My situation is this:
- I have several credit cards and about $40,000 in debt
- I’m self-employed and should pay quarterly taxes
- I owe the IRS for back taxes in 2004, haven’t done the 2005 taxes yet or paid on them, haven’t paid yet for 2006.
I’m in my late 40s and live with a housemate because I can’t afford a one-bedroom apt (I live in an expensive city).
I talked to the Consumer Credit Counseling Service (nonprofit agency). They reviewed my situation and said that I’m more than $600 short every month. Which is the amount of my payments to creditors. CCCS said I couldn’t use their service because I don’t have enough income to pay my bills. Usually, they would take on the creditors and get lower interest rates, etc. I’d make one monthly check to CCCS. They said to talk to a BK lawyer. It costs $1000-3000 to file BK.
Here’s my question: Should I file BK? Should I try to pay off the cards myself? Should I borrow $1000-2000 to throw at one or two credit cards to put me in a better place with them and keep paying them off? Should I borrow that $1000-2000 and put it toward my car loan so that payment will be less per month, or paid off sooner?
If I borrow $2000, what is the best use of it? I want it to make enough of a difference. To give me a jump start. I don’t want to just use it to keep barely making ends meet and not get ahead. I want to stop the downward spiral and turn this around.
Eventually, I’d like to buy a small condo. So I’d rather not file BK. Or, won’t that matter?
Right now, I’ve paid creditors just enough so that my accounts are not being charged off as bad debt. I’m barely holding that together. It takes all my money each month just to do it. I can’t continue this. I need to make some kind of move.
Thanks so much for your support and advice.
Welcome. Keep reading and posting to this blog – there are so many nice, helpful people here, who’ve been there.
Your situation sounds almost to a tee to a friend of mine (except he is a guy) One thing everyone is telling this friend is – find another full-time job and do the self employment thing part-time.
Obviously, if it’s not paying enough to cover your bills, then you need to do something else. The friend I am talking about won’t do this because of the supposed freedom he has with being self employed … but he is just fooling himself. He can’t see the light, maybe you can.
Borrowing more money is kind of futile, it holds you in the same never-ending cycle and trap. It’s got to stop.
It’s like telling an alcoholic that they can drink -once a week- just to get use to quitting eventually. It doesn’t work.
Rather than using more borrowed money – are there “things” you have you can sell? Do without to cut costs every month?
Thinking about buying a condo (way down the line) is a low priority, but filing bankruptcy (if that is your last option) WILL make that more difficult. If filing bankruptcy is your only choice, maybe you can do it all yourself and save a lot money. You’ll just have a lot of research to do on your own and find out what you can for free.
When I was in debt (it was like half the amount of yours) I had to do all kinds of downsizing, work more, and budget to the extremes. But it was worth it for the final goal of becoming debt free. You may not have to file bankruptcy and go through the long term consequences of that, it’s a lot tougher now. It’s a matter of your determination.
My 1st thought is deal with the IRS FIRST – personal debts can wait and be dealt with, but even BK will NOT satisfy the IRS, and they have heavier consequences for non-payment. Talk to them – they are not complete monsters (I speak as someone paying off tax debt and a employee of a tax accountant) and that shoudl be addresses FIRST – then assess the rest and deal with it, one debt at a time.
You do not want to get more credit to pay of credit. It is a visous cycle. Filling BK will not discharge your taxes. Is your business not making it? Are you able to pay yourself first? Why where you not paying quarterly taxes? These are questions that I need answered to help out in thinking of a solution for you.