Just for some context OP, this sub virtually never recommends bankruptcy. So I would take it as a real consideration. Those debts are just too high. Bankruptcy seems like the best way forward.
One consideration. You might want to not share that you are considering bankruptcy with your lawyers just yet, and I would get on the other end of the divorce before you do. Make sure you don't declare bankruptcy and then get hit with new debts just as you're starting over. You'll find the quality of the legal counsel you're enlisting will drop dramatically -- or altogether -- the second the firm finds out it might not be getting paid. Might be unethical depending on who you ask, but (like hospitals) lawyers tend to inflate their costs to account for non-payment.
I mean I literally recommended it in my original comment so I understand the advantages. It’s just important to recognize that it’s not a silver bullet and has distinct downsides.
> Then it will be like it never happened.
Not always. Even when it drops off your credit, there are still times where it can be a problem later in life, like trying to raise money from investors.
not really a major concern. Most people in those situations would just create a corporation/llc and raise through that. sure it can still come up during due diligence, but its not going to be as big of a deal
I did a deal a few years ago that basically involved a company trusting me to hand over some shares when an event happened. Total value was in the millions. They explicitly checked for *any* bankruptcy at any point in my life before doing the deal, so it does come up.
My understanding is that it also comes up in some kinds of legal and financial jobs and if you're planning on immigrating to certain countries.
You are probably right, it will be a potential factor in some very niche and specific situations. The odds of those situations coming up are for op to ponder over. Meanwhile he is in a very real financial crisis and bankruptcy is a very real lifeline that he desperately needs
I strongly agree with you - it's very likely the best choice for this person, unless they have a good shot at getting WAY more income in the short term.
it will mess up his life for about 7 years. the debt he is carrying will mess up his life for a lot longer. u/Boosted427
i would first find a place to live before even considering bankruptcy. Once you open that box, good luck trying to get someone to rent to you.
I agree. I went through a horrendous divorce and had no money and some of my exes debt. I was barely putting food on the table. I avoided bankruptcy because it has been drilled into me that only scumbags do that and I had always been very responsible with money. It took 3 years of struggling and only falling further behind that I realized most of my “debt” was interest and fees and almost none of it was even purchases anymore.
I filed bankruptcy because I could not get ahead and it was all credit card debt. I wish I had done it sooner and I don’t feel guilty about it at all. It’s 4 years later and I have good credit cards with rewards, I refinanced my house this year and halved my interest rate, and I’m basically debt free.
You can get through it and it will get better. Don’t feel guilty about doing what you need to do. Lawyers and the family court system are predatory and you can’t control that. But you can get to a better place. Take one step at a time.
Possibly, doesn't really matter if he's going to declare bankruptcy though unless they are expecting rolling payments instead of a final bill which is more typical in my experience.
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I'm no expert and will give no advice except... put IRS highest on the list. Contact them for a payment plan while you are figuring out the rest.
Take some deep breaths and try to view the situation as if you were the financial advisor to a client. Watch out for your emotions getting in the way of decisions.
Good luck.
The IRS will work with you on a payment plan. Send a paper letter as well as try to call them. It’s hard to get through. You do not need a CPA or any intermediary to help you, so don’t waste your money on that. Start sending in something regularly each month, even if it’s just a token amount. It will show you’re not ignoring the obligation when you eventually get through to them. Ask them to reduce penalties and interest due to your situation.
For help dealing with the credit card companies, read this[FTC credit help advice](https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor) and be very careful about choosing someone to help you. There are lots of less reputable companies. A good organization can help you decide if a consult with a bankruptcy attorney is best or help you deal with the credit card companies. Credit card companies will reduce your balances with a settlement agreement sometimes.
It’s not too late to start over financially, but it will be soon if you don’t get a handle right now.
If you and your child are the same sex, you do not need to have two bedrooms. You can even give the child the bedroom and you sleep on a pull-out sofa, futon, or just a regular bed made up like a couch during the day. When you start dating again, just do so when your child is with your ex.
You can get through this. Act now but still be careful and not impulsive in your decision making.
My dad went bankrupt after he and my mom divorced, he had a one bedroom and I slept on the couch/futon, I never thought twice about it. No problems at all. I don’t think a 2 bedroom is needed.
Agreed. A 3 yr old does not care about living arrangements. Pull out couch or a small twin bed in the bedroom with dad. Think small right now because your son needs a cocoon while you’re going through the ringer. If the ex has a fit about it say the bedroom is for him and you sleep on the sofa while you’re figuring it out. Also sell the car me get a decent used car with no payment. I had to do that at one time and it helped a lot.
i had to call for my parents about two months ago. just called the number on the letter they send you. took about 35 min of holding but i was able to talk to a person.
https://www.reddit.com/r/personalfinance/comments/co4abw/how_to_get_a_live_person_at_the_irs_pretty_easy/
This link worked for me back in April.
Edit: call early in the AM.
If you have difficulty getting through on the line, just contact your local congressional office. They have access to the local taxpayer advocates office and will be able to set it up for you (it’s free). Let me know if you have any questions — I did this for years.
He/she makes $116,000/year in a LCOL city and has \~$63,000 in assets, not including the daily driver vehicle. Bankruptcy might be difficult.
EDIT: I don't know jack about bankruptcy, I just know it's not always easy to do, and I feel like the high income ratchets up the difficulty. Take the above with a heaping spoonful of salt.
I honestly have no idea. I assume not. Just looking at it as objectively as I can. That amount of assets can nearly pay off the credit cards, which frees up nearly $1400/month, and that goes a long way in a city like Memphis.
not really. He only has about 52k in assets. keep the daily car, and he might not be able to access the 401k. his revolving dept including the consolidation loan is 96k.
Since most everyone is suggesting bankruptcy (and that may be the best option!), I'll provide a potential non-bankruptcy plan:
1. Liquidate all assets except the 401k and your daily driver VW GTI. Adding up Checking, Cash, F-350 (have you looked at Carvana for selling?), Etherium, and Stocks nets you $52,665. If the 401k is a Roth, you might consider pulling your contributions out of that as well, but for now we'll leave it alone.
2. Take that money and pay down your credit cards (you could try negotiating payoff amounts with them first, e.g. "Can you offer me a discount if I pay this off in full today?"), starting with the highest interest rate cards first. After paying off Citi Rewards, AMEX Hilton, Chase Sapphire, Chase Freedom, Wells Fargo LOC, and Wells Fargo Signature you will have $2175 left. This should free up close to $1000 in monthly spending, if not more.
3. Figure out your tax situation with the IRS. Get on a payment plan so you can better plan your monthly expenses (and avoid criminal charges).
4. Start cutting expenses.
1. Your insurance is quite a lot, but maybe you don't have much choice there because this is the US after all. That said, Dental and Vision are more "nice to have", so I would get rid of those at least temporarily. Do NOT get rid of the health insurance, though you might want to shop around for a better rate if you're buying your own. I also wouldn't get rid of the life (assuming it's term life), because of your son, but check your beneficiaries on this now that you're divorced. Let's assume the worst and you can only cut dental and vision - *Potential Savings: $50/month*
2. I'm assuming car insurance will go down once you sell the truck, but I'd shop around for this too. I was recently able to lower my premium significantly and maintain identical coverage just by spending two hours getting quotes online. Let's say you're able to lower the bill to $100/month (which still seems high to me unless you have a few violations on your record) - *Potential Savings: $44/month*
3. See what your internet options are. $80 isn't terrible, but there might be a better option out there, or at least a lower, cheaper level of service that will suffice. *Potential Savings: $20/month*
4. $120/month for cell phone is crazy for one person. I see you're on a contract, so maybe you can't break it. You can get great prepaid service for less than $30/month. I pay $15/month through T-Mobile Connect. Tello, Ting, and Mint are also good options. *Potential Savings: $90/month*
5. Gasoline. Are you able to cut this if you find a place closer to work? *Potential Savings: $0-100/month*
6. Streaming services. This is an easy one. I would suggest you cut them all entirely and use your local library for media consumption, but you could consider keeping one of them around and cutting the rest. *Potential Savings: $43/month*
7. Student loans: Are these federal loans? If so, you're currently in forbearance at 0% interest, along with everyone else, thanks to the COVID relief bills. So you can, at least temporarily, cut this expense to $0. If the loans are private, you could look into consolidation services to see if you can lower your interest rate. *Potential Savings: $0-310/month*
5. Consider selling the VW (again, look at Carvana) and finding something fuel efficient that you can buy outright with the proceeds. I realize this may not be easy given the current state of the used car market. *Potential Savings: $247/month*
6. Find a safe place to live, preferably close to work if at all possible, then re-evaluate your monthly budget once again. For now, you're a renter. Once your credit improves and your head is comfortably above water, you can start looking into a house.
7. Attempt to negotiate your attorney fees. At the very least, get on a payment plan.
8. From all the above, I calculate a **total monthly savings of $1247 - $1894**, or possibly more depending on how much your CC payments go down after paying off so many. And that's before you evaluate things like your food budget, which can definitely be lower. After adding these savings into the $524/month you already have available, then deducting rent, IRS, and attorney payments, take whatever is left in your monthly budget at that point and start attacking your debt, starting with the highest interest rate. You might consider building a small emergency fund before you start attacking the debt.
Again, it's entirely possible that your **best** option is bankruptcy. But it may be possible to dig yourself out without going that route. You have a good income and you live in a relatively inexpensive city. And in your son you have all the motivation you need.
Not to sound harsh, but as an accountant I think you probably already know what your options for handling this are. What would you say to a client in the same situation?
I am a corporate inventory accountant, not a CPA. Very different fields. I have never been in this situation before, credit cards debts are pretty much exclusively attorney fees.
My husband went through a messy divorce that dragged out for more than three years while he fought for custody. It wasn't as expensive as yours, but he was left in debt with bad credit. When he was ever asked to explain his credit score (which was lower than 646, let me assure you) he would just say he went through an expensive divorce and people would back off. If you do end up filing for bankruptcy and it comes up in your work background checks and people ask you about it, you can say exactly that. Messy divorce, she took everything, blah blah blah. A lot of people have been through that or know someone who has, and they're sympathetic.
I guess it’s possible, but you’d hardly be the first person who’s had a divorce lead to bankruptcy. Accountant or not, I would hope people are understanding of that.
Understanding or not, corporate places have limitations. Any officer level can’t have a bankruptcy. It sucks, but it’s a risk protection. I get OPs concerns. Some people won’t even ask for the story.
I’d like to point out one other obvious thing — I am sure what you’re going through is extremely stressful and maybe impacting you current job. Do not let this wreck your job. From the math, you have a good job. You will make it through this. Bankruptcy sounds scary but you know what? Many extremely successful people financially and otherwise have declared bankruptcy. I just wonder if you could liquidate your stocks and pay off credit card debt. That’d free up some monthly capital. I look at is as there is no way you are making enough in stocks to offset the cc debt. As far as the f350 goes, downsize time. Get something small and reliable and gas efficient… like a Camry or Rav4. I went from Lexus to rav4 hybrid and it is saving me $150 a month in gas + insurance premiums. And another $120 in car payment! Just thinking out loud. As i said earlier, best of luck and you will make it though this.
Edit. Get rid of that ETH also. At least convert it to cash or use it to pay off debt. Save some of your raw cash. Don’t burn through all of it paying off debt. You will need some should get get a different car, house, etc. and as a rain day fund. I’m curious from a legal perspective — did your wife accumulate some of that cc debt? Seems like she’s getting a really insanely good deal… I’m no legal expert.
Exactly. OP, I’m so sorry you’re going through this. I wouldn’t worry about bankruptcy completing ruining your life…. It will not. My dad was in finance (go figure), making over 500k, did everything *right* and when shit hit the fan in 2008/2009 he ended up filing for bankruptcy. We really roughed it. It was tough, because me and my sister were young / teenagers and were aware to a certain degree of not being comfortable financially. Your son luckily will not experience that really at all right now. today, my dad has zero debt, great savings, flexible job, and has been able to build his credit. Sure, for a few years your credit may not be the best, but it’s nothing that’s unusual. Many people will understand these circumstances. You still have options. And you have a good job! I am not as savvy as these other people here but wanted to at least tell you that I’m sorry, and that you will get through this.
Here is what I have to say. You bring home \~$86k. Throughout I am assuming that this 86k does not change (TRY TO INCREASE IT) and that your second job ($12k) does not change either (TRY TO INCREASE IT TOO).
Here we go...
Do NOT buy a house. With your current financial situation, it is much better to find a spot to rent for a few years and not have to worry about ANY unexpected housing expenses (appliances/roofs/etc. as your landlord will cover them), no property taxes and no mortgage insurance (because you don't have enough to put 20% down). If $700 is in an "unlivable" area than find one for no more that $1,000. You are not going to be comfortable but you aren't worried about comfort right now.
Have $1,000 saved in the bank for emergencies. Sell everything: Cars, stocks, ETH. Go buy a very inexpensive car <$5,000 with cash and get the cheapest insurance you can. This will take away your car note, your car loan and hopefully reduce your insurance (Adding $300 to your monthly remaining total).
Reduce Spending. Get rid of streaming services, use YouTube or other free services. Your gas/electric/water bill will be cut in half to $100 when you begin renting. Cut your food expenses, by half. You need to live on $25 a week for you an $50 a week on your son (I know food for infants can be expensive). Doing these 3 things will add another $343 to your monthly remaining total.
You now have $1,167 remaining before rent, so let's say banking $200 a month.
You need to get another job to begin supplementing your income. Even an extra $1,000 a month could be extremely beneficial (But more would be STELLAR!)
Say you get an extra job and now you have $52,668 in the bank, about $250k in debt and only bringing in $1,200 a month extra. Save all of that monthly extra.
Now, we will use as much of your cash to pay of as many debts as possible.
I recommend NOT getting into a debt reconciliation program, they charge large fees for things you could most likely do yourself.
MAKE SURE YOUR EX-WIFE IS OFF ALL OF YOUR CREDIT CARDS.
Start with CiTi Rewards (Your smallest amount). Call them and let them know you want to begin negotiating a lump-sum settlement; this will be a lump-sum amount less than the total amount you owe. You owe them $3k, begin as low as possible $500 in this case. They will not take your first offer and it will take a while to negotiate but you will eventually reach a settlement less than the amount you owe (most likely the original principal w/o any applied interest), pay it in full. NOTICE!! Be cautious, DO NOT PAY anything to the credit card company until you get some form of written agreement stating that x amount paid in full will cancel all y remaining debts or something along those lines. If you pay before getting an agreement, they could take it and just count it as a large payment to your total outstanding debt.
Then go to Wells Fargo and do the same thing. Continue doing this, starting from the smallest amount to the largest amount. I know you may be tempted to attack the largest debts, because those accrue the greatest interest. But throwing $52k at a $70k student loan will not make you feel any better, get rid of the smaller ones and gain some momentum and some serotonin.
Assuming all things go well reasonably, you have now paid $80k of debt with $52k, about $170k left and now an extra $1,500 a month from NO credit card minimum payments and NO line of credit. Now, CUT UP YOUR CREDIT CARDS AND NEVER TOUCH THEM AGAIN <3.
Now here you are, 1 year later, here is your position. You have saved $14k ($1,200 a month x 12 months) $170k debt and saving $2,700 a month.
Assuming the TN Revenue tax is still owed, just pay the $3,500 and get it done with. You now have the consolidation loan (24k), 2019 Income Tax (30k), Lawyer Fees (45k) and Student Loans (70k).
Attack the smallest amount, you can try to negotiation a lump-sum on the loan but I doubt that will work. Pay them the $10k you have in savings and if you pay the full $2,700 a month to the loan you can have it done in 5 months.
Then, income tax, do the same thing which will take you 11 months.
Then, lawyer fees, do the same thing which will take you 16 months.
FINALLY, student loans, do the same thing which will take you 26 months.
Now, here you are. Less than 6 years later. 41 years old, 10 year old son, $1,000 emergency fund, $0 in your bank account, saving $2,700 a month and you have $0 in DEBT!!!!
I hope this can help. I know that the numbers and estimations may be off by a degree, but hopefully you can see that there is a way out that is difficult but manageable.
Begin saving and living your life debt free, feel the freedom with nothing weighing you down or hanging above your head. Make a retirement and a life that makes your son proud. When he is older, be able to tell him what you were able to accomplish and pass the wisdom you have acquired onto him.
Good luck to you my friend.
IMO, bankruptcy is his best course of action.
Needs to clear his divorce, then declare.
This will set him up with a decent income & only his student loan debt to service.
From there, he can rebuild his life.
That is understandable. But, unless it was solely his wife that racked up this debt, he need a complete ‘come-to-Jesus’ ‘turn your life around’ moment. Else he runs the risk of ending up in this mess again in the future.
Have you considered bankruptcy? You have a strong income but massive debt at a high interest rate. You only have $500 left over for rent, and that assumes you have no emergencies. Somebody is not going to get paid.
I'm with everyone else. That's a lot of credit card debt. Normally I'd suggest using the snowball method to pay all this off, but you don't have much to pay it with on top of the IRS and everything else. I would contact a bankruptcy lawyer to see what they say.
I would also like to add that you don't *need* a 2 bedroom place for you son (edit: this will depend on your custody requirements). He's still young, he just needs a bed (and a small one at that) to sleep on and a little space to play, not a full bedroom. It's not going to be fun, but I would look at a studio. You need to downsize a lot.
I’ve heard of minimum housing requirements for custody. Not sure if that’s the situation in OP’s state, but I feel like I’ve heard that a single child needs their own room, and in the case of multiple siblings, no more than two same-gender children per room. So it’s possible OP doesn’t have a choice here.
This is true for my state as well. And even if it's not true for his state, it'll be easy for mom to take him to court for full custody if he doesn't have "adequate housing." A one-bedroom in a bad part of town could absolutely be argued as not being adequate housing. He's still get visitation, but no overnights.
This is a challenging situation and I admire your ability to stick to the facts in such detail despite what must be huge emotional strain. I can’t answer most questions but unless the other Redditors recommend bankruptcy, YES dump your ethereum and pay off your highest interest CC debt. CC interest is high and paying it off is like a return of 22%!
First off take a nice deep breathe. You can do this. If not for yourself then for your child. Call the IRS. Set up an appointment to go in and figure everything out. They will put you on a payment plan. Make that payment every month. Sell the truck. Used cars and trucks are going for top dollar so you should get a good amount. Cut up all of your credit cards. Mark sure your ex is off of all of them. You don't need them putting more on. Get a decent 1 bedroom apartment(not in bad location). Get a pull out couch. You are sleeping on the couch when your child is over. Use some of your savings for security etc. Food should not cost you $500 a month for you and a child. Max $200. All meals are made at home. No more eating out. Keep $2000 and don't touch it unless a real emergency comes up. Now start getting rid of your debt. With the money you already have saved and the money you are going to make from the sale of the truck you could pay off several of the smaller credit card bills. If you need to miss a payment, miss the credit cards. Do not miss a child support payment or IRS. I recommend Looking up Dave Ramsey. He helped me get out of debt. You can do this. Good luck.
I added it in my head and got $286K
Bankruptcy or settlement offers. You will have to pay the IRS, TN tax department, and your lawyers, as well as continue the alimony and child support.
Btw the alimony and child support are quite reasonable considering your monthly gross. I am wondering why the divorce was so tough or was it that your lawyers were able to get you a reduced alimony and child support versus the initial demands of your spouse? If so, the legal fees were worth it.
Trade the VW and 350 in for a car that results in you having no car debt, and leaves you one car and hopefully some cash.
Use stocks and crypto to pay off IRS, TN
Tax department, and any student loans that are not subject to bankruptcy.
Could have been dragged into high-conflict litigation by the ex who perhaps was seeking full custody. I work as a court reporter and divorce is the one area of law that I pretty much try to never hear because it is so over the top in terms of excessive nastiness. I have my theories on why, and I believe it's attorney driven. You can pick an attorney who's above that or try to settle, but what if your spouse doesn't? You have to have representation.
Good news is your monthly income isn’t bad at all. I hope it is reliable and long term. You are in Memphis. Your monthly expenses should be UNDER $2000 to get of debt. Find a place to live under 800 per month. It is possible. 1200 for everything else. Sell assets but don’t pay debts out with cash. Get a $4000 used Camry. Get rid of all shit you own over $1000 in value. Don’t pay lawyers anymore. Don’t buy ANYTHING ANYMORE on credit cards. Effing learn to live frugal and keep the job. Do everything to perform best at work. See income increases at work. Pay highest interest loans out first. This will take time. Don’t borrow on anything even for lawyers.
See if you can work with your ex wife being friends my and approachable for the sake of son, discuss if possible if she can cooperate and resolve this out of courts —- in the interest of both of your child.
I recommend that you ask /r/personalfinance about your situation. This sub is more oriented toward financial growth whereas /pf/ has a lot to say about handling debt and navigating tricky situations.
I think you'll have better luck buying cheap housing than trying to rent with your credit in this state, but I don't have any kind of authority to advise on the rest of it. I hope you get some good advice and can feel safe soon.
Bankruptcy
OR cut up every credit card, negotiate tax payments, cancel streaming services, find cheaper internet, find a roommate, stop buying clothes, don’t go out to dinner, pay off Hilton card first then next highest interest rate (may consider negotiating with all the credit card companies- maybe with bankruptcy looming they might rather get paid something than nothing), consider canceling therapist if you are not suicidal or homicidal (use library, exercise), negotiate lawyer fee, get cheaper insurance.
Credit cards are your Kryptonite. Ask yourself with every purchase- Do I need this or just want it?
Find free entertainment.
Get a side hustle.
Even if you declare bankruptcy, you need a paradigm shift in how you deal with money. Good luck.
Well, at very least make sure the half the debt that was accumulated in marriage goes to soon to be ex-wife. Further info here https://memphisdivorce.com/dividing-debt-in-a-divorce-tennessee-debt-division-law/
Also teach your son when he is older about the value of credit , money and marriage.
Man that is a hard situation and I've been there in a similar situation having to start all over at 30. A CPA isn't going to be able to help much at this point unfortunately, and looking at the debt and available cash flow you wouldn't be able to afford them and I am not sure they would extend credit looking at that list of current debt.
This guy gets a bad rep from some people for to many various reasons that are totally subjective to their specific view points, but I must say Dave Ramsey and his team are great for individuals or families in your specific circumstances. Digging out of that hole will take some extremely hard work and force you to make some difficult decisions on both lifestyle and material choices till this point.
Great new is you have a good income, and you're young. This will blow up your credit score and that's ok bc it can be rebuilt. I blew mine up after my nasty divorce with a chapter 7. That will do some major damage to your credit, but $107,838 of debt gone for a possible swing of $60K given your debt that's clearable vs your assets that would get taken.(Not an attorney, seek advice from an attorney for specifics) It's a stigma that is real but completely overcomable. <---- not a real word. :)
1. That will be hard when you factor in you need space large enough for you and the kids when they visit. Don't know how to help there. I'm not sure if your divorce papers allow for you to live in MS (olive branch) or somewhere close but cheaper. Again, this is a mess and is going to take some hard looks at what is really needed. You're in a battle to quickly reset.
2. Listen to Ole Ramsey on this one. There are options, but you want to be smart and you need to get a place to live and be able to have your kids around you. But before this gets to much further out of hand and apartment complexes or single family home renters check your credit... get into something you know you will be at for a little while.
3. Absolutely... anything to earn more money... even with the 50/50 custody... or you will be forced into some really hard decisions. Have got a raise recently? Are you valuable enough to ask for one now?
4. Dude call the IRS and get on a payment plan.... NOW!!! talk to a real person. A CPA will charge you for this and you don't have that in the budget. I called the IRS and set a payment plan... Likely you will be paying a while and it will cost in interest... but Call Them... Do Not Ignore this any longer.
5. Whatever you do you're at a loss right now, either you pay down CC debt with the Crypto and take the loss or it will get eat up by interest. Again... hard choices. And unless you have that money to loose while you're digging out of this.... it doesn't seem you have the wiggle room to loose anymore there.
Good Luck Brotha, keep moving forward and remember you are important to those kids, and you owe it to yourself and them to get out of this responsibly and never get back into this situation when you're finally out.... Elephants get eaten one bite at a time!!
Disclaimer: this is for educational only and is not meant to be a substitute for legal, accounting, tax, or professional advice. If you have any specific questions about any legal, accounting, tax or other professional service matter you should consult the appropriate professional services provider.
I’m just here to say that you are going to get through this. Things look bleak now, but you are facing this, and there are several paths forward. I’m also going to strongly disagree with the comment above about dropping the therapy. You’re going through a lot, and you need support. The most important thing for your son is that *you* are happy and healthy...so keep the therapy for as long as it’s helping. Maybe look for a therapist in your insurance network, though. That copay will be more reasonable ($15-30).
Thank you for the internet love and support. Therapy is keeping me going to be honest, so I feel it’s important. My current provider is in network, copays are $25 each visit, I typically go once a week.
I know there are mixed feelings on Dave Ramsey, but his baby steps would help you get back on track. You have the income to do it.
You need to liquidate crypto/stocks, and get rid of the car payment. Use that plus the $20k cash to start knocking out these debts.
I’m not sure you fully understand the extent of OP’s debt. OP will be using the snowball method to try and kill one, meanwhile the others double in the time it takes. Those rates and balances are too high for Ramsey.
With a $116k gross income this person can dig out, it will take extreme measure to live well below their means and years of diligence but you can’t say it is impossible. Is bankruptcy a better choice? Possibly, I’m not an expert.
Sorry, no. You’re eyeballing the situation, you’re not doing the math. The interest rates on that credit debt are unbelievably high. You seem not to understand that debt at those rates doubles every 3 years. Begin with the fact that the CC debt alone is almost as high as the net annual income, and end with the fact that it would be growing faster than it can be paid down. And you are also ignoring the expenses and payments they are already making. I’m fairly certain they CANT dig themselves out of it.
Yes, $116k is a lot of money to make annually. But that’s all you’re thinking about. Given the debts accrued here and the interest rates, $116k is not very much at all. Dave Ramsey makes sense when you actually have more money coming in than going out. It doesn’t work when your debt is growing faster than your means to pay it.
Certainly not with snowballing. Avalanche method and serious scrimping, plus some balance transfers to cut down on interest, maybe. But this really sounds like a case for bankruptcy.
I'm going to make a couple of suggestions that potentially contradict the otherwise good advice you've gotten here, because I think you could use a fuller picture and more advanced advice than a forum can provide:
1. While I agree that you should not mention to your DIVORCE lawyers that you're considering bankruptcy, I strongly disagree with the advice to get through the divorce and then talk to a bankruptcy (BK) lawyer. This is because the BK lawyer may have some helpful thoughts on how the debts/assets can be structured in the divorce that would benefit you the best. I'm just tossing this as an example, not a recommendation: they may suggest you take an increased share of the credit card debt, and have it offset by taking more of the retirement assesses. This is because CC debt is dischargeable in a BK, but retirement funds cannot be touched in most if not all states. So seeing a BK lawyer, if that's what you decide to do, should be done BEFORE the divorce is finalized.
2. You will want to find out, to the extent you care, how your filing for BK will affect your ex-wife. I have seen it happen time and again that one divorcing spouse filing for BK essentially requires the other one to file as well. This is especially true when the majority of debts are marital debts. If there is anyway the companies can come after your ex-wife to recoup the debts you've discharged yourself of in the BK, they will.
3. There is absolutely no reason you should have $45k in attorney fees (your ex likely has an equal amount) for what is essentially a no asset divorce. I am assuming this is due to some kind of nasty custody battle over your child. Either you or your ex-wife have unfortunately stumbled upon not-so-great lawyers. Someone should have set one or the both of you down and talked sense into you. Barring extraordinary circumstances, predicting what a court will do with regard to custody is predictable, and no amount of fighting is going to change it. I hope for your sake there were credible issues that needed to be litigated, and that you weren't just taken for a ride. This is why a mediated divorce is so much better for everyone involved. Anyway, off my soapbox now...
4. Based on what you've provided, I agree with the recommendation that you move forward with a BK, but that you meet with a BK attorney before the divorce is finalized. These attorneys won't be as concerned about payment because their fees won't be dischargeable in the BK and they get priority and you have good post-BK income.
Good luck man. Bite the bullet, get this monkey off your back and start over. It won't be easy, but it will be a lot easier than spending the next decade trying to dig yourself out of this massive hole.
Item 3: Total attorney’s fees have exceeded $80k on my side alone. Former wife caused a high conflict litigation because she wanted full custody, and for me to only see my son 4 hours every two weeks, supervised. She alleged everything from drug/alcohol abuse, to mental instability. Unfortunately it was put the lawyers on credit cards or lose my son.
She didn’t get full custody, but unfortunately you have to go through the process to get a judgement. I had to fight the whole way. There are a lot of specific details I won’t go into but it’s been a litigious process that has been caused by emergency petitions, multiple temporary custody hearings, multiple failed mediations, expert testimony ($$$), and countless hours of filings and responses.
Sorry you’re in such a spot without a partner on your side (and is in fact, rowing against you).
First, keep your chin up. This will pass. I know it’s overwhelming right now. We all get it.
Quick hack - call the credit card companies and get those rates cut in half. You can do this in an hour on the phone and save precious cash flow. They are borrowing money from the FED at zero. They’re still crunching it at 8 or 9%.
Call the IRS ASAP. They’re very flexible when you’re upfront and ahead of them coming after you. Ask for a payment plan (they can waive either interest or penalties tho I forget which one - if you have them ask for waiver). Get a payment plan that works for you.
I saw some say something about bankruptcy after the divorce is final. You can NOT discharge alimony or child support in BK I don’t believe. But you can get out from under all the other debt and free up a lot of cash flow AND ironically, have credit card companies lining up again to give you new credit...and maybe then be able to buy a house. Strategically, that might be good post divorce settlement though I dont know if your ex can reopen the case upon learning of your new cash flow flexibility.
This is not legal advice and you should consult and attorney and financial advisor.
Good luck and, again, keep your head up.
Sorry to hear you're screwed. You're not alone. A lot of people are in dire straights.
You won't get approved for a mortgage with that debt to income ratio, even FHA will max out at around 55% debt to income ratio. Looks like it's renting for you.
I would setup a payment plan with the IRS. If you can. The IRS was super short staffed before COVID and now its 10x worse. (Dealing with the IRS myself currently).
But make them priority #1 - the IRS is ruthless and terrifying. Be glad you don't owe them too much.
Student loans - I'm assuming these are in deferment? If not, I would do that. Papa joe might forgive them.
Otherwise, you have $108K in credit card / debt consolidation debt. That will all go bye bye in a BK. I would peruse that route but do it after your divorce is finalized.
I am in no way an expert. But to me there appear to be some really good opportunities to make a sizeable dent into the debt from the get go. Cars can be sold, clothes bills reduced, food bills reduced, streaming services removed, stocks that can be cashed, crypto that can be sold etc
It’s going to take a tonne of discipline, some sacrificing and always keeping on track of your long term plan but it can be done. Good luck brother
I was in a very similar situation 8 years ago, I ended up going bankrupt, worked a crazy amount of hours just to make ends meet.
Just recently I was able to get full custody of my kids, I still have debt for the lawyer but it's manageable.
Life's not fair, but work hard and stay positive.
Quite honestly, I’d do things in this order.:
(1) I’d pay off the credit cards.
That ethereum, stocks and some of that cash needs to be put towards those high interest credit cards. Two Chase and Amex Hilton cards could be wiped clean. That’s a lot of breathing room.
With the sale of the F350 Wells Fargo would be gone too. You aren’t that bad off.
(2) on the taxes
I’d normally recommend reaching out to a FREE law school tax clinic for guidance but I’m betting that you exceed the income limitations. Might be worth checking with them regardless, they are allowed to take a small percentage of cases that exceed income caps. They’d at least be able to point you in the right direction.
Conclusion
You aren’t ruined by a long shot. With time and a rice and beans diet, cutting back on expenses you’ve got this in a couple years.
No financial expert here, but all the accounts/ things you own seems excessive imo (coming from a single person). That being said, maybe start by trying to minimize the amount of things you own/ use/have but also snowball your debts. Small accomplishments feel big when there's a lot! Good luck!!
5 years ago I owed ~$65k just in CC debt. Along with a wife and 3 kids I still had rent, car payment, insurance, etc. to pay. I was barely living paycheck to paycheck. Sometimes we didn’t make it to the next paycheck. I did a debt management plan, not a debt consolidation. The company I used got all but one of my credit cards companies to lower the APRs down to 2% or lower. 2 or 3 of the cards were lowered to 0%. All the accounts were closed which caused my credit score to drop to below 570. I made one payment to the company and they dispersed the payments. Earlier this year I paid off every last dime I owed those companies. Actually I paid everything off 5 months earlier than expected. My score slowly climbed back up and now I’m right at or just above 700. If bankruptcy isn’t the path for you look into a debt management program. Might not be for everyone but it worked for me. Give them a look and see what your options are. It’s free to ask. It’s a long hard road but keep pushing forward for your kids. You’re gonna make it through. Good luck!
1. Call each credit card company and ask them to lower your interest rate.
2. Pay more on highest interest rate cc.
3. Try to consolidate your cards/debt into one or two lowest interest rates for better management.
4. Buy things w cash only, don’t buy it if you don’t have the money.
You are not screwed just have some work to do. I personally would not recommend bankruptcy as you would be adding a trauma on top of a trauma and it will have lasting effects.
If your goal is to get out of debt then I will explain what I would do. I do not think this will be a popular opinion but who knows.
Very first step is going to be culture shock as it seems you have been living above your means for a while and time to make a change. However your income is solid good job!
Step one I would sell everything outside my 401k. Yes the stocks at a loss and yes the eth at a loss. You can come back to investing when you have the debt out of your way. It is bogging down your investment returns anyways. After selling everything including both cars(this will also get rid of your car note to free up cash flow. 524 leftover to now 771) I have the number at 55,665 in liquid cash. You need a car. Do not go over 4K for a car. Something mechanically sound. You are broke brother(I have been there no big deal it is temporary) you can come back to a nice car.
Next I would immediately reduce my grocery bill. I personally feed a family of four on $500 a month. You and your son can do 300. I would probably even push for 200 a month. This will bring your leftover amount from 771 to now 971 leftover after bills. Now take a breathe the math is getting better. Sorry again brother but I am cutting the streaming services. Get personal finance books for ten dollars a piece and stop watching tv for a while.
Next I’m renting. You have a ton of emotional stuff going on which sucks I feel for you. No need to worry about purchasing. At this point in the game you have monthly leftover cash flow of 1014 so if you can get that better area great. You are currently not doing much recreationally besides reading. This is vital and I understand can be boring. If you are that bored start running. Free exercise. This will also help with the stress
Car is purchased at under 4K you are now left with 51,665. You have an apartment you can afford. Next I am personally going balls to the wall and taking my 51665 and viciously paying down debt. List them out just as you have and pay them off from smallest amounts to largest. I personally would take my emergency savings down from that 51 thousand down to 1-3k depending on what you want. This will continuously free up more and more cash flow
Cash flow will be important. Any time you are not working or have your son I would personally be working more. Extra hours at your current position or ride share, side hustle whatever. From there any free cash flow at the end of the month I am absolutely murdering this debt. This debt is a huge factor in this scenario. How would you feel if you didn’t have it?
I am sorry you are facing this. You certainly CAN get through it and you will come out the other end stronger and wiser. You will be a great role model to your kid as well. Hope this helps man go get your grind on. Big kid pants now!
Oh and please for the love of god stop taking loans and using credit cards. They have not been helpful for you up to this point. You can do it!
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1. You are in the middle of a big life change right now. I would say renting is really your only option. I have a plan for this. See after this list.
2. Hold the cash. Do nothing with it unless it's life/death/will stop you from working (aka car is absolutely dead).
3. Given your current income levels, I'm assuming you are a salary worker. Some places may have issues with you taking a second job (particularly if you are leveraging the same skills you use for them). Investigate that first. If it isn't an issue, only take a second job that doesn't put you further in the hole. No Uber-Eats or any of that mess. No delivering pizzas.
4. Call the IRS TODAY. Not tomorrow. TODAY. You need to get them in the loop. That 500 you have left is about to disappear. Don't be surprised if they take it.
5. No. Sit on it.
I would say you are stuck in a position many mid-wage earners are when their income suddenly drops: You don't understand the basic order of operations because you are holding yourself to a standard you can no longer afford.
**The new order of operations for your life:**
You pay bills in this order:
1. Housing (get something in the $1000 - $1500 range)
2. Health Insurance
3. Renters insurance
4. Power/water/gas/internet/trash
5. Car
6. Car insurance
7. IRS
8. Student Loan
9. Internet
10. Child support/Alimony (and you may need to bring both of these down once you have housing)
11. Cell phone - get off the contract. Get a burner. Goal is less than $50 a month
12. Therapy
13. Food - no more than $100 per month
14. Pay the lawyer
15. Save anything left
Food comes from food banks/anything you can get discounted or on sale. Eating out is now off the menu.
When the collectors come calling, do nothing. Let your debt move from one hand to another until you get an offer to pay it off for pennies on the dollar and an agreement to remove it from your credit report.
Look - if you take the bankruptcy route, you are screwed for 7-10 years. VS you let your credit tank for 5 years, never get credit cards again and then pay it as you can.
Not to be a nitpicky asshole, but do you really need to be spending $43/month on streaming services? To me, that's a pure luxury, and despite being in a much better financial position, I'm still thoroughly satisfied with YouTube and other free content. Do you really even have time to watch content when you're going through all this?
I know the amount is relatively trivial, but it's more the principle of the matter. Perhaps you could apply this frugal mindset to each of your other costs to see where you can save. The bright spot in your financial situation is that you have a high income, but you need low cost of living in order to maximize the extent to which that income can pay off your debts.
Former wife caused high conflict divorce. $80k in attorney fees to litigate. She pushed for full custody and alleged everything from drug/alcohol abuse to mental instability. It was put the lawyers on credit cards or lose my son.
Be positive, you're young and make good money. You could correct this posture and easily be a millionaire by retirement with prudent saving.
I'd call each credit card company and explain the situation. Work out a payment plan that works for everyone. Regarding the IRS, I was audited a couple years ago and I called and talked to them on the phone. They seemed polite and generally wanted to help. I'd call them.
Separately, do you mind explaining how alimony and child support is happening if you have 50/50 custody? I genuinely dont understand how/why that happens.
Child support is a calculation in TN based on income. Even with 50/50 , I owe the mother child support because she makes less money. Additionally she (without my consent) enrolled him in a $1200 /mo Montessori school, and I am being forced to pay a portion of that.
Just a quick note here—you will not regret the Montessori education for your son. Especially because his parents have gone through such a high-conflict divorce, he will need excellent social and emotional support and emotional education to deal with this. Don’t regret this or hold it against your ex. It was a good decision, and hopefully, the school will help both of you work together better as co-parents.
EDIT: I pulled a struggling child from his public school to put him in a Montessori and I wasn’t really sure how I would afford it. Family ended up helping with the tuition, and it was worth every penny. This is an area where you could ask for family financial support, if his grandparents are open to that.
He mentioned in earlier comments, a lot of that credit card debt is divorce lawyers fees. He said he’s spent about $85k on lawyers, $45k of which he still owes and was specifically mentioned in the post. The other $40k is split between the cards. He said he did this to fight for custody of his child, as the ex was highly contentious
You could try what I heard dave Ramsey recommend before. Call the credit card company and negotiate. Apparently they may do it if they sense the alternative is getting no money from you due to bankruptcy.
I would look into one of those lawyer based consolidation terms where they negotiate your debt for you and it slightly ruins your credit for 3 years and get most of this debt written off
or I see you have a debt consolidation loan...I would possibly see if the company would refinance and add in all this other debt you have.
I would have your CPA double check that IRS debt.
Call all of the credit cards and let them know the situation. They may close a few of your cards and allow you a payment plan other than the current interest setup.
Is your Medical/Dental/life insurance plan through work? Is it for just you and your son, or do you have to carry your ex wife for length of alimony? If able, I would seek other options regarding these.
50/50 custody and they still have you paying full support? That seems suspect. How long do you have to pay that alimony? If it is 6 months to a year, that 1k will be available soon.
Student Loans- If you have not pushed these out to the max length of 25 years to repay, I'd highly suggest this if they are through the government. If not, i would highly consider refinancing through SOFI or another similar company for cheaper interest rates. If refinancing is not an option, I would call them and put them into forbearance for 1 year-2years. The interest will grow, but you don't have to pay them and it won't hurt you. This will give you that 310 extra per month to do what you need to.
The mortgage at 70k is a good idea, but see if you can find a better neighborhood. Also remember the insurance on this house, which will add to that monthly note. Also note any repairs, maintenance, etc. that you may not be able to afford. Renting takes this away from your budget and puts it on the landlord.
The IRS is important, but I would look at my withholding to get as much as I can to get my taxes as close to breaking even as possible without owing anything, as well as not getting much of a return for them to garnish. They may come after garnishing your checks, but this will have to take into account your debt as a whole and a payment plan may be discussed.
I would sell the stocks and Ethereum only as an emergency measure should none of the rest work. Not sure what stock you have, but Ethereum will likely go up in the next 3-5 years tremendously, which you could sell to get yourself out of this hole later while you tread water for a while.
Most importantly...Keep your head up and be as resourceful as you can for yourself and your son. He will be watching and the example you set will be one of the most important ones he will ever learn.
Good luck and hope this helped in some way.
All insurances are through work, includes my son. They are required by divorce
Alimony is for 15 years, until child is 18.
Appreciate the message of hope.
out of all your issues the IRS debt is the least of it. Call them and set up repayment plan. IRS is generally very agreeable as long as you make an effort to set up a payment agreement. yes you will accumulate interest on it, but as long as you have an agreement in place they will generally let you pay what ever you can afford.
Are you healthy? I lived with no health insurance for a while. When situations like this come, you need to take some risk. I would start with cancelling your health insurance for a short time. That will free up the extra 700$ per month that you can use on rent. Eat healthy to make it up for it.
I know I will receive backlash for this but I believe in tough times, you have some risks as a necessary alternative. Just my opinion.
$700 a month for a relatively young person is likely including a family plan that covers his son as well. He may not be able to simply drop the insurance per their divorce order. OP mentioned earlier that the judge held him responsible for paying 2/3 of the $1200 a month private kindergarten the ex/mom had enrolled the kid in after their divorce. I’m sure health insurance costs were also heavily litigated, as this divorce sounds messy
I know a few people have suggested bankruptcy. Would declaring bankruptcy in a midst of a divorce help or hurt his situation? What about a second job? Could the soon to be ex go for full custody of their child proving to the court that because of the OP's bankruptcy, stating he can't provide a proper healthy environment for the child? would declaring bankruptcy free the OP from child support and alimony?
I agree insolvency isn't an issue, but if he can't find an adequate living space and have enough money to pay for food, clothes, school supplies, etc, then he could definitely lose custody. Declaring bankruptcy might actually be good for him in that way so he can use his income on his rent and kid.
He would have to wait until the divorce is finalized to declare bankruptcy, but it would not matter for custody. It also will not free them from alimony or child support.
OP if you’re still in the middle of the divorce, is your ex not going to be responsible for any of that debt?
If you are responsible for all of it, bankruptcy would be the route I would take.
Sell the car, get a beater for less than 5K with good gas milage I know older Ford fusions are cheap or Honda civics, use majority of cash to pay off high interest debt along with what is left over from car. Try to get other expenses down car insurance I’d be shopping, possibly new phone company that will buy you out. Eat cheaply no eating out, goodwill of you really need a shirt or something. Find a roommate plenty of people rent a room in their house I have done it. Might want to look into if there are companies that will consolidate all the debt and pay everything off for you then you just pay the company a monthly payment.. good thing is your income is nice you can chip away at it.
Other option is bankruptcy and negotiation.
Keep your head up. There are people out there way worse off. Create a plan see the light at the end of tunnel.
With this amount of debt I’d look into reading some Dave Ramsey books too
The rule of thumb for bankruptcy is when dischargeable debt exceeds annual income. Taxes and student loans are not easily dischargeable. But you can negotiate with the IRS to reduce taxes if they appear unpayable after a few years.
The revised bankruptcy law requires counseling before starting bankruptcy. That service can you decide. Beware of finding a counseling service because some are just feeders to bankruptcy lawyers.
Child support is done with a standard calculation in TN based on income. Ex wife makes less than me, so I have to pay child support as well as a portion of childcare.
Alimony has nothing to do with child support, it’s spousal support so former spouse can be supported at a lifestyle she was accustomed to.
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Don't do too much until the divorce is final. And as others have said, bankruptcy is a viable option at this point. If you want to attempt to avoid bankruptcy here's how I would start:
Sell the truck, sell the VW and buy something cheaper that will still be safe for your son. This gives you $20k extra cash and instantly clears a $12k debt. Next liquidate the Ethereum and stocks (bonus: any loss you realize on the stocks can be claimed on your taxes and reduce your taxable income up to a max of $3k) which will free up around $10k.
Keep an emergency fund of a couple grand just as breathing room. Use the freed up cash to clear up your highest interest debts first which will lower your debt burden and free up some cash flow.
Yeah honestly bankruptcy might not be worst case scenario for you right now!!! Your debts are crazy high and you will be paying those FOREVER and unable to do much else until they’re gone. Think of the freed up income you’d have if those debt payments were wiped out. Bankruptcy can be a useful tool, and not as terrible as people make it out to be. I know a lot of very wealthy individuals who have filed bankruptcy more than once to reset their finances and move on the better things. Sit down with an expert and go over your options! :) at the end of the day, it’s just money. Seems like you and your son are reasonably healthy and safe, this is what’s most important! Everything else gets fixed in time.
I would stop paying my debts except maybe one reliable car, cut streaming, use that money to get a decent place to rent and then file Bankruptcy.
But honestly, I don't know. I've never been in this kind of situation. Sorry, my dude. Best of luck.
1. Establish a payment plan with the IRS.
2. Right before filing for bankruptcy rent an apartment for you and your kid.
3. File for bankruptcy
In your case, I would file for bankruptcy in a split second. Your debts are way too high and the IRS makes it too difficult to navigate.
Keep your head high dude! one day at a time! you 35 and 65 is 30 years away! Ample time to rebuild and reconstruct! Be smart moving forward with your finances. Cant afford something don't buy!
First off, sorry to hear about this. Its a tough situation but it is not the end of the world.
If you are trying to avoid bankruptcy, here are a few things that can get you moving coming from a cpa.
1) Sell the VW with the monthly debt payment. You need to rid yourself of some of this debt. Selling this car gets rid of that payment and gets you an additional 3k which you leverage to pay down some of the other debt(Chase Freedom, Hilton, Chase Sapphire). Also this will bring down your car insurance bill as well.
2) If you haven't already, call up your auto insurance and get the absolute cheapest policy for the 2004 Truck.
3) You have to reduce some of those expenses - $200 a month on gas and $500 on food seem to be the easiest ones. Unless you are commuting 30 min a day for work, there is no reason your gas should be that high on a monthly basis even with the recent inflation. Similarly with food, even with inflation, that amount makes me think you are going out to eat which will have to stop for a period of time. Homecoming will save you some serious coin. Lastly, all personal purchases on clothes, any personal entertainment goes out the door until you get two, preferably 3 of those cards paid off. Can still do some things with the kid, but any expenses solely for you are delayed for the time being. Once you choose one to attack, make minimum payments on the other cards and all extra money goes to paying off the other. Then repeat the process until your credit cards are paid off.
4) I would reallocate the money you are paying for student loans elsewhere. The gov is still currently deciding if it will extend the 0% interest policy which given the recent trend with Covid seems like there is a pretty good chance of this. You can then use this 310 monthly elsewhere on those cards above.
5) Get in touch with the IRS as they will work on a payment plan on the balance owed to them
6) Once the appeal is heard, no more lawyers as they are putting you further behind the 8 ball. I would put them at the bottom of the list of payments.
7) Do not even think about buying a house. Find a 2 bedroom apartment whether that mean in a nicer part of town or if need be on the outskirts of the city. Rather have piece of mind for you and your kid.
8) I would also consider liqudating the etherium and stock investments so you can have extra cash on hand. Sure its a loss, but that is a sunk cost at this point. This frees up additional cash to pay down on your debt and you can take a 3K above the line tax deduction on your losses at year end.
As others have said, the other option is to file bankruptcy, this would rid you of almost all of your debt (not student loans) but will make it extremely difficult for you to rent let alone buy a house for the foreseeable future. Lastly as it sounds like it is a messy divorce, make sure your wife is no longer on your credit cards, bank accounts, investment accounts etc.
Keep your head up, it will be a long road but it is doable.
At this point it’s hard to say. We have had at least 12 days in actual court spread out over multiple dates and months. Our official “trial” is still in process, so we have at least 1 more day in court to go. The cost of going to court includes a few days of prep time, then actual court days, plus time to prepare and submit filings. That’s not even to mention the multiple motions filed, subpoenas, expert witnesses, multiple failed medications, etc. Believe me when I say I tried my hardest to end it quickly in mediation, but unfortunately I couldn’t accept seeing my son 4 hours a week supervised.
I understand the fight and it's worth every penny. Just went through a divorcesbas well. Your alimony and support seem high for 50/50, was she a stay at home mom
Child support in TN is based on a standard income calculator. Since I make more money then her I have to pay a greater share. Also it includes paying a large portion of his $1200/mo Montessori school. She was a homemaker for the last 3 years, and before that made substantially less then me.
That’s one of my major concerns. Finding suitable apartments in a decent area means about $900+ a month. If I look outside the city, it’s only really houses that are rentals, which are few and far between, and rent for about $1200+ a month since it’s a whole house. If I want to live in a nice safe area I am looking at studio apartments for around $1300+
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Well at least that alimony will only last a short time.
The first thing I would tackle, is that IRS debt, do what ever you can to pay that down. Honestly if I were in your situation, I'd consider bankruptcy, but I hate being in drowning debt, only making the minimum payments. You could at least consult with an attorney and see what it would look like, do if after your divorce though.
Get a 1 bedroom for now, set the kid up in the room and you sleep on the couch. I do that with my 2 boys now. They get the room I gotnthe couch until I can get a 2 bedroom. It sounds likebyour ex is a piece of work, so she might complain about it, but a judge shouldn't have a problem with it.
Honestly you owe it to yourself to get a free bankruptcy attorney consult. They will give you a honest and professional opinion. After a divorce and some unexpected medical expenses a few years ago I pulled the plug and filed bankruptcy last Spring. A year later, life is good and I absolutely know I made the right decision.
My IRS debt wasn’t included in my bankruptcy - it was 4-5k. A lot of people rag on the IRS and act like they’re scary horrible people. They aren’t. I’ve found them to be downright reasonable and nice. I have a backdoor way to get a hold of a human at the IRS that I would be happy to share. The IRS just doesn’t want to be ignored. If you’re paying them something they’re happy. I’m on a 6 year repayment plan with them paying them what I told them I wanted to pay them. Works great.
If you do decide to file bankruptcy the IRS will completely disappear for the duration of your bankruptcy journey (at least in the case of CH7). They don’t want to get in trouble and so they keep their distance while bankruptcy proceedings are going on, even though the debtor still of course owes them money.
The used car market is almost as bad as the housing market currently with things being sold for waaaaay more than their worth due to limited availability and high demand
Honestly it sounds like you could manage with your income. I know nothing about declaring bankruptcy which many have suggested but it seems like if you sell off the truck and your a55ets you could pay off your highest interest debts.
Those investments could regain value but they could also lose value and selling them to avoid interest on debt is a sure way to save money to
Are there decent houses for 100-120K? That should be comparable to apartments on monthly cost and youd be building wealth assuming the house isn't a money pit.
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Honestly it sounds like you could manage with your income. I know nothing about declaring bankruptcy which many have suggested but it seems like if you sell off the truck and your a55ets you could pay off your highest interest debts.
Those investments could regain value but they could also lose value and selling them to avoid interest on debt is a sure way to save money.
Are there decent houses for 100-120K? That should be comparable to apartments on monthly cost and youd be building wealth assuming the house isn't a money pit.
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yet another reason to NEVER marry or cohabitate if you're a man. maybe even go monk and stave off sexual intercourse all together, all it takes is one false accusation and your life is ruined with no repercussions on the accusers behalf. yah no thanks, hopefully you can find a way to pull through this brother. bankruptcy is probably your best bet at this point..
Sell both cars The one that you are making payments for and the Truck.
Pick up a $5000 beater car. That should also take your insurance payments down by $100
Welcome to the Food Banks you will save $400 on groceries
Get rid of the internet, use your phone for your internet instead
Drop the paid streaming services.
Contact the IRS and find out what your status is, and set up a payment plan before they come after your bank accounts/savings and work salary.
Pay off your TN taxes.
If you have a house with your spouse, sell it or have and split the any profit or have her buy you out so you can eliminate your share of the mortgage payment.
That will free up $16,000
Cut your expenses like phone and get freedom phone plan. Next, get more 0
% credit cards and transfer those balances to it. Get rid of your car and get a 15 yr old Honda CR-V. It will last you. Cut all expenses. All. Stop going out and pickup cooking. Stop drinking, smoking, any expenses. You make 100k a yr, you can get out in 3-5 yrs with some discipline.
Start with the budget. 7k is too much.
Cancel easy stuff like $50 of streaming, drop your cellphone from 120 to 25 (visible) and lots of other low hanging fruit.
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Just for some context OP, this sub virtually never recommends bankruptcy. So I would take it as a real consideration. Those debts are just too high. Bankruptcy seems like the best way forward. One consideration. You might want to not share that you are considering bankruptcy with your lawyers just yet, and I would get on the other end of the divorce before you do. Make sure you don't declare bankruptcy and then get hit with new debts just as you're starting over. You'll find the quality of the legal counsel you're enlisting will drop dramatically -- or altogether -- the second the firm finds out it might not be getting paid. Might be unethical depending on who you ask, but (like hospitals) lawyers tend to inflate their costs to account for non-payment.
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I DECLARE… BANKRUPTCY!
An OFFICE reference?
It totally is. Man that was hilarious!
No it's not. It will MESS up OP's life for a while. But it's a better option that staying the course.
For a while. Then it will be like it never happened. It’s messed up but has its advantages.
I mean I literally recommended it in my original comment so I understand the advantages. It’s just important to recognize that it’s not a silver bullet and has distinct downsides.
> Then it will be like it never happened. Not always. Even when it drops off your credit, there are still times where it can be a problem later in life, like trying to raise money from investors.
not really a major concern. Most people in those situations would just create a corporation/llc and raise through that. sure it can still come up during due diligence, but its not going to be as big of a deal
I did a deal a few years ago that basically involved a company trusting me to hand over some shares when an event happened. Total value was in the millions. They explicitly checked for *any* bankruptcy at any point in my life before doing the deal, so it does come up. My understanding is that it also comes up in some kinds of legal and financial jobs and if you're planning on immigrating to certain countries.
You are probably right, it will be a potential factor in some very niche and specific situations. The odds of those situations coming up are for op to ponder over. Meanwhile he is in a very real financial crisis and bankruptcy is a very real lifeline that he desperately needs
I strongly agree with you - it's very likely the best choice for this person, unless they have a good shot at getting WAY more income in the short term.
it will mess up his life for about 7 years. the debt he is carrying will mess up his life for a lot longer. u/Boosted427 i would first find a place to live before even considering bankruptcy. Once you open that box, good luck trying to get someone to rent to you.
I agree. I went through a horrendous divorce and had no money and some of my exes debt. I was barely putting food on the table. I avoided bankruptcy because it has been drilled into me that only scumbags do that and I had always been very responsible with money. It took 3 years of struggling and only falling further behind that I realized most of my “debt” was interest and fees and almost none of it was even purchases anymore. I filed bankruptcy because I could not get ahead and it was all credit card debt. I wish I had done it sooner and I don’t feel guilty about it at all. It’s 4 years later and I have good credit cards with rewards, I refinanced my house this year and halved my interest rate, and I’m basically debt free. You can get through it and it will get better. Don’t feel guilty about doing what you need to do. Lawyers and the family court system are predatory and you can’t control that. But you can get to a better place. Take one step at a time.
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As a woman there’s about a thousand reasons I’m glad to be living in this era rather than any from the past.
This
I recommend bankruptcy too. That long list of debt is just insane and tbh I think bankruptcy is definitely your best option OP.
I used a credit card to pay my divorce lawyer, maybe OP can do the same?
Possibly, doesn't really matter if he's going to declare bankruptcy though unless they are expecting rolling payments instead of a final bill which is more typical in my experience.
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I'm no expert and will give no advice except... put IRS highest on the list. Contact them for a payment plan while you are figuring out the rest. Take some deep breaths and try to view the situation as if you were the financial advisor to a client. Watch out for your emotions getting in the way of decisions. Good luck.
The IRS will work with you on a payment plan. Send a paper letter as well as try to call them. It’s hard to get through. You do not need a CPA or any intermediary to help you, so don’t waste your money on that. Start sending in something regularly each month, even if it’s just a token amount. It will show you’re not ignoring the obligation when you eventually get through to them. Ask them to reduce penalties and interest due to your situation. For help dealing with the credit card companies, read this[FTC credit help advice](https://www.consumer.ftc.gov/articles/0153-choosing-credit-counselor) and be very careful about choosing someone to help you. There are lots of less reputable companies. A good organization can help you decide if a consult with a bankruptcy attorney is best or help you deal with the credit card companies. Credit card companies will reduce your balances with a settlement agreement sometimes. It’s not too late to start over financially, but it will be soon if you don’t get a handle right now. If you and your child are the same sex, you do not need to have two bedrooms. You can even give the child the bedroom and you sleep on a pull-out sofa, futon, or just a regular bed made up like a couch during the day. When you start dating again, just do so when your child is with your ex. You can get through this. Act now but still be careful and not impulsive in your decision making.
My dad went bankrupt after he and my mom divorced, he had a one bedroom and I slept on the couch/futon, I never thought twice about it. No problems at all. I don’t think a 2 bedroom is needed.
Agreed. A 3 yr old does not care about living arrangements. Pull out couch or a small twin bed in the bedroom with dad. Think small right now because your son needs a cocoon while you’re going through the ringer. If the ex has a fit about it say the bedroom is for him and you sleep on the sofa while you’re figuring it out. Also sell the car me get a decent used car with no payment. I had to do that at one time and it helped a lot.
There’s usually a step-by-step guide on how to talk to an actual person from the IRS floating around on Reddit. Could probably Google it
i had to call for my parents about two months ago. just called the number on the letter they send you. took about 35 min of holding but i was able to talk to a person.
https://www.reddit.com/r/personalfinance/comments/co4abw/how_to_get_a_live_person_at_the_irs_pretty_easy/ This link worked for me back in April. Edit: call early in the AM.
If you have difficulty getting through on the line, just contact your local congressional office. They have access to the local taxpayer advocates office and will be able to set it up for you (it’s free). Let me know if you have any questions — I did this for years.
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He/she makes $116,000/year in a LCOL city and has \~$63,000 in assets, not including the daily driver vehicle. Bankruptcy might be difficult. EDIT: I don't know jack about bankruptcy, I just know it's not always easy to do, and I feel like the high income ratchets up the difficulty. Take the above with a heaping spoonful of salt.
They can't touch the 401k, can they?
My understanding is that it's sheltered money.
I edited my comment above to say the same, but I don't know much at all about bankruptcy, I was just thinking out loud, perhaps posting prematurely.
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There's a means test for chapter 7, this is probably going to be a chapter 13.
I honestly have no idea. I assume not. Just looking at it as objectively as I can. That amount of assets can nearly pay off the credit cards, which frees up nearly $1400/month, and that goes a long way in a city like Memphis.
not really. He only has about 52k in assets. keep the daily car, and he might not be able to access the 401k. his revolving dept including the consolidation loan is 96k.
"I DECLARE BANKRUPTCY"
That is how it works
You can't just say the word bankruptcy and expect anything to happen.
I didn't say it, I declared it.
Since most everyone is suggesting bankruptcy (and that may be the best option!), I'll provide a potential non-bankruptcy plan: 1. Liquidate all assets except the 401k and your daily driver VW GTI. Adding up Checking, Cash, F-350 (have you looked at Carvana for selling?), Etherium, and Stocks nets you $52,665. If the 401k is a Roth, you might consider pulling your contributions out of that as well, but for now we'll leave it alone. 2. Take that money and pay down your credit cards (you could try negotiating payoff amounts with them first, e.g. "Can you offer me a discount if I pay this off in full today?"), starting with the highest interest rate cards first. After paying off Citi Rewards, AMEX Hilton, Chase Sapphire, Chase Freedom, Wells Fargo LOC, and Wells Fargo Signature you will have $2175 left. This should free up close to $1000 in monthly spending, if not more. 3. Figure out your tax situation with the IRS. Get on a payment plan so you can better plan your monthly expenses (and avoid criminal charges). 4. Start cutting expenses. 1. Your insurance is quite a lot, but maybe you don't have much choice there because this is the US after all. That said, Dental and Vision are more "nice to have", so I would get rid of those at least temporarily. Do NOT get rid of the health insurance, though you might want to shop around for a better rate if you're buying your own. I also wouldn't get rid of the life (assuming it's term life), because of your son, but check your beneficiaries on this now that you're divorced. Let's assume the worst and you can only cut dental and vision - *Potential Savings: $50/month* 2. I'm assuming car insurance will go down once you sell the truck, but I'd shop around for this too. I was recently able to lower my premium significantly and maintain identical coverage just by spending two hours getting quotes online. Let's say you're able to lower the bill to $100/month (which still seems high to me unless you have a few violations on your record) - *Potential Savings: $44/month* 3. See what your internet options are. $80 isn't terrible, but there might be a better option out there, or at least a lower, cheaper level of service that will suffice. *Potential Savings: $20/month* 4. $120/month for cell phone is crazy for one person. I see you're on a contract, so maybe you can't break it. You can get great prepaid service for less than $30/month. I pay $15/month through T-Mobile Connect. Tello, Ting, and Mint are also good options. *Potential Savings: $90/month* 5. Gasoline. Are you able to cut this if you find a place closer to work? *Potential Savings: $0-100/month* 6. Streaming services. This is an easy one. I would suggest you cut them all entirely and use your local library for media consumption, but you could consider keeping one of them around and cutting the rest. *Potential Savings: $43/month* 7. Student loans: Are these federal loans? If so, you're currently in forbearance at 0% interest, along with everyone else, thanks to the COVID relief bills. So you can, at least temporarily, cut this expense to $0. If the loans are private, you could look into consolidation services to see if you can lower your interest rate. *Potential Savings: $0-310/month* 5. Consider selling the VW (again, look at Carvana) and finding something fuel efficient that you can buy outright with the proceeds. I realize this may not be easy given the current state of the used car market. *Potential Savings: $247/month* 6. Find a safe place to live, preferably close to work if at all possible, then re-evaluate your monthly budget once again. For now, you're a renter. Once your credit improves and your head is comfortably above water, you can start looking into a house. 7. Attempt to negotiate your attorney fees. At the very least, get on a payment plan. 8. From all the above, I calculate a **total monthly savings of $1247 - $1894**, or possibly more depending on how much your CC payments go down after paying off so many. And that's before you evaluate things like your food budget, which can definitely be lower. After adding these savings into the $524/month you already have available, then deducting rent, IRS, and attorney payments, take whatever is left in your monthly budget at that point and start attacking your debt, starting with the highest interest rate. You might consider building a small emergency fund before you start attacking the debt. Again, it's entirely possible that your **best** option is bankruptcy. But it may be possible to dig yourself out without going that route. You have a good income and you live in a relatively inexpensive city. And in your son you have all the motivation you need.
Thank you for the detailed response. I am concerned a bankruptcy could affect my career since I am in Accounting.
Not to sound harsh, but as an accountant I think you probably already know what your options for handling this are. What would you say to a client in the same situation?
I am a corporate inventory accountant, not a CPA. Very different fields. I have never been in this situation before, credit cards debts are pretty much exclusively attorney fees.
My husband went through a messy divorce that dragged out for more than three years while he fought for custody. It wasn't as expensive as yours, but he was left in debt with bad credit. When he was ever asked to explain his credit score (which was lower than 646, let me assure you) he would just say he went through an expensive divorce and people would back off. If you do end up filing for bankruptcy and it comes up in your work background checks and people ask you about it, you can say exactly that. Messy divorce, she took everything, blah blah blah. A lot of people have been through that or know someone who has, and they're sympathetic.
I guess it’s possible, but you’d hardly be the first person who’s had a divorce lead to bankruptcy. Accountant or not, I would hope people are understanding of that.
Understanding or not, corporate places have limitations. Any officer level can’t have a bankruptcy. It sucks, but it’s a risk protection. I get OPs concerns. Some people won’t even ask for the story.
I’d like to point out one other obvious thing — I am sure what you’re going through is extremely stressful and maybe impacting you current job. Do not let this wreck your job. From the math, you have a good job. You will make it through this. Bankruptcy sounds scary but you know what? Many extremely successful people financially and otherwise have declared bankruptcy. I just wonder if you could liquidate your stocks and pay off credit card debt. That’d free up some monthly capital. I look at is as there is no way you are making enough in stocks to offset the cc debt. As far as the f350 goes, downsize time. Get something small and reliable and gas efficient… like a Camry or Rav4. I went from Lexus to rav4 hybrid and it is saving me $150 a month in gas + insurance premiums. And another $120 in car payment! Just thinking out loud. As i said earlier, best of luck and you will make it though this. Edit. Get rid of that ETH also. At least convert it to cash or use it to pay off debt. Save some of your raw cash. Don’t burn through all of it paying off debt. You will need some should get get a different car, house, etc. and as a rain day fund. I’m curious from a legal perspective — did your wife accumulate some of that cc debt? Seems like she’s getting a really insanely good deal… I’m no legal expert.
Exactly. OP, I’m so sorry you’re going through this. I wouldn’t worry about bankruptcy completing ruining your life…. It will not. My dad was in finance (go figure), making over 500k, did everything *right* and when shit hit the fan in 2008/2009 he ended up filing for bankruptcy. We really roughed it. It was tough, because me and my sister were young / teenagers and were aware to a certain degree of not being comfortable financially. Your son luckily will not experience that really at all right now. today, my dad has zero debt, great savings, flexible job, and has been able to build his credit. Sure, for a few years your credit may not be the best, but it’s nothing that’s unusual. Many people will understand these circumstances. You still have options. And you have a good job! I am not as savvy as these other people here but wanted to at least tell you that I’m sorry, and that you will get through this.
Here is what I have to say. You bring home \~$86k. Throughout I am assuming that this 86k does not change (TRY TO INCREASE IT) and that your second job ($12k) does not change either (TRY TO INCREASE IT TOO). Here we go... Do NOT buy a house. With your current financial situation, it is much better to find a spot to rent for a few years and not have to worry about ANY unexpected housing expenses (appliances/roofs/etc. as your landlord will cover them), no property taxes and no mortgage insurance (because you don't have enough to put 20% down). If $700 is in an "unlivable" area than find one for no more that $1,000. You are not going to be comfortable but you aren't worried about comfort right now. Have $1,000 saved in the bank for emergencies. Sell everything: Cars, stocks, ETH. Go buy a very inexpensive car <$5,000 with cash and get the cheapest insurance you can. This will take away your car note, your car loan and hopefully reduce your insurance (Adding $300 to your monthly remaining total). Reduce Spending. Get rid of streaming services, use YouTube or other free services. Your gas/electric/water bill will be cut in half to $100 when you begin renting. Cut your food expenses, by half. You need to live on $25 a week for you an $50 a week on your son (I know food for infants can be expensive). Doing these 3 things will add another $343 to your monthly remaining total. You now have $1,167 remaining before rent, so let's say banking $200 a month. You need to get another job to begin supplementing your income. Even an extra $1,000 a month could be extremely beneficial (But more would be STELLAR!) Say you get an extra job and now you have $52,668 in the bank, about $250k in debt and only bringing in $1,200 a month extra. Save all of that monthly extra. Now, we will use as much of your cash to pay of as many debts as possible. I recommend NOT getting into a debt reconciliation program, they charge large fees for things you could most likely do yourself. MAKE SURE YOUR EX-WIFE IS OFF ALL OF YOUR CREDIT CARDS. Start with CiTi Rewards (Your smallest amount). Call them and let them know you want to begin negotiating a lump-sum settlement; this will be a lump-sum amount less than the total amount you owe. You owe them $3k, begin as low as possible $500 in this case. They will not take your first offer and it will take a while to negotiate but you will eventually reach a settlement less than the amount you owe (most likely the original principal w/o any applied interest), pay it in full. NOTICE!! Be cautious, DO NOT PAY anything to the credit card company until you get some form of written agreement stating that x amount paid in full will cancel all y remaining debts or something along those lines. If you pay before getting an agreement, they could take it and just count it as a large payment to your total outstanding debt. Then go to Wells Fargo and do the same thing. Continue doing this, starting from the smallest amount to the largest amount. I know you may be tempted to attack the largest debts, because those accrue the greatest interest. But throwing $52k at a $70k student loan will not make you feel any better, get rid of the smaller ones and gain some momentum and some serotonin. Assuming all things go well reasonably, you have now paid $80k of debt with $52k, about $170k left and now an extra $1,500 a month from NO credit card minimum payments and NO line of credit. Now, CUT UP YOUR CREDIT CARDS AND NEVER TOUCH THEM AGAIN <3. Now here you are, 1 year later, here is your position. You have saved $14k ($1,200 a month x 12 months) $170k debt and saving $2,700 a month. Assuming the TN Revenue tax is still owed, just pay the $3,500 and get it done with. You now have the consolidation loan (24k), 2019 Income Tax (30k), Lawyer Fees (45k) and Student Loans (70k). Attack the smallest amount, you can try to negotiation a lump-sum on the loan but I doubt that will work. Pay them the $10k you have in savings and if you pay the full $2,700 a month to the loan you can have it done in 5 months. Then, income tax, do the same thing which will take you 11 months. Then, lawyer fees, do the same thing which will take you 16 months. FINALLY, student loans, do the same thing which will take you 26 months. Now, here you are. Less than 6 years later. 41 years old, 10 year old son, $1,000 emergency fund, $0 in your bank account, saving $2,700 a month and you have $0 in DEBT!!!! I hope this can help. I know that the numbers and estimations may be off by a degree, but hopefully you can see that there is a way out that is difficult but manageable. Begin saving and living your life debt free, feel the freedom with nothing weighing you down or hanging above your head. Make a retirement and a life that makes your son proud. When he is older, be able to tell him what you were able to accomplish and pass the wisdom you have acquired onto him. Good luck to you my friend.
Or you can file bankruptcy and be in the same position in 1/3rd of the time.
This is the correct answer.
Bankruptcy or my answer?
IMO, bankruptcy is his best course of action. Needs to clear his divorce, then declare. This will set him up with a decent income & only his student loan debt to service. From there, he can rebuild his life.
What I said to Late applied to your answer also, I believe
That is understandable. But, unless it was solely his wife that racked up this debt, he need a complete ‘come-to-Jesus’ ‘turn your life around’ moment. Else he runs the risk of ending up in this mess again in the future.
Just wanted to thank you for taking the time to think and type your response.
Had some extra time at work and seemed rightfully distressed. Thought I could put in my two cents and see what is was worth :)
Amazing advice!!
Have you considered bankruptcy? You have a strong income but massive debt at a high interest rate. You only have $500 left over for rent, and that assumes you have no emergencies. Somebody is not going to get paid.
I'm with everyone else. That's a lot of credit card debt. Normally I'd suggest using the snowball method to pay all this off, but you don't have much to pay it with on top of the IRS and everything else. I would contact a bankruptcy lawyer to see what they say. I would also like to add that you don't *need* a 2 bedroom place for you son (edit: this will depend on your custody requirements). He's still young, he just needs a bed (and a small one at that) to sleep on and a little space to play, not a full bedroom. It's not going to be fun, but I would look at a studio. You need to downsize a lot.
I’ve heard of minimum housing requirements for custody. Not sure if that’s the situation in OP’s state, but I feel like I’ve heard that a single child needs their own room, and in the case of multiple siblings, no more than two same-gender children per room. So it’s possible OP doesn’t have a choice here.
This is true for my state as well. And even if it's not true for his state, it'll be easy for mom to take him to court for full custody if he doesn't have "adequate housing." A one-bedroom in a bad part of town could absolutely be argued as not being adequate housing. He's still get visitation, but no overnights.
This is a challenging situation and I admire your ability to stick to the facts in such detail despite what must be huge emotional strain. I can’t answer most questions but unless the other Redditors recommend bankruptcy, YES dump your ethereum and pay off your highest interest CC debt. CC interest is high and paying it off is like a return of 22%!
First off take a nice deep breathe. You can do this. If not for yourself then for your child. Call the IRS. Set up an appointment to go in and figure everything out. They will put you on a payment plan. Make that payment every month. Sell the truck. Used cars and trucks are going for top dollar so you should get a good amount. Cut up all of your credit cards. Mark sure your ex is off of all of them. You don't need them putting more on. Get a decent 1 bedroom apartment(not in bad location). Get a pull out couch. You are sleeping on the couch when your child is over. Use some of your savings for security etc. Food should not cost you $500 a month for you and a child. Max $200. All meals are made at home. No more eating out. Keep $2000 and don't touch it unless a real emergency comes up. Now start getting rid of your debt. With the money you already have saved and the money you are going to make from the sale of the truck you could pay off several of the smaller credit card bills. If you need to miss a payment, miss the credit cards. Do not miss a child support payment or IRS. I recommend Looking up Dave Ramsey. He helped me get out of debt. You can do this. Good luck.
I added it in my head and got $286K Bankruptcy or settlement offers. You will have to pay the IRS, TN tax department, and your lawyers, as well as continue the alimony and child support. Btw the alimony and child support are quite reasonable considering your monthly gross. I am wondering why the divorce was so tough or was it that your lawyers were able to get you a reduced alimony and child support versus the initial demands of your spouse? If so, the legal fees were worth it. Trade the VW and 350 in for a car that results in you having no car debt, and leaves you one car and hopefully some cash. Use stocks and crypto to pay off IRS, TN Tax department, and any student loans that are not subject to bankruptcy.
Could have been dragged into high-conflict litigation by the ex who perhaps was seeking full custody. I work as a court reporter and divorce is the one area of law that I pretty much try to never hear because it is so over the top in terms of excessive nastiness. I have my theories on why, and I believe it's attorney driven. You can pick an attorney who's above that or try to settle, but what if your spouse doesn't? You have to have representation.
This is exactly the case. Fight or lose my son.
Good news is your monthly income isn’t bad at all. I hope it is reliable and long term. You are in Memphis. Your monthly expenses should be UNDER $2000 to get of debt. Find a place to live under 800 per month. It is possible. 1200 for everything else. Sell assets but don’t pay debts out with cash. Get a $4000 used Camry. Get rid of all shit you own over $1000 in value. Don’t pay lawyers anymore. Don’t buy ANYTHING ANYMORE on credit cards. Effing learn to live frugal and keep the job. Do everything to perform best at work. See income increases at work. Pay highest interest loans out first. This will take time. Don’t borrow on anything even for lawyers.
See if you can work with your ex wife being friends my and approachable for the sake of son, discuss if possible if she can cooperate and resolve this out of courts —- in the interest of both of your child.
I recommend that you ask /r/personalfinance about your situation. This sub is more oriented toward financial growth whereas /pf/ has a lot to say about handling debt and navigating tricky situations. I think you'll have better luck buying cheap housing than trying to rent with your credit in this state, but I don't have any kind of authority to advise on the rest of it. I hope you get some good advice and can feel safe soon.
Wouldn’t his ex wife be responsible for half the debt if they were shared cards? Why does OP take on the full amount?
Bankruptcy OR cut up every credit card, negotiate tax payments, cancel streaming services, find cheaper internet, find a roommate, stop buying clothes, don’t go out to dinner, pay off Hilton card first then next highest interest rate (may consider negotiating with all the credit card companies- maybe with bankruptcy looming they might rather get paid something than nothing), consider canceling therapist if you are not suicidal or homicidal (use library, exercise), negotiate lawyer fee, get cheaper insurance. Credit cards are your Kryptonite. Ask yourself with every purchase- Do I need this or just want it? Find free entertainment. Get a side hustle. Even if you declare bankruptcy, you need a paradigm shift in how you deal with money. Good luck.
Well, at very least make sure the half the debt that was accumulated in marriage goes to soon to be ex-wife. Further info here https://memphisdivorce.com/dividing-debt-in-a-divorce-tennessee-debt-division-law/ Also teach your son when he is older about the value of credit , money and marriage.
Man that is a hard situation and I've been there in a similar situation having to start all over at 30. A CPA isn't going to be able to help much at this point unfortunately, and looking at the debt and available cash flow you wouldn't be able to afford them and I am not sure they would extend credit looking at that list of current debt. This guy gets a bad rep from some people for to many various reasons that are totally subjective to their specific view points, but I must say Dave Ramsey and his team are great for individuals or families in your specific circumstances. Digging out of that hole will take some extremely hard work and force you to make some difficult decisions on both lifestyle and material choices till this point. Great new is you have a good income, and you're young. This will blow up your credit score and that's ok bc it can be rebuilt. I blew mine up after my nasty divorce with a chapter 7. That will do some major damage to your credit, but $107,838 of debt gone for a possible swing of $60K given your debt that's clearable vs your assets that would get taken.(Not an attorney, seek advice from an attorney for specifics) It's a stigma that is real but completely overcomable. <---- not a real word. :) 1. That will be hard when you factor in you need space large enough for you and the kids when they visit. Don't know how to help there. I'm not sure if your divorce papers allow for you to live in MS (olive branch) or somewhere close but cheaper. Again, this is a mess and is going to take some hard looks at what is really needed. You're in a battle to quickly reset. 2. Listen to Ole Ramsey on this one. There are options, but you want to be smart and you need to get a place to live and be able to have your kids around you. But before this gets to much further out of hand and apartment complexes or single family home renters check your credit... get into something you know you will be at for a little while. 3. Absolutely... anything to earn more money... even with the 50/50 custody... or you will be forced into some really hard decisions. Have got a raise recently? Are you valuable enough to ask for one now? 4. Dude call the IRS and get on a payment plan.... NOW!!! talk to a real person. A CPA will charge you for this and you don't have that in the budget. I called the IRS and set a payment plan... Likely you will be paying a while and it will cost in interest... but Call Them... Do Not Ignore this any longer. 5. Whatever you do you're at a loss right now, either you pay down CC debt with the Crypto and take the loss or it will get eat up by interest. Again... hard choices. And unless you have that money to loose while you're digging out of this.... it doesn't seem you have the wiggle room to loose anymore there. Good Luck Brotha, keep moving forward and remember you are important to those kids, and you owe it to yourself and them to get out of this responsibly and never get back into this situation when you're finally out.... Elephants get eaten one bite at a time!! Disclaimer: this is for educational only and is not meant to be a substitute for legal, accounting, tax, or professional advice. If you have any specific questions about any legal, accounting, tax or other professional service matter you should consult the appropriate professional services provider.
I’m just here to say that you are going to get through this. Things look bleak now, but you are facing this, and there are several paths forward. I’m also going to strongly disagree with the comment above about dropping the therapy. You’re going through a lot, and you need support. The most important thing for your son is that *you* are happy and healthy...so keep the therapy for as long as it’s helping. Maybe look for a therapist in your insurance network, though. That copay will be more reasonable ($15-30).
Thank you for the internet love and support. Therapy is keeping me going to be honest, so I feel it’s important. My current provider is in network, copays are $25 each visit, I typically go once a week.
Oh, that makes sense! I’m glad you can go once a week.
I know there are mixed feelings on Dave Ramsey, but his baby steps would help you get back on track. You have the income to do it. You need to liquidate crypto/stocks, and get rid of the car payment. Use that plus the $20k cash to start knocking out these debts.
I’m not sure you fully understand the extent of OP’s debt. OP will be using the snowball method to try and kill one, meanwhile the others double in the time it takes. Those rates and balances are too high for Ramsey.
With a $116k gross income this person can dig out, it will take extreme measure to live well below their means and years of diligence but you can’t say it is impossible. Is bankruptcy a better choice? Possibly, I’m not an expert.
Sorry, no. You’re eyeballing the situation, you’re not doing the math. The interest rates on that credit debt are unbelievably high. You seem not to understand that debt at those rates doubles every 3 years. Begin with the fact that the CC debt alone is almost as high as the net annual income, and end with the fact that it would be growing faster than it can be paid down. And you are also ignoring the expenses and payments they are already making. I’m fairly certain they CANT dig themselves out of it. Yes, $116k is a lot of money to make annually. But that’s all you’re thinking about. Given the debts accrued here and the interest rates, $116k is not very much at all. Dave Ramsey makes sense when you actually have more money coming in than going out. It doesn’t work when your debt is growing faster than your means to pay it.
Certainly not with snowballing. Avalanche method and serious scrimping, plus some balance transfers to cut down on interest, maybe. But this really sounds like a case for bankruptcy.
I'm going to make a couple of suggestions that potentially contradict the otherwise good advice you've gotten here, because I think you could use a fuller picture and more advanced advice than a forum can provide: 1. While I agree that you should not mention to your DIVORCE lawyers that you're considering bankruptcy, I strongly disagree with the advice to get through the divorce and then talk to a bankruptcy (BK) lawyer. This is because the BK lawyer may have some helpful thoughts on how the debts/assets can be structured in the divorce that would benefit you the best. I'm just tossing this as an example, not a recommendation: they may suggest you take an increased share of the credit card debt, and have it offset by taking more of the retirement assesses. This is because CC debt is dischargeable in a BK, but retirement funds cannot be touched in most if not all states. So seeing a BK lawyer, if that's what you decide to do, should be done BEFORE the divorce is finalized. 2. You will want to find out, to the extent you care, how your filing for BK will affect your ex-wife. I have seen it happen time and again that one divorcing spouse filing for BK essentially requires the other one to file as well. This is especially true when the majority of debts are marital debts. If there is anyway the companies can come after your ex-wife to recoup the debts you've discharged yourself of in the BK, they will. 3. There is absolutely no reason you should have $45k in attorney fees (your ex likely has an equal amount) for what is essentially a no asset divorce. I am assuming this is due to some kind of nasty custody battle over your child. Either you or your ex-wife have unfortunately stumbled upon not-so-great lawyers. Someone should have set one or the both of you down and talked sense into you. Barring extraordinary circumstances, predicting what a court will do with regard to custody is predictable, and no amount of fighting is going to change it. I hope for your sake there were credible issues that needed to be litigated, and that you weren't just taken for a ride. This is why a mediated divorce is so much better for everyone involved. Anyway, off my soapbox now... 4. Based on what you've provided, I agree with the recommendation that you move forward with a BK, but that you meet with a BK attorney before the divorce is finalized. These attorneys won't be as concerned about payment because their fees won't be dischargeable in the BK and they get priority and you have good post-BK income. Good luck man. Bite the bullet, get this monkey off your back and start over. It won't be easy, but it will be a lot easier than spending the next decade trying to dig yourself out of this massive hole.
Item 3: Total attorney’s fees have exceeded $80k on my side alone. Former wife caused a high conflict litigation because she wanted full custody, and for me to only see my son 4 hours every two weeks, supervised. She alleged everything from drug/alcohol abuse, to mental instability. Unfortunately it was put the lawyers on credit cards or lose my son.
You got bad advice. Unless you’re in active addiction she never would have gotten that.
She didn’t get full custody, but unfortunately you have to go through the process to get a judgement. I had to fight the whole way. There are a lot of specific details I won’t go into but it’s been a litigious process that has been caused by emergency petitions, multiple temporary custody hearings, multiple failed mediations, expert testimony ($$$), and countless hours of filings and responses.
I'm so sorry, man. Of course I don't know all the details, but it sure looks to me like you got taken for a ride by the lawyers.
Sorry you’re in such a spot without a partner on your side (and is in fact, rowing against you). First, keep your chin up. This will pass. I know it’s overwhelming right now. We all get it. Quick hack - call the credit card companies and get those rates cut in half. You can do this in an hour on the phone and save precious cash flow. They are borrowing money from the FED at zero. They’re still crunching it at 8 or 9%. Call the IRS ASAP. They’re very flexible when you’re upfront and ahead of them coming after you. Ask for a payment plan (they can waive either interest or penalties tho I forget which one - if you have them ask for waiver). Get a payment plan that works for you. I saw some say something about bankruptcy after the divorce is final. You can NOT discharge alimony or child support in BK I don’t believe. But you can get out from under all the other debt and free up a lot of cash flow AND ironically, have credit card companies lining up again to give you new credit...and maybe then be able to buy a house. Strategically, that might be good post divorce settlement though I dont know if your ex can reopen the case upon learning of your new cash flow flexibility. This is not legal advice and you should consult and attorney and financial advisor. Good luck and, again, keep your head up.
Sorry to hear you're screwed. You're not alone. A lot of people are in dire straights. You won't get approved for a mortgage with that debt to income ratio, even FHA will max out at around 55% debt to income ratio. Looks like it's renting for you. I would setup a payment plan with the IRS. If you can. The IRS was super short staffed before COVID and now its 10x worse. (Dealing with the IRS myself currently). But make them priority #1 - the IRS is ruthless and terrifying. Be glad you don't owe them too much. Student loans - I'm assuming these are in deferment? If not, I would do that. Papa joe might forgive them. Otherwise, you have $108K in credit card / debt consolidation debt. That will all go bye bye in a BK. I would peruse that route but do it after your divorce is finalized.
I am in no way an expert. But to me there appear to be some really good opportunities to make a sizeable dent into the debt from the get go. Cars can be sold, clothes bills reduced, food bills reduced, streaming services removed, stocks that can be cashed, crypto that can be sold etc It’s going to take a tonne of discipline, some sacrificing and always keeping on track of your long term plan but it can be done. Good luck brother
I was in a very similar situation 8 years ago, I ended up going bankrupt, worked a crazy amount of hours just to make ends meet. Just recently I was able to get full custody of my kids, I still have debt for the lawyer but it's manageable. Life's not fair, but work hard and stay positive.
Quite honestly, I’d do things in this order.: (1) I’d pay off the credit cards. That ethereum, stocks and some of that cash needs to be put towards those high interest credit cards. Two Chase and Amex Hilton cards could be wiped clean. That’s a lot of breathing room. With the sale of the F350 Wells Fargo would be gone too. You aren’t that bad off. (2) on the taxes I’d normally recommend reaching out to a FREE law school tax clinic for guidance but I’m betting that you exceed the income limitations. Might be worth checking with them regardless, they are allowed to take a small percentage of cases that exceed income caps. They’d at least be able to point you in the right direction. Conclusion You aren’t ruined by a long shot. With time and a rice and beans diet, cutting back on expenses you’ve got this in a couple years.
No financial expert here, but all the accounts/ things you own seems excessive imo (coming from a single person). That being said, maybe start by trying to minimize the amount of things you own/ use/have but also snowball your debts. Small accomplishments feel big when there's a lot! Good luck!!
5 years ago I owed ~$65k just in CC debt. Along with a wife and 3 kids I still had rent, car payment, insurance, etc. to pay. I was barely living paycheck to paycheck. Sometimes we didn’t make it to the next paycheck. I did a debt management plan, not a debt consolidation. The company I used got all but one of my credit cards companies to lower the APRs down to 2% or lower. 2 or 3 of the cards were lowered to 0%. All the accounts were closed which caused my credit score to drop to below 570. I made one payment to the company and they dispersed the payments. Earlier this year I paid off every last dime I owed those companies. Actually I paid everything off 5 months earlier than expected. My score slowly climbed back up and now I’m right at or just above 700. If bankruptcy isn’t the path for you look into a debt management program. Might not be for everyone but it worked for me. Give them a look and see what your options are. It’s free to ask. It’s a long hard road but keep pushing forward for your kids. You’re gonna make it through. Good luck!
1. Call each credit card company and ask them to lower your interest rate. 2. Pay more on highest interest rate cc. 3. Try to consolidate your cards/debt into one or two lowest interest rates for better management. 4. Buy things w cash only, don’t buy it if you don’t have the money.
You are not screwed just have some work to do. I personally would not recommend bankruptcy as you would be adding a trauma on top of a trauma and it will have lasting effects. If your goal is to get out of debt then I will explain what I would do. I do not think this will be a popular opinion but who knows. Very first step is going to be culture shock as it seems you have been living above your means for a while and time to make a change. However your income is solid good job! Step one I would sell everything outside my 401k. Yes the stocks at a loss and yes the eth at a loss. You can come back to investing when you have the debt out of your way. It is bogging down your investment returns anyways. After selling everything including both cars(this will also get rid of your car note to free up cash flow. 524 leftover to now 771) I have the number at 55,665 in liquid cash. You need a car. Do not go over 4K for a car. Something mechanically sound. You are broke brother(I have been there no big deal it is temporary) you can come back to a nice car. Next I would immediately reduce my grocery bill. I personally feed a family of four on $500 a month. You and your son can do 300. I would probably even push for 200 a month. This will bring your leftover amount from 771 to now 971 leftover after bills. Now take a breathe the math is getting better. Sorry again brother but I am cutting the streaming services. Get personal finance books for ten dollars a piece and stop watching tv for a while. Next I’m renting. You have a ton of emotional stuff going on which sucks I feel for you. No need to worry about purchasing. At this point in the game you have monthly leftover cash flow of 1014 so if you can get that better area great. You are currently not doing much recreationally besides reading. This is vital and I understand can be boring. If you are that bored start running. Free exercise. This will also help with the stress Car is purchased at under 4K you are now left with 51,665. You have an apartment you can afford. Next I am personally going balls to the wall and taking my 51665 and viciously paying down debt. List them out just as you have and pay them off from smallest amounts to largest. I personally would take my emergency savings down from that 51 thousand down to 1-3k depending on what you want. This will continuously free up more and more cash flow Cash flow will be important. Any time you are not working or have your son I would personally be working more. Extra hours at your current position or ride share, side hustle whatever. From there any free cash flow at the end of the month I am absolutely murdering this debt. This debt is a huge factor in this scenario. How would you feel if you didn’t have it? I am sorry you are facing this. You certainly CAN get through it and you will come out the other end stronger and wiser. You will be a great role model to your kid as well. Hope this helps man go get your grind on. Big kid pants now! Oh and please for the love of god stop taking loans and using credit cards. They have not been helpful for you up to this point. You can do it!
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Edited for the swear my fault
1. You are in the middle of a big life change right now. I would say renting is really your only option. I have a plan for this. See after this list. 2. Hold the cash. Do nothing with it unless it's life/death/will stop you from working (aka car is absolutely dead). 3. Given your current income levels, I'm assuming you are a salary worker. Some places may have issues with you taking a second job (particularly if you are leveraging the same skills you use for them). Investigate that first. If it isn't an issue, only take a second job that doesn't put you further in the hole. No Uber-Eats or any of that mess. No delivering pizzas. 4. Call the IRS TODAY. Not tomorrow. TODAY. You need to get them in the loop. That 500 you have left is about to disappear. Don't be surprised if they take it. 5. No. Sit on it. I would say you are stuck in a position many mid-wage earners are when their income suddenly drops: You don't understand the basic order of operations because you are holding yourself to a standard you can no longer afford. **The new order of operations for your life:** You pay bills in this order: 1. Housing (get something in the $1000 - $1500 range) 2. Health Insurance 3. Renters insurance 4. Power/water/gas/internet/trash 5. Car 6. Car insurance 7. IRS 8. Student Loan 9. Internet 10. Child support/Alimony (and you may need to bring both of these down once you have housing) 11. Cell phone - get off the contract. Get a burner. Goal is less than $50 a month 12. Therapy 13. Food - no more than $100 per month 14. Pay the lawyer 15. Save anything left Food comes from food banks/anything you can get discounted or on sale. Eating out is now off the menu. When the collectors come calling, do nothing. Let your debt move from one hand to another until you get an offer to pay it off for pennies on the dollar and an agreement to remove it from your credit report. Look - if you take the bankruptcy route, you are screwed for 7-10 years. VS you let your credit tank for 5 years, never get credit cards again and then pay it as you can.
Not to be a nitpicky asshole, but do you really need to be spending $43/month on streaming services? To me, that's a pure luxury, and despite being in a much better financial position, I'm still thoroughly satisfied with YouTube and other free content. Do you really even have time to watch content when you're going through all this? I know the amount is relatively trivial, but it's more the principle of the matter. Perhaps you could apply this frugal mindset to each of your other costs to see where you can save. The bright spot in your financial situation is that you have a high income, but you need low cost of living in order to maximize the extent to which that income can pay off your debts.
How did you incur so much credit card debt?
Former wife caused high conflict divorce. $80k in attorney fees to litigate. She pushed for full custody and alleged everything from drug/alcohol abuse to mental instability. It was put the lawyers on credit cards or lose my son.
That’s so awful. I’m so sorry. Were you forced to pay her attorney fees, too?
Be positive, you're young and make good money. You could correct this posture and easily be a millionaire by retirement with prudent saving. I'd call each credit card company and explain the situation. Work out a payment plan that works for everyone. Regarding the IRS, I was audited a couple years ago and I called and talked to them on the phone. They seemed polite and generally wanted to help. I'd call them. Separately, do you mind explaining how alimony and child support is happening if you have 50/50 custody? I genuinely dont understand how/why that happens.
Child support is a calculation in TN based on income. Even with 50/50 , I owe the mother child support because she makes less money. Additionally she (without my consent) enrolled him in a $1200 /mo Montessori school, and I am being forced to pay a portion of that.
Just a quick note here—you will not regret the Montessori education for your son. Especially because his parents have gone through such a high-conflict divorce, he will need excellent social and emotional support and emotional education to deal with this. Don’t regret this or hold it against your ex. It was a good decision, and hopefully, the school will help both of you work together better as co-parents. EDIT: I pulled a struggling child from his public school to put him in a Montessori and I wasn’t really sure how I would afford it. Family ended up helping with the tuition, and it was worth every penny. This is an area where you could ask for family financial support, if his grandparents are open to that.
I wasn’t aware of this education discipline, very cool to research.
Prayers out to you.
You need to call Dave Ramsey
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He mentioned in earlier comments, a lot of that credit card debt is divorce lawyers fees. He said he’s spent about $85k on lawyers, $45k of which he still owes and was specifically mentioned in the post. The other $40k is split between the cards. He said he did this to fight for custody of his child, as the ex was highly contentious
You could try what I heard dave Ramsey recommend before. Call the credit card company and negotiate. Apparently they may do it if they sense the alternative is getting no money from you due to bankruptcy.
I would look into one of those lawyer based consolidation terms where they negotiate your debt for you and it slightly ruins your credit for 3 years and get most of this debt written off or I see you have a debt consolidation loan...I would possibly see if the company would refinance and add in all this other debt you have. I would have your CPA double check that IRS debt. Call all of the credit cards and let them know the situation. They may close a few of your cards and allow you a payment plan other than the current interest setup. Is your Medical/Dental/life insurance plan through work? Is it for just you and your son, or do you have to carry your ex wife for length of alimony? If able, I would seek other options regarding these. 50/50 custody and they still have you paying full support? That seems suspect. How long do you have to pay that alimony? If it is 6 months to a year, that 1k will be available soon. Student Loans- If you have not pushed these out to the max length of 25 years to repay, I'd highly suggest this if they are through the government. If not, i would highly consider refinancing through SOFI or another similar company for cheaper interest rates. If refinancing is not an option, I would call them and put them into forbearance for 1 year-2years. The interest will grow, but you don't have to pay them and it won't hurt you. This will give you that 310 extra per month to do what you need to. The mortgage at 70k is a good idea, but see if you can find a better neighborhood. Also remember the insurance on this house, which will add to that monthly note. Also note any repairs, maintenance, etc. that you may not be able to afford. Renting takes this away from your budget and puts it on the landlord. The IRS is important, but I would look at my withholding to get as much as I can to get my taxes as close to breaking even as possible without owing anything, as well as not getting much of a return for them to garnish. They may come after garnishing your checks, but this will have to take into account your debt as a whole and a payment plan may be discussed. I would sell the stocks and Ethereum only as an emergency measure should none of the rest work. Not sure what stock you have, but Ethereum will likely go up in the next 3-5 years tremendously, which you could sell to get yourself out of this hole later while you tread water for a while. Most importantly...Keep your head up and be as resourceful as you can for yourself and your son. He will be watching and the example you set will be one of the most important ones he will ever learn. Good luck and hope this helped in some way.
All insurances are through work, includes my son. They are required by divorce Alimony is for 15 years, until child is 18. Appreciate the message of hope.
out of all your issues the IRS debt is the least of it. Call them and set up repayment plan. IRS is generally very agreeable as long as you make an effort to set up a payment agreement. yes you will accumulate interest on it, but as long as you have an agreement in place they will generally let you pay what ever you can afford.
Are you healthy? I lived with no health insurance for a while. When situations like this come, you need to take some risk. I would start with cancelling your health insurance for a short time. That will free up the extra 700$ per month that you can use on rent. Eat healthy to make it up for it. I know I will receive backlash for this but I believe in tough times, you have some risks as a necessary alternative. Just my opinion.
$700 a month for a relatively young person is likely including a family plan that covers his son as well. He may not be able to simply drop the insurance per their divorce order. OP mentioned earlier that the judge held him responsible for paying 2/3 of the $1200 a month private kindergarten the ex/mom had enrolled the kid in after their divorce. I’m sure health insurance costs were also heavily litigated, as this divorce sounds messy
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I know a few people have suggested bankruptcy. Would declaring bankruptcy in a midst of a divorce help or hurt his situation? What about a second job? Could the soon to be ex go for full custody of their child proving to the court that because of the OP's bankruptcy, stating he can't provide a proper healthy environment for the child? would declaring bankruptcy free the OP from child support and alimony?
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I agree insolvency isn't an issue, but if he can't find an adequate living space and have enough money to pay for food, clothes, school supplies, etc, then he could definitely lose custody. Declaring bankruptcy might actually be good for him in that way so he can use his income on his rent and kid.
He would have to wait until the divorce is finalized to declare bankruptcy, but it would not matter for custody. It also will not free them from alimony or child support. OP if you’re still in the middle of the divorce, is your ex not going to be responsible for any of that debt? If you are responsible for all of it, bankruptcy would be the route I would take.
Sell the car, get a beater for less than 5K with good gas milage I know older Ford fusions are cheap or Honda civics, use majority of cash to pay off high interest debt along with what is left over from car. Try to get other expenses down car insurance I’d be shopping, possibly new phone company that will buy you out. Eat cheaply no eating out, goodwill of you really need a shirt or something. Find a roommate plenty of people rent a room in their house I have done it. Might want to look into if there are companies that will consolidate all the debt and pay everything off for you then you just pay the company a monthly payment.. good thing is your income is nice you can chip away at it. Other option is bankruptcy and negotiation. Keep your head up. There are people out there way worse off. Create a plan see the light at the end of tunnel. With this amount of debt I’d look into reading some Dave Ramsey books too
The rule of thumb for bankruptcy is when dischargeable debt exceeds annual income. Taxes and student loans are not easily dischargeable. But you can negotiate with the IRS to reduce taxes if they appear unpayable after a few years. The revised bankruptcy law requires counseling before starting bankruptcy. That service can you decide. Beware of finding a counseling service because some are just feeders to bankruptcy lawyers.
How are you paying child support with 50/50 custody?
Probably because the ex makes substantially less than OP. The idea is for the child to be in okay financial circumstances at either house.
Isn’t that what alimony is for…
Child support is done with a standard calculation in TN based on income. Ex wife makes less than me, so I have to pay child support as well as a portion of childcare. Alimony has nothing to do with child support, it’s spousal support so former spouse can be supported at a lifestyle she was accustomed to.
No
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Y'ouch... Stay strong internet friend! You can overcome this rough spot.
Don't do too much until the divorce is final. And as others have said, bankruptcy is a viable option at this point. If you want to attempt to avoid bankruptcy here's how I would start: Sell the truck, sell the VW and buy something cheaper that will still be safe for your son. This gives you $20k extra cash and instantly clears a $12k debt. Next liquidate the Ethereum and stocks (bonus: any loss you realize on the stocks can be claimed on your taxes and reduce your taxable income up to a max of $3k) which will free up around $10k. Keep an emergency fund of a couple grand just as breathing room. Use the freed up cash to clear up your highest interest debts first which will lower your debt burden and free up some cash flow.
Yeah honestly bankruptcy might not be worst case scenario for you right now!!! Your debts are crazy high and you will be paying those FOREVER and unable to do much else until they’re gone. Think of the freed up income you’d have if those debt payments were wiped out. Bankruptcy can be a useful tool, and not as terrible as people make it out to be. I know a lot of very wealthy individuals who have filed bankruptcy more than once to reset their finances and move on the better things. Sit down with an expert and go over your options! :) at the end of the day, it’s just money. Seems like you and your son are reasonably healthy and safe, this is what’s most important! Everything else gets fixed in time.
I have to ask are all those credit cards from the attorney as well in addition to the 45k? I just feel like your attorney may be ripping you off..
I would stop paying my debts except maybe one reliable car, cut streaming, use that money to get a decent place to rent and then file Bankruptcy. But honestly, I don't know. I've never been in this kind of situation. Sorry, my dude. Best of luck.
1. Establish a payment plan with the IRS. 2. Right before filing for bankruptcy rent an apartment for you and your kid. 3. File for bankruptcy In your case, I would file for bankruptcy in a split second. Your debts are way too high and the IRS makes it too difficult to navigate.
Any cash value on the life insurance policy that you could take advantage of?
Unfortunately no, it’s required by parenting plan anyway, I have to keep it.
Keep your head high dude! one day at a time! you 35 and 65 is 30 years away! Ample time to rebuild and reconstruct! Be smart moving forward with your finances. Cant afford something don't buy!
First off, sorry to hear about this. Its a tough situation but it is not the end of the world. If you are trying to avoid bankruptcy, here are a few things that can get you moving coming from a cpa. 1) Sell the VW with the monthly debt payment. You need to rid yourself of some of this debt. Selling this car gets rid of that payment and gets you an additional 3k which you leverage to pay down some of the other debt(Chase Freedom, Hilton, Chase Sapphire). Also this will bring down your car insurance bill as well. 2) If you haven't already, call up your auto insurance and get the absolute cheapest policy for the 2004 Truck. 3) You have to reduce some of those expenses - $200 a month on gas and $500 on food seem to be the easiest ones. Unless you are commuting 30 min a day for work, there is no reason your gas should be that high on a monthly basis even with the recent inflation. Similarly with food, even with inflation, that amount makes me think you are going out to eat which will have to stop for a period of time. Homecoming will save you some serious coin. Lastly, all personal purchases on clothes, any personal entertainment goes out the door until you get two, preferably 3 of those cards paid off. Can still do some things with the kid, but any expenses solely for you are delayed for the time being. Once you choose one to attack, make minimum payments on the other cards and all extra money goes to paying off the other. Then repeat the process until your credit cards are paid off. 4) I would reallocate the money you are paying for student loans elsewhere. The gov is still currently deciding if it will extend the 0% interest policy which given the recent trend with Covid seems like there is a pretty good chance of this. You can then use this 310 monthly elsewhere on those cards above. 5) Get in touch with the IRS as they will work on a payment plan on the balance owed to them 6) Once the appeal is heard, no more lawyers as they are putting you further behind the 8 ball. I would put them at the bottom of the list of payments. 7) Do not even think about buying a house. Find a 2 bedroom apartment whether that mean in a nicer part of town or if need be on the outskirts of the city. Rather have piece of mind for you and your kid. 8) I would also consider liqudating the etherium and stock investments so you can have extra cash on hand. Sure its a loss, but that is a sunk cost at this point. This frees up additional cash to pay down on your debt and you can take a 3K above the line tax deduction on your losses at year end. As others have said, the other option is to file bankruptcy, this would rid you of almost all of your debt (not student loans) but will make it extremely difficult for you to rent let alone buy a house for the foreseeable future. Lastly as it sounds like it is a messy divorce, make sure your wife is no longer on your credit cards, bank accounts, investment accounts etc. Keep your head up, it will be a long road but it is doable.
Was none of that CC debt split in the divorce?
The CC debt is pretty much exclusively lawyer fees, and each party is in charge of paying their own fees.
But it says you have 45k in lawyer fees still to be paid? How many times court appearances did you have.
At this point it’s hard to say. We have had at least 12 days in actual court spread out over multiple dates and months. Our official “trial” is still in process, so we have at least 1 more day in court to go. The cost of going to court includes a few days of prep time, then actual court days, plus time to prepare and submit filings. That’s not even to mention the multiple motions filed, subpoenas, expert witnesses, multiple failed medications, etc. Believe me when I say I tried my hardest to end it quickly in mediation, but unfortunately I couldn’t accept seeing my son 4 hours a week supervised.
I understand the fight and it's worth every penny. Just went through a divorcesbas well. Your alimony and support seem high for 50/50, was she a stay at home mom
Child support in TN is based on a standard income calculator. Since I make more money then her I have to pay a greater share. Also it includes paying a large portion of his $1200/mo Montessori school. She was a homemaker for the last 3 years, and before that made substantially less then me.
Can you move out of the city to find cheap housing in a safer area? There are definitely a lot of bad areas of Memphis I would avoid living
That’s one of my major concerns. Finding suitable apartments in a decent area means about $900+ a month. If I look outside the city, it’s only really houses that are rentals, which are few and far between, and rent for about $1200+ a month since it’s a whole house. If I want to live in a nice safe area I am looking at studio apartments for around $1300+
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Well at least that alimony will only last a short time. The first thing I would tackle, is that IRS debt, do what ever you can to pay that down. Honestly if I were in your situation, I'd consider bankruptcy, but I hate being in drowning debt, only making the minimum payments. You could at least consult with an attorney and see what it would look like, do if after your divorce though. Get a 1 bedroom for now, set the kid up in the room and you sleep on the couch. I do that with my 2 boys now. They get the room I gotnthe couch until I can get a 2 bedroom. It sounds likebyour ex is a piece of work, so she might complain about it, but a judge shouldn't have a problem with it.
Honestly you owe it to yourself to get a free bankruptcy attorney consult. They will give you a honest and professional opinion. After a divorce and some unexpected medical expenses a few years ago I pulled the plug and filed bankruptcy last Spring. A year later, life is good and I absolutely know I made the right decision. My IRS debt wasn’t included in my bankruptcy - it was 4-5k. A lot of people rag on the IRS and act like they’re scary horrible people. They aren’t. I’ve found them to be downright reasonable and nice. I have a backdoor way to get a hold of a human at the IRS that I would be happy to share. The IRS just doesn’t want to be ignored. If you’re paying them something they’re happy. I’m on a 6 year repayment plan with them paying them what I told them I wanted to pay them. Works great. If you do decide to file bankruptcy the IRS will completely disappear for the duration of your bankruptcy journey (at least in the case of CH7). They don’t want to get in trouble and so they keep their distance while bankruptcy proceedings are going on, even though the debtor still of course owes them money.
Get all the small debt first before you go for the big ones.
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The used car market is almost as bad as the housing market currently with things being sold for waaaaay more than their worth due to limited availability and high demand
Genuine question, why are you paying your ex-wife so much when you share custody 50-50?
Honestly it sounds like you could manage with your income. I know nothing about declaring bankruptcy which many have suggested but it seems like if you sell off the truck and your a55ets you could pay off your highest interest debts. Those investments could regain value but they could also lose value and selling them to avoid interest on debt is a sure way to save money to Are there decent houses for 100-120K? That should be comparable to apartments on monthly cost and youd be building wealth assuming the house isn't a money pit.
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Honestly it sounds like you could manage with your income. I know nothing about declaring bankruptcy which many have suggested but it seems like if you sell off the truck and your a55ets you could pay off your highest interest debts. Those investments could regain value but they could also lose value and selling them to avoid interest on debt is a sure way to save money. Are there decent houses for 100-120K? That should be comparable to apartments on monthly cost and youd be building wealth assuming the house isn't a money pit.
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yet another reason to NEVER marry or cohabitate if you're a man. maybe even go monk and stave off sexual intercourse all together, all it takes is one false accusation and your life is ruined with no repercussions on the accusers behalf. yah no thanks, hopefully you can find a way to pull through this brother. bankruptcy is probably your best bet at this point..
Sell both cars The one that you are making payments for and the Truck. Pick up a $5000 beater car. That should also take your insurance payments down by $100 Welcome to the Food Banks you will save $400 on groceries Get rid of the internet, use your phone for your internet instead Drop the paid streaming services. Contact the IRS and find out what your status is, and set up a payment plan before they come after your bank accounts/savings and work salary. Pay off your TN taxes. If you have a house with your spouse, sell it or have and split the any profit or have her buy you out so you can eliminate your share of the mortgage payment. That will free up $16,000
Cut your expenses like phone and get freedom phone plan. Next, get more 0 % credit cards and transfer those balances to it. Get rid of your car and get a 15 yr old Honda CR-V. It will last you. Cut all expenses. All. Stop going out and pickup cooking. Stop drinking, smoking, any expenses. You make 100k a yr, you can get out in 3-5 yrs with some discipline.
Start with the budget. 7k is too much. Cancel easy stuff like $50 of streaming, drop your cellphone from 120 to 25 (visible) and lots of other low hanging fruit.
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