Bump on the Road - 30 year old trying to get out of debt

[setyembre2014]

Hi SA,

I am new to this thread; found this site while searching for "i'm so tired of being broke" in google.
I feel so lost for the past weeks and i am so desperate to have someone to talk to me or scold me or whatever about my mess. My apologies in advance if maybe I've posted on the wrong forum.

So here is my story.

Year 2008 was my all-time low. I don't have money to pay for my fare so I have to walk from boarding house to office. I lost good friends because I can't pay them back and they got tired of waiting for me to get back on my feet. Sometimes I don't even have money for my lunch I end up eating only once a day.

Fast forward to early 2013 I was finally making progress on my debts and I am starting to live comfortably. I also managed to increase my monthly salary from $700.00 to $1,600.00 by changing my career (from being an accountant to a junior SAP consultant) and after 3 company changes. But then something happened to our house and we need to construct a new one (renting out is not an option... we will lose our rights to the land if we don't build). My debts went up again. I am back to where I started in 2008. I am back to being dead broke and its driving me nuts. My goal was to be debt free by september 2014 but it didn't happen. I was so close to it... but it didn't happen.

I am now earning $1,600 per month, take out taxes and other deductions my take home pay is $1,100.
I pay $900 for my debts and that leaves me with just $200 to spend for everything else. I have to be aggressive with my debt payments because the interest is at 10% per month. I loaned the money from persons not from banks simply because I can't. My credit rating is also a mess. I am single but I am the breadwinner of our household of 3 plus a dog.

The only solution I have in mind is to find another job again with a higher salary, but no progress yet after 2 months of job search.

Sorry this post might just sound like a rant, but maybe someone here can see something different that I cannot see for myself.

By the way, I am from PH. Thanks guys.

[Firstofmanysteps]

How in the world do you manage to live on $200 a month?

[kork13]

Upfront: I almost never say this.

Bankruptcy may be the best option for you. Your debts are obviously the biggest problem in your life -- your income only barely supports your debt payments, with next to nothing left to live on. I assume you have next to no savings at all? (not counting retirement accounts -- those are typically protected in bankruptcy) What exactly are your debts? Credit card? Mortgage? Auto? Personal loans? All of those can/would likely be cleared through bankruptcy. Student loan debts, back taxes (or debts to the federal/state/local government), and a few other specific types generally cannot be forgiven through bankruptcy.

Another slightly-less-bad option would be to basically stop paying your debts completely, save up as much as you can, then in a year or two, hope that the debt holders would be willing to settle for less than you owe.

Both of those options will damage your credit even further. Also, they are often looked down upon socially (by family/friends/coworkers, if that matters to you), and also by employers & landlords (many run credit checks nowadays, and bankruptcy/settled debts are a big red flag). Some people also consider those options immoral. (I'm not accusing you, just laying out reality)

Finally, you can try to negotiate with your creditors for better terms on your debt, seeking lower interest rates, lower monthly payments (which won't actually help you, because it'll stretch out your debt for years longer, but it *would* help you stay above water), or if possible, reductions on your principle. Call each company to which you owe money, explain your situation. Tell them that if they can't work with you, you will have to stop paying on the debt, and potentially even declare bankruptcy. Even if that is not (yet?) your intention, it will demonstrate to them the severity of your situation, and pressure then into making it more possible for you to pay your debts. The easiest for them to do is to lower your interest rate. They'll likely offer to reduce your monthly required payment, but as I said, that's going to only be a detriment to you. They'll fight tooth and nail to reduce your owed principle & interest. If they refuse to work with you, your only choice may be to actually stop paying and/or declare bankruptcy. I seriously hate telling someone that is their best option, because you literally lose everything. You lose your home, property, potentially your car, and anything else that's sale-able... not to mention your dignity (again, if that matters to you). But given your situation, it may actually be the case. You need help dealing with your debts.

Last few notes/questions:
- How much is your tax return normally? You likely are getting WAY too much taken out in Federal taxes, being the sole breadwinner with 2 dependents on such a low income. Talk with your HR department, and adjust your tax withholding amount to reduce what is taken out of your gross pay. This will immediately improve your net income.
- Is it possible for your spouse to find a job? Or is your spouse required to stay home for 24-hr care of your child? If a job would mean paying for childcare, that probably wouldn't help...
- Is your family currently on WIC (food stamps)? Your income definitely qualifies you for it, and would help offset some of your basic food expenditures.

[Petunia 100]

Why is your salary so low? If you are working 40 hours per week, you are making $9.23 per hour. And you made $700 per month as an accountant? I'm just a staff accountant, in a MCOLA, and I make substantially more than $700 per month.

Are these people who are charging you 10% per month loan sharks?