I'm stuck in a small debt trap and can't get out.

[SiliconMagician]

Hi all. I'm sought out this forum on google because I really need advice on what I can do to get myself out of this debt trap I'm in.

I didn't get any credit until a few years ago because I was afraid of it. I was always worried I'd get into trouble with it. So when my father finally, at age 39, trusted me enough to co-sign on a personal loan from our common credit union in order to buy a car. I was very, very careful to pay the debt off.

After paying the debt off I decided to get a single starter credit card. Over time with doing the usual good debt practices. I managed to turn a $500 credit limit into an $7300 credit limit. I never borrowed more than I could pay off in a single month, etc.

Then I lost my job for 6 months and wound up maxing out that single credit card in order to survive. I also had a second personal loan at the time, which I managed to get paid off. I also ended up with a minor medical problem and wound up with about $800 in doctor bills which I couldn't pay at the time and have no gone into collections.

So, I have right around $8000 in debt and a credit score of 600.

I make 32,000 a year.

The problem is that just before I lost my job, I had met a girl and moved out of my tiny breadbox apartment into a house. Which rose my rent from 450 a month to 700. It also doubled my usual utility bills. My girlfriend, unfortunately only makes about 10 bucks an hour and has her own car payments, cell phone and insurance bills which eat up virtually all of her income. So she provides for the food shopping bill.

The problem is that in the final weeks of my unemployment, I totally ran out of credit and ran 1 month behind in my bills.

Now that I have been working for just over 3 months and my paychecks after paying rent, past due utilities, past due internet and minimum payment on my credit card debt. I am at the very last end of my rope.

I bring in $2000 a month, and spend in bills and living expenses alone $2000. I've made what adjustments I can to try to do things like lower the utility bill. But then the money saved has to go towards other living expenses that get held off and paid every other month, car maintenance and other tiny "disasters" that seem to keep occuring.

The hours that I work at my job (9:30am to 7:00pm) make it impossible to get a second job for awhile unless I am willing to run on 2 hours of sleep a day broken up into two sessions of an hour or so each. That is unhealthy and untenable.

The sad part is, if I could just get a simple $4000 loan that could pay off half the credit card debt and pay the $800 in medical expenses I would be just fine. But right now, with my credit maxed out I can't get a loan from anyone, even the high interest lenders despite the fact that I have never once missed a credit card or loan payment.

I just don't know what do. I have always made my payments on time and in full to the minimum and I'm considered in good standing except for the $800 in medical bills currently in collections.

I've looked into one of those debt consolidation programs but those are basically one step above bankruptcy. They close down my credit card account, take a huge hit to my credit, and then spend 5 years paying back the debt and a large part goes to the debt management company. If I'm going to pay 235 a month, I'd rather it all go toward my CC debt and not toward a credit consolidation company.

I don't know what to do. A simple debt consolidation loan would fix all my problems but I can't get one due to my limited credit and I have no assets to put up for collateral.

Once again I note, my credit record shows I have never missed a single loan or credit card payment.

What can I do?

[msomnipotent]

The first thing I would do is focus on paying off the medical bills in collection. Ask the creditor what amount are they willing to accept to pay off the debt. Once it is showing paid on your credit report, look for a cheaper place to rent or take on another renter if you really can't break your lease. Then I would look to join a credit union. They give cheaper loans out, and are more liable to give you one with so-so credit. If you can get a loan, try to get one that is going to pay off all of your debt.

You start work pretty late, so you can earn money delivering newspapers in the mornings, or selling things on Ebay and dropping the boxes off at the post office before work, or picking up a week end job. Yeah, it sucks but you have to do what you have to do. I worked a full time job, went to night school, and worked at a restaurant on the weekends, so I know. I was burnt out and tired all the time, but I paid the bills. Ask your credit card provider to raise your limit, but don't use it. Even a little bit might raise your credit score. Tell them you want a larger amount for debt consolidation, if you have to give a reason. When I was in this position, they never turned me down once they realized that I wanted to owe them more money.

Debt consolidation companies don't do anything you can't do yourself.

It basically boils down to not having enough money, so you either have to reduce expenses or earn more. Ideally, you would do both. There really isn't anything else you can do to get out of debt. And just so you know, you will probably be asked to post your budget so people can give you more specific advice.

[LivingAlmostLarge]

Something has to give and I think that it probably has to be getting a weekend job? Great time with holidays now. I think you have an income problem unfortunately. It doesn't seem like you are super spendy but you don't make enough to make ends meet.

[Jluke]

Netflix?
Hulu?
Gym Membership?
Dining out?
Cable?
Internet?

How much is your car worth?

Either way it is time for you and your gf to get 2nd jobs (yes, on the weekends) and move when the lease is up.


The minimum payment on the credit cards will get you nowhere.

You are one unexpected emergency away from falling even further into debt.

sorry if that is harsh.

[bjl584]

I don't think that finding a second job is "impossible."
Just think outside the box a little.

You can find a morning job working a few hours and still get your 8 hours of sleep.
I'm sure that you have days off. You can pick up side work on those days.
Are you good at fixing things or working on things? Can you advertise your services on Craigslist or locally and pick up side work and odd jobs?
Can you buy and resell items?

I think the key here is raising income, and there are plenty of ways to do it.

[disneysteve]

I have right around $8000 in debt

I make 32,000 a year.

I bring in $2000 a month, and spend in bills and living expenses alone $2000.

There are only 2 possible solutions to this: spend less or earn more. Preferably, you should be doing both of those things.

The hours that I work at my job (9:30am to 7:00pm) make it impossible to get a second job

It isn't impossible at all. There are lots of ways to bring in extra income regardless of your schedule. Ebay and Craigslist can be lifesavers for someone like yourself. Even an extra $200 or so each month would go a long way to fixing your problem. Walk dogs. Mow lawns. Water people's plants while they're on vacation. Sell crafts. Do whatever you can think of to make a buck.

if I could just get a simple $4000 loan that could pay off half the credit card debt and pay the $800 in medical expenses I would be just fine.

You can't borrow your way out of debt. Explain to us how a $4,000 loan would fix your situation.

[james.hendrickson]

To the OP - here are my thoughts.

Have you considered checking out Dave Ramsey's baby steps?

Ramsey is controversial, but his methods for getting out of debt are generally well regarded. In your situation, Ramsey says you should:


1) $1,000 to Start an Emergency Fund
- The idea is to save $1,000 as quickly as possible. Go sell some stuff. Work an extra job. Do whatever it takes to start saving money. Once you have it, open a checking account that is separate from your regular finances and stash it there. This way you won't need to keep using your cards - you'll have money if something happens.

2) Pay Off All Debts, Except for Your House
- List your debts in order. The smallest balance should be your number one priority. Don't worry about interest rates unless two debts have similar payoffs. If that's the case, then list the higher interest rate debt first. Then, attack the smallest balances first, that will give you early wins and free up your cash flow for the larger balances.

3) 3 to 6 Months of Expenses in Savings
Sit down and calculate how much you need to live on for 3–6 months. Thats usually between $10,000 and $15,000, and this up to protect yourself against life's bigger surprises. You'll never be in debt again—no matter what comes your way.

Most people lose momentum after Step 2 and don't push to complete their emergency fund. Don't do that! This part is key to keeping yourself permanent off the debt wagon. If you have enough cash saved up, you should be protected if you have a large medical issue or you get laid off.

Keep this in a simple checking account that you can get at electronically or with a paper check. That way you can get at it if you need to pay the doctor or cover your bills when you don't have an income.

Finally, you will need a community to help you.

Paying off debt can take months - usually, it takes less time than you think - but it can take months. So, feel free to keep coming back to the forums to get help and support. We disagree on a lot here - but not on important things like getting out of debt, thrify living and saving. People here will give you straight advice, information and provide you with a sounding board for making decisions on your debt elimination journey.

[scfr]

Lots of great advice on this thread already.

To get where you want to be, as others have stated, you'll need to increase income and/or decrease spending. Trying to do both at the same time may be overwhelming. Which would you prefer to focus on first? Depending on your answer, you'll be able to get more good advice here.

[Nutria]

my father finally, at age 39, trusted me enough to co-sign on a personal loan from our common credit union in order to buy a car.

Something's going unsaid.

[Gailete]

Part of your problem is highlighted in the title of this thread. "I'm stuck in a small debt trap". You are not in small debt. You are in paralyzing large debt. You can get out of it, but it will take hard work on your part as well as the girlfriend that appears to be getting a free ride. How was she supporting herself prior to moving in with you? If she was supporting herself before then she needs to contribute more than grocery money, but you both need to go on a big spending diet. Cancel every non-essential recurring bill or service. All savings need to go into paying off your debt. You will need to find cheap if not free entertainment, make sure you are cooking at home to lower food prices, many great posts here on lowering expenses.

On top of trying to make more money, you need to start saving for retirement which is only about 25 years away. You hit unemployment with not much at all in savings, now have stacks of debt that you have to find ways to pay them off. At the same time you need to be saving towards those little things like car repairs that keep popping up.

I'm also curious about what had been going on that your dad only just lately cosigned for a car loan for you. Most 39 year olds don't need or want their parents to sign loan aps for them.

[disneysteve]

OP hasn't been back since posting this almost 3 weeks ago. Just pointing that out before anyone else takes the time to respond.

[Gailete]

OP hasn't been back since posting this almost 3 weeks ago. Just pointing that out before anyone else takes the time to respond.

Too bad as it sounds like he could use some help.