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 Post subject: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 3:33 pm 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
I have taught school for 24 years (counting this one).
My personal finances are a BIG MESS right now. I'm currently behind on NO PAYMENTS to ANY ONE (in fact, I have never been charged a late fee in my whole life and my credit score is easily over 700), but . . . I have raided all of my savings.
My net monthly income is about 2,500. My wife brings in an additional 500. So, a total net monthly income of 3k.
But, our monthly expenses are about 3,350k. Leaving us with a NEGATIVE monthly cash flow of 350 bucks.
We live in a nice home. I have not checked home values lately. But, I would estimate ours at around 150k. About ten years ago we got our mortgage (CNB) on our home for about 112k (at a fixed rate of 5.6% for 30 years). I think the buying price we paid was like 121k.
We owe CNB 93,500 on the mortgage. We have a SECOND mortgage on it with Meritrust - we owe them about 28k at 5.25% fixed for about 14 more years. So we MIGHT still have about 30k in equity in our home. I don't know. It has not been appraised in a long time.
My wife thinks she can make 1k per month with her own home/business cleaning business (self-employed). She wants to be self-employed because we have three daughters ages 5, 7 and 9. She thinks the cost of daycare, and the fact that she doesn't trust any daycare, makes her having a normal JOB, 'impossible' for her. I don't think she'll make more than 500-700 per month.
Here is the big picture. All we are guaranteed, provided I stay healthy, is about 45k per year with my teaching job. We have the above mentioned mortgages, plus 30,100K in credit card debt (all at 0-1% interest . . . we just keep playing the 'roll it over into another zero percent deal' game, when the current ones expire), 6k in new windows. So, not including our first mortgage - we currently have 64,100K in debt.
We have no student loans. We have no car payments. I have my 21 years of service in a teachers pension, plus an IRA 401 that is worth about 20K.
So, for me, the BIG PICTURE IS -- at least 64K in non-first mortgage debt, on a measly salary of my 45k per year. And as described above, our monthly cash flow is about NEGATIVE 350 bucks a month. I used to be able to cover that with my savings . . . but we have no savings left any more.
I see the 'writing on the wall', and I do not like what it says! I'm trying to get educated and wise advice now in a pro-active manner, rather than later, in a reactive manner, when the ship has sunk.
Does anybody have any suggestions? Early today, I had the ‘dream’ below. I would like more OBJECTIVE eyes, to tell me if it is a workable plan. It is under my sig.
Thank you very much for your time and attention.
PS: I'll be 49 in May. I have been married about 11 years. While single I always had between 4-8k in cash, plus a low over-head. The expense of marriage, family and some bad spending habits . . . I never thought I would be in a mess like this. I'm 'educated'. I know better. UGH.
^^^^^^^^^^^^
**If you round our current CC debt off to 30k

**My yearly income plus your (my wife) income equals about 10,800K per year that goes to debt

**each year we get back tax money, we send 2K per year to debt

**I can find a summer job (big IF), that adds another 2K per year to our debt

**The above totals 14,800K per year that we can 'possibly' pay towards our debt each year

**14,800K towards our debt of 30k -- means that in about two years, we could possibly be free from CC debt???

Then actually have a monthly positive cash flow again and never get stupid with CC's again?

Does that make sense? No lawyers needed. No bankruptcy needed. Just lots of 'good luck' (no medical emergencies, our OLD cars keep on trucking without needing any major repairs -DOUBTFUL-)

So . . . we try the above with no third parties involved but yet run into problems -- THEN at THAT time, we could/would call the CC's about modifications to our accounts to avoid bankruptcy.

The book I read said when the CC companies here you say, "I am calling you for a modification on my current loan SO AS TO AVOID BANKRUPTCY..." He said they will be eager to work something out with you because they know that if one goes bankrupt, most likely the CC will not get a single penny out of you. Better for them to cut a deal and get like 40-60 cents on the dollar, then to get NOTHING. That makes sense.

So anyway . . . is the above feasible? Or . . . should I be looking at other alternatives now?


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 Post subject: Re: Bankrupt or try to 'gut' it out? - REVISED
PostPosted: Mon Oct 29, 2012 3:43 pm 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
I revised my payoff plan to reflect a lower amount to be able to apply to our debt. Basically, it was just cutting the yearly income amount that could be applied to our debt via employment in half -- from 14,8k to 7,4K ^^^^ thank you and sorry for the inconvenience:

**My yearly income plus your (my wife) income equals about 7,400K per year that goes to debt

**each year we get back tax money, we send 2K per year to debt

**I can find a summer job (big IF), that adds another 2K per year to our debt

**The above totals 11,400K per year that we can 'possibly' pay towards our debt each year

**11,400K towards our debt of 30k -- means that in about three years, we could possibly be free from CC debt???


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 Post subject: Re: Bankrupt or try to 'gut' it out? - REVISED
PostPosted: Mon Oct 29, 2012 3:58 pm 

Joined: Sun May 29, 2011 4:50 am
Posts: 170
tdcgd0507 wrote:
**each year we get back tax money, we send 2K per year to debt


Why are you getting back 2k in tax money? If you're getting that each year, perhaps it's time to change the number of exemptions on your W4


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 Post subject: Re: Bankrupt or try to 'gut' it out? - REVISED
PostPosted: Mon Oct 29, 2012 4:00 pm 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
Justus wrote:
tdcgd0507 wrote:
**each year we get back tax money, we send 2K per year to debt


Why are you getting back 2k in tax money? If you're getting that each year, perhaps it's time to change the number of exemptions on your W4


I am clueless on taxes. I guess because we are 'poor' for a family of five. I have three daughters under the age of ten. 5 people basically living off a gross income of 45k per year.


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 Post subject: Re: Bankrupt or try to 'gut' it out? - REVISED
PostPosted: Mon Oct 29, 2012 4:34 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1616
Location: Seattle, WA
tdcgd0507 wrote:
Justus wrote:
tdcgd0507 wrote:
**each year we get back tax money, we send 2K per year to debt


Why are you getting back 2k in tax money? If you're getting that each year, perhaps it's time to change the number of exemptions on your W4


I am clueless on taxes. I guess because we are 'poor' for a family of five. I have three daughters under the age of ten. 5 people basically living off a gross income of 45k per year.


That's not what Justus was asking. No matter what your total tax is for the year, you can adjust your W-4 so that just enough is withheld to equal it. Then you get to keep more money throughout the year rather than getting it back the following spring. For someone in debt, like yourself, this can be pretty big - though you have to make sure you use it to pay debt, not to increase your spending.


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 Post subject: Re: Bankrupt or try to 'gut' it out? - REVISED
PostPosted: Mon Oct 29, 2012 4:40 pm 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
That's not what Justus was asking. No matter what your total tax is for the year, you can adjust your W-4 so that just enough is withheld to equal it. Then you get to keep more money throughout the year rather than getting it back the following spring. For someone in debt, like yourself, this can be pretty big - though you have to make sure you use it to pay debt, not to increase your spending.[/quote]

Understood. Those payroll forms that I fill out at the beginning of the year (or whenever that once a year time is). I'd have to get a tax guy to tell me what to check I guess. And, with our poor habits (which we are working on breaking), we like to error on the side of getting money back . . .rather than paying it. But, I do understand the point that IF I could fill out those forms correctly, that I could be bringing home more money each month. But again, how can I be sure that I filled them out the 'right' way? And, since this school year is already going . . . I probably have to wait until next school year to make changes on my with-holdings? Thank you.


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 Post subject: Re: Bankrupt or try to 'gut' it out? - REVISED
PostPosted: Mon Oct 29, 2012 4:50 pm 

Joined: Tue Jun 12, 2012 4:34 pm
Posts: 495
tdcgd0507 wrote:
Understood. Those payroll forms that I fill out at the beginning of the year (or whenever that once a year time is). I'd have to get a tax guy to tell me what to check I guess. And, with our poor habits (which we are working on breaking), we like to error on the side of getting money back . . .rather than paying it. But, I do understand the point that IF I could fill out those forms correctly, that I could be bringing home more money each month. But again, how can I be sure that I filled them out the 'right' way? And, since this school year is already going . . . I probably have to wait until next school year to make changes on my with-holdings? Thank you.


You shouldn't need a tax guy to figure out how much you should be withholding for your taxes. If you get $2k back each year, and if you get paid 2x per month, that means you're over-paying by about $83 per paycheck ($2k/24 paychecks). So, you just need to adjust your withholding number up to pay about that much less in taxes per paycheck. (Keep in mind, though, if the payroll tax cuts expire at the end of the year as scheduled, you'll need to take that into account for next year's withholdings.)

Check with your work HR to see when you can make changes. My work has an automated system where I can go in and adjust my withholdings at any time throughout the year. Others have "open seasons" for adjustments.


Last edited by alohabear on Mon Oct 29, 2012 4:52 pm, edited 1 time in total.

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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 4:52 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5370
Welcome to the forum!

I must admit that I am very confused by your post.

If you spend $350 more per month than you earn, how will you come up with over $11000 per year to pay toward debt?

If you CAN find that kind of money it would be fantastic and I think you could be in a very good position in just 3 years as you say.

There are many people on this forum that will help you figure this out. We'll help you make your dream a reality if you can stick with it.

My suggestion would be to make yourself a detailed budget and post it here for people to comment on and help you find other ways to save. You should also reduce your withholdings as soon as possible by submitting a new W4. You should be able to do that tomorrow. It sounds like you ought to be able to come out even with 4, 5 or even 6 exemptions (3 children, wife, and mortgage). That will give you more take home every month to apply to debt. If you do it now you will still have put in enough this year to get a refund in April that you can apply to debt but you probably will no longer get a big refund starting in April 2014.


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 5:12 pm 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
DoingHomework wrote:
Welcome to the forum!

I must admit that I am very confused by your post.

***Understandable. Sometimes I do not express myself well. I have ADD (seriously, I take medicine for it and have for the last five years now). I usually type as fast as I can so I can move on to another project (lesson plans, clean up my pig-pen room, spend time with my family, etc).

If you spend $350 more per month than you earn, how will you come up with over $11000 per year to pay toward debt?

***Good point. Let me try to clarify and correct my thoughts:

***I revised it down to 7,4k per year that I could pay towards debt. My wife rightly corrected me down even further tonight. With my salary, and the little bit she makes, plus a tax refund - we could send about 5,5k per year. And hence have the 30k amount paid off in about six years.

***The '350 more per month than I earned' was being covered by my SAVINGS. However, I can play that game no longer, as I have exhausted my savings. So, now we will try to make up that 350 with the wife picking up a few more part time jobs, and with us watching/trimming our spending.

If you CAN find that kind of money it would be fantastic and I think you could be in a very good position in just 3 years as you say.

There are many people on this forum that will help you figure this out. We'll help you make your dream a reality if you can stick with it.

****Thank you for your kind and encouraging words. I appreciate it very much.

That is all for now.

Again, thank you. I am a bit more hopeful now. What a nice and helpful community! :D

My suggestion would be to make yourself a detailed budget and post it here for people to comment on and help you find other ways to save. You should also reduce your withholdings as soon as possible by submitting a new W4. You should be able to do that tomorrow. It sounds like you ought to be able to come out even with 4, 5 or even 6 exemptions (3 children, wife, and mortgage). That will give you more take home every month to apply to debt. If you do it now you will still have put in enough this year to get a refund in April that you can apply to debt but you probably will no longer get a big refund starting in April 2014.


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 7:04 pm 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
So . . . I should trust that HR are 'tax experts' and will best know how to handle my W-4 with-holdings so that I can increase my take home pay?

I don't trust them. I am afraid that they would screw it up so that in April I would end up owing like 500 bucks or a grand. Again, money that I don't have.

You would really trust HR to be able to do the figures correctly?


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 7:30 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5370
I see your point. If you reduce your tax withholding then you are basically just borrowing from the tax refund you expect and also taking a risk of having to pay in April so maybe that's not something you should do. The return you would earn on it is just the 0-2% you pay in credit card interest so in the end it may not be worth the risk for the $20 a year it will save you.

Do you have any expenses that you could cut out even for a few months to try it out?


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 7:34 pm 

Joined: Sun May 29, 2011 4:50 am
Posts: 170
tdcgd0507 wrote:
So . . . I should trust that HR are 'tax experts' and will best know how to handle my W-4 with-holdings so that I can increase my take home pay?

I don't trust them. I am afraid that they would screw it up so that in April I would end up owing like 500 bucks or a grand. Again, money that I don't have.

You would really trust HR to be able to do the figures correctly?


It seems you'd rather have your employer take excess money from your paycheck rather than risk owing the IRS money in April. A lot of people feel that way; taxes are a big mystery until the turbotax evening where you scramble to key in all your forms and pull the magic lever and either win or lose. Seems that way, but it really isn't.

How do you know you'll get back 2k in the form of a "tax refund"? Would you rather have the extra $167 per month and wind up with zero "tax refund"?


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Mon Oct 29, 2012 9:41 pm 

Joined: Tue Jun 12, 2012 4:34 pm
Posts: 495
tdcgd0507 wrote:
So . . . I should trust that HR are 'tax experts' and will best know how to handle my W-4 with-holdings so that I can increase my take home pay?

I don't trust them. I am afraid that they would screw it up so that in April I would end up owing like 500 bucks or a grand. Again, money that I don't have.

You would really trust HR to be able to do the figures correctly?


I apologize for not being more clear. What I was suggesting was that YOU figure out how much you should be withholding and then adjust your W4 accordingly. You may have to go to HR to fill out the paperwork, but I did not mean to imply that you ask them to do the math. (Any good HR person wouldn't do that anyway; they know they're not tax professionals.)

You can view the 2012 tax brackets to find out your tax rates here: http://www.forbes.com/sites/moneybuilder/2011/09/30/2012-federal-income-tax-brackets-irs-tax-rates/

I understand if you're not spun up on how this works that it can be a daunting task. Maybe the best bet for now is to leave things as is (so you get the full return you expect in 2013), but read up on how taxes and withholding work so next tax year you feel more confident in changing your W4.


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Tue Oct 30, 2012 4:15 am 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
alohabear wrote:
tdcgd0507 wrote:
So . . . I should trust that HR are 'tax experts' and will best know how to handle my W-4 with-holdings so that I can increase my take home pay?

I don't trust them. I am afraid that they would screw it up so that in April I would end up owing like 500 bucks or a grand. Again, money that I don't have.

You would really trust HR to be able to do the figures correctly?


I apologize for not being more clear. What I was suggesting was that YOU figure out how much you should be withholding and then adjust your W4 accordingly. You may have to go to HR to fill out the paperwork, but I did not mean to imply that you ask them to do the math. (Any good HR person wouldn't do that anyway; they know they're not tax professionals.)

You can view the 2012 tax brackets to find out your tax rates here: http://www.forbes.com/sites/moneybuilder/2011/09/30/2012-federal-income-tax-brackets-irs-tax-rates/

I understand if you're not spun up on how this works that it can be a daunting task. Maybe the best bet for now is to leave things as is (so you get the full return you expect in 2013), but read up on how taxes and withholding work so next tax year you feel more confident in changing your W4.


Very well said. Thank you.


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 Post subject: Re: Bankrupt or try to 'gut' it out?
PostPosted: Tue Oct 30, 2012 4:22 am 

Joined: Mon Oct 29, 2012 3:11 pm
Posts: 49
Justus wrote:
tdcgd0507 wrote:
So . . . I should trust that HR are 'tax experts' and will best know how to handle my W-4 with-holdings so that I can increase my take home pay?

I don't trust them. I am afraid that they would screw it up so that in April I would end up owing like 500 bucks or a grand. Again, money that I don't have.

You would really trust HR to be able to do the figures correctly?


It seems you'd rather have your employer take excess money from your paycheck rather than risk owing the IRS money in April.

***Yep. Exactly.

A lot of people feel that way; taxes are a big mystery

***Yep. Exactly.

until the turbotax evening where you scramble to key in all your forms and pull the magic lever and either win or lose. Seems that way, but it really isn't.

***Very well said. Yes, they are a total mystery to me.


How do you know you'll get back 2k in the form of a "tax refund"?

**Past returns. We have always gotten money back. But, the rules have changed and my wife has earned a lot less money. When she ran a daycare in our home, we could claim many things . . . We have gotten as much as 5k back before. So, I figured with her NOT doing a daycare any more, that we would get a lot less back. Basically I'm just guessing. And, if you are wondering why she no longer runs a daycare in our home . . . she says it is because a registered sex offender bought a home across the street from us and that legally she can not now do a day care in our home because of that fact. I do know for sure he is a reg. sex offender. I do not know for sure if this keeps her from running her daycare again. I figure why look into it, if I was able to 'prove' that she could ran her daycare, then she would most likely come up with some other excuse why she could not do it again... She wants flexibility and that is a gift given to the rich and responsible of which we are neither.

Would you rather have the extra $167 per month and wind up with zero "tax refund"?


***Yeah, I'd love that. But . . . I don't know how to do that. I don't even know how to start to do that. You might as well be speaking greek or latin to me. So . . . I guess it is time for me to learn greek or latin . . . it is just hard to find the time to do that when one is a full-time worker, husband, and father.


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