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URL:  http://boards.fool.com/he-had-accumulated-on-2-seperate-credit-cards-a-30304024.aspx

Subject:  Re: Credit Card Debt - Best Approach? Date:  10/6/2012  12:04 PM
Author:  aj485 Number:  306015 of 308232

He had accumulated on 2 seperate credit cards a total of near 50,000 in debt.

Has he stopped using the cards?

He has a total income now of 52,000 per year.

With annual income slightly more than his debt, if he buckles down, he's still in a position where he could pay the debt off, although it will probably take a while.

With other expenses related to living he is in a jam.

Has he examined his 'other expenses related to living' to ensure that he has minimized them? Is he tracking his spending so that he knows what his 'other expenses related to living' are?

Most likely he will not improve his income salary for the next 5 years due to his situation.

He needs to look for other ways to improve his income then, like another job, or selling some of that stuff that he accumulated while doing all the spending.

1. What is the best approach? Credit Card Companies will not work with him.

Have him come here himself. While it's a nice gesture that you are trying to find out information for him, he really needs to decide that he wants help himself, and if he's not ready for that, no amount of coaching that you do from the sideline will help the situation. If he has decided that he's ready for help, it's much more likely to be effective if he seeks out the help himself.

2. Legal help then what does he file?

He could file for bankruptcy, but that may have employment implications, depending on what his career is. Prior to filing for bankruptcy, he will need to go through approved credit counseling anyway, so that might be a good first step. He should check www.nfcc.org to find an accredited credit counselor.

3. How does that impact his ability to go forward and purchase a 8,000 to 10,000 vehicle he needs? He is using one that is 15 years old now so he has the sacrifice part down.

I assume that you are talking about getting a car loan here. If that's how he is planning to 'afford' the $8k - $10k car, he's just going to get himself into deeper financial trouble, if anyone would even lend him the money. If he is struggling with the level of 'other expenses related to living' and isn't going to increase his income anytime soon, how does he expect to make payments on a car loan? He needs to look at a vehicle that he can save cash up for if he wants a different car.

4. How will this affect his future employment opportunities if they do a credit check?

Many employers require credit checks for even entry level positions, like customer service reps. If he already has late payments and defaults on his credit history, he's may already have limited his chances of employment. Declaring bankruptcy could further limit his chances for employment. It depends a lot on what he does, as some industries/positions will be more picky about what's on your credit report than others.

Also - be aware that for employment credit checks, employers can see the entire credit history, not just the last 7 - 10 years. So any late payments he already has, and declaring bankruptcy now could continue to affect his employement chances for the rest of his working life.

5. Can debtors get his 401K, home if not paid for, car worth 3,000,no boat, no other property,

401(k)s are protected from creditors by ERISA laws. IRAs (rollover, as well as other types) are protected to a lesser extent, depending on state laws. Also depending on the laws in his state, it is possible that they could put liens on his house and/or his car, although it is unlikely that they could seize either one for credit card debt.

AJ
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