Hi --This is my first time here, and I have a general question. Is there a rule of thumb for when bankruptcy is an inevitability or at least the most viable option.I've heard Suze Orman say that hers is "your debt is more than twice your annual income" but I'm not always sure what I think of that broad so I would like some input.Right now I'm talking to a person with an annual gross income of around $40,000 who has $50,000 in CC debt and another $50,000 or so in other personal debts. She is asking me how to create a budget.As an example of the depth of this problem, she is about to take possession of a luxury Lincoln sedan that costs as much as her annual salary (her current car is 3 years old and within a couple months of being paid off. I can't even state in words how painful this is to hear & watch). Obviously there is a big mental adjustment that is going to have to take place or she would be right back in this position within months of a bankruptcy. I don't even want to talk about it or mention it to her while she is still in the "if I want it I'll get another card and buy it" mindframe.The first two steps I've given her are to write down all her spending for November & December, and to keep all of her bills to add up her total debt. I think she will find in short order that the reason she is spending twice her monthly salary every month is because her minimum payments currently exceed her salary, so she is living off the cards. I'm hoping this might shock her into a bit of reality. Honestly, I don't know how it has gotten this bad. We're in a much better financial situation, and no one is going to give me $50k on credit cards!If she does see the reality of her situation & still takes possession of the car, I think she will have to hit rock bottom (in danger of losing her house or running out of credit) before she wakes up.If she does look at it and have the appropriate reaction, my next step will be to ask her to admit to her parents the situation she is in (they encourage the spending with unreasonable expectations for vacations & holiday spending and encouraging her to do stupid things like buy this car), and seek counseling.Are the debt proportions such that the budget is going to be a fairly moot point? Have any of you been in the situation of needing to make a big mental change before you try to fix the situation with a BK, but not being in a place to do that because of the mess you're in? What caused you to wake up & say, "uh, oh"?The worst is that she is alternately freaking out & wanting to do something different & then justifying this with, "but everyone I know is in a mess financially -- you're just talented in that area." (oh, brother)Thanks,W
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