can you break down the $3,500 in monthly bills for us?

[cschin4]

Really, it boils down to numbers. Cash in vs cash out. So, at this point you need cash in. You both need to go to work. If you work at home, then you can continue that but you need to go and get an an outside job as well. Both of you do. And, don't be picky, take what you can get be it digging ditches or flipping burgers. That should establish some cash flow and all some breathing room.
As for the car, you are pretty much stuck with it unless you are able to take a big loss. So, unfortunately this is a good lesson on cars! Whatever engine trouble you were having on the old one would have been way cheaper to fix. People get themselves in a heap of trouble by deciding it is "too expensive" to fix their old cars. In reality, that is rarely true. But, we have all done it so join the club!
Anyway, apparently you do have income coming at $3600 a month which is a decent chunk. So, with that I don't think you need to panic. You will just need to stay the course but generate more income

[aida2003]

Before I can give my 2 cents, I'd like to see a detailed list of your monthly expenses. Also, how many kids do you have?
Does your DH or you contribute to 401k or other retirement plans right now? If so, I would stop until you're back on your feet.
CC debt.... What interest do you pay on it (them)?
Do you have mortgage? If so, would it be possible to call your lender and ask to change your payment plan for a while? Not sure, they'd like to do that but doesn't hurt to try. The same goes for medical bills.

[FrugalFish]

I, too, would like to have more of a breakdown on the $3500 of non-negotiable bills. What all does this include? Without knowing the full budget, it's hard to make a call. If you list things like cell phones and cable, you've definitely got work to do and places to cut back. If you only have mortgage, car payment, CC bills, and medical bills in that $3500, then it's probably time to think about getting rid of the car, house, or both.

[onestopmom]

Thanks everyone. I'll post our bills this evening.

I think I've confused everyone with the car situation. Our monthly payment is very low ($350) but we have to catch our car up. The $4000 is sales tax and 2007 personal property tax.

[aevans1206]

In addition to negotiating about the hospital bills, you should also call the credit card companies and let them know you are in financial distress. They would rather get some money than no money, so they may be willing to lower your minimum monthly payment for awhile and maybe will also lower interest rate. If not, you may try credit counseling. They will at least get your interest rates lowered for you, but it will not allow you to continue using the credit cards. If your credit is shot anyway, don't worry about credit counseling ruining it further. That's my two cents.