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well, i dont really know where to begin, just that im in such a HUGE hole at such a young age due to my stupidity. To give a little background info, IM currently 22 and a senior in college working a full-time job (45-50 hrs week) In high school i started my own company and made really, really good money. ($50k year at 17 yrs old)
Its hard to believe, but i blew 90% of it as soon as i got it. One thing all this money allowed me to do was get alot of credit cards quick, with high credit limits. Well, my freshman year in college, I got three credit cards, all with limits of $10,000 each. My hobby at the time was old muscle cars so i went and payed cash for an old car. Well, three years later I have amassed $30,000 of credit card debt by restoring the stupid car. I kept sinking money into it thinking i could sell it and get out of it but that wasnt the case. A year ago i also bought a new Cadillac Escalade (they gave me the loan at 21 yrs old, i couldnt believe it either) Now i make $3000 a month and have no money left over at the end of the month and need advice on the best way to get out of debt. Once im out, i will NEVER have another credit card, and the ones i have now are in the trash. My car payment is $943 a month, $150 insurance, rent $500 (with roommates) and credit card minimums are $650 each month. That leaves me with just a couple humdred a month. Im upside down on my car, so i cant sell it without coming up with $8000 dollars cash. I cant get any kind of loans with the debt i have b/c my three cards are all maxed. Is there any way out? at the end of the month, i have about $100-200 dollars left over. I cant get another job because of school. Is there any way out of this? I am putting the car up for sale next week for $17000 (thats high for what its worth) Am i doomed?
thanks in advance for your help......feel free to email me any comments or suggestions......
mreeves@austin.rr.com

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As everyone knows it is best to pay off your debts, but with that said some times people get themselves into situations where they just can't do it. Looking at the numbers you give it appears you are in that situation. I am assuming you are already doing damage to your credit report and probably will continue to do so if you continue down this path...with that said it may be time to consider bankruptcy. People will correctly tell you that it will ruin your credit report for years to come, but the question to ask yourself is are you already doing that and is there any other way out of the hole. If you do not have a rich kind relative the answer is probably not. If you do follow down the patch of bankruptcy it is important to realize that it is more important for you, then for people who did not declare, to save as much money as possible. People with good credit rattings can lean on a bank in hard times, but most likely you would not have that option for a considerable time in the future.

I would love to tell you the particular rules for bankruptcy in your state, but I do no know where you live or the rules they have there. Most states allow you to keep a car and "some" states even allow you to keep a primary residence (not all states do this although most people believe it to be so). The problem you will have is the value of the car is usually an issue (once again depends upon the state), but that's okay since a more practical car is really what you should be looking at. It sounds like you may have made purchases that could still be valuable beyond your car and if this is so it is likely that the credit card companies will request those items be sold and the proceeds go to them.

Bankruptcy is a harsh step, but people should not ignore it as a possible step due to social stigma. It is a valid action for many people, but should not be used as an easy way out. It appears that your situation may lend itself to this step. I wish you much luck and I hope you see another way out, but bankruptcy does allow you to get yourself out of a hole you dug which you can't get yourself out of.
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Forgot one obvious thing...have you tried going to the dealership explaining to them that you are at your wits ends and your staring bankruptcy in the face. They might take the car back; although I would assume if they did they would still want X a month to pay off some additional part of the loan. This could possibly open up enough money to make a difference.

Also depending upon where you are living it may be possible to move into another apartment with friends and split the rent reducing your $500 a month considerabily.

If both these ideas worked maybe you could be out of part of your hole and if you are Consumer Credit Counseling may be able to help dig you out of your CC debt at a realistic rate and interest rate.
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Try going to the LBYM board. You didn't really say but have you been able to keep your payments current? If so, then I would not go the BK route. Have you tried selling the restored muscle car? Are there other things you own that you could sell to get some money? This board and the LBYM board are full of ideas for people, many who have overcome or are still overcoming many thousands of dollars in debt. A BK will stay with you forever and as many will tell you of their personal experience that they wish they hadn't done it. It can even keep you out of some jobs, apartments, etc. There are many people who know ALOT of useful information that post to these boards and I'm sure they'll give you lots of great ideas. Also, I admit that I have no idea of how much a new Cadillac cost but $943 seems a little high for a monthly payment. Have you looked into maybe refinancing it to lower the payments? Are there any new job opportunities or bonuses or raises coming your way? I'll bet you'll be surprised when you start brainstorming for ideas and IF and that's a big if you don't think of any, try something like CCCs first before going BK.

Stockbuyer2
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I think that talk of bankruptcy is premature. You say that you're a college senior. That tells me that you'll graduate within a year -- and perhaps much earlier. After you graduate you may be able to get a better job, a raise, and/or another job. I can see attacking this a couple of different ways:

1) Call each of the credit card companies and tell them that you've gotten in over your head and can't afford to make the minimum payments right now, but that this is temporary until graduation. Ask that your monthly payments be reduced until then by AT LEAST half. That could get you up to $500+ left over every month, and you should be able to live on that. It won't be fun, but you could suck it up and do it for a year.


2) Call the car loan people and be frank with them about your situation. Tell them you want to sell or return the car and pay off the remaining balance of the loan over time. They will not like this one bit, but in the end this is better for them (and you) than a straight repossesion. Getting out from this big alligator will solev your cash flow problems.

Good luck.
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While the cc are sure not helping, your most pressing problem is that caddy and the insurance. That's damn near $1100/month! You are unclear about the muscle car. Do you still own it? If so, you need to turn that into cash asap. At the same time, let the caddy go and buy a good used car for 10k or so.Pay cash for it of course and anything left over, split between a budget for your senior year and pay down some cc debt.
Exactly when do you graduate and what are your job prospects? By that I mean how soon can you expect to boost your income and by how much?
If you don't still have the 2nd car, you got some problems. I still say the cc aren't the most pressing {though they don't help} but, you got to do something with that caddy and the insurance payment. You really could use a successful theft {just kidding}. How about coming back with some answers to these questions and maybe the board can cobble something together?
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Sell your automobile, and with your salary there is no reason why you should file for bankruptcy. You can get 30,000 in CC debt paid off in just 2-3 years, if you bear down and not use them again. Just learn to live within your means. If you don't then you will be back in the same position you are in now in 2-3 with a BK on your record. BK does nothing to treat your real problems, which is overspending.
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well, i dont really know where to begin, just that im in such a HUGE hole at such a young age due to my stupidity. To give a little background info, IM currently 22 and a senior in college working a full-time job (45-50 hrs week) In high school i started my own company and made really, really good money. ($50k year at 17 yrs old)

That's impressive!

Its hard to believe, but i blew 90% of it as soon as i got it.

This habit is the reason most everyone here who ever had credit card debt developed the problem in the first place. It's not hard to believe at all.

One thing all this money allowed me to do was get alot of credit cards quick, with high credit limits. Well, my freshman year in college, I got three credit cards, all with limits of $10,000 each.

Time for me to rant here, but not at you. I really wish the credit card companies would at least give folks a chance to graduate from college before hitting them up with the opportunity to add to the college loans most already have. End rant.

My hobby at the time was old muscle cars so i went and payed cash for an old car. . .A year ago i also bought a new Cadillac Escalade...My car payment is $943 a month, $150 insurance . .I am putting the car up for sale next week for $17000 (thats high for what its worth)

I'm assuming the car that you're selling is the muscle car you've been restoring. You mentioned you paid cash for the car and that the restoration costs are on credit cards, so there are no loans directly collateralized by the car itself - you can do whatever you want with the proceeds. So whatever you sell the car for (let's say $15000, since you think $17000 is high), I'd apply the money in this order as it's available:

$8000 - Sell the Cadillac and get rid of that $943/month payment! [you mentioned your were $8000 in the hole on the loan)
$4000 - Buy a reliable used car for transportation to replace the Cadillac.
$1000 - Emergency fund. This is so you don't need to resort to using the credit cards you'll be paying off. If the used car you purchased is fairly reliable (do your research!), maintenance costs should be reasonable.
$2000 - apply to the credit cards.

The next step, if you haven't already, is to develop yourself a detailed budget. You need to allocate money to standard expenses like food, transportation, and school expenses, but also ensure that you maximize the amount you can send in to apply to the credit card companies. Keep your eyes open for special offers which will let you transfer balances from high rate cards to low rate cards, and be sure that your payments are sent in plenty early to avoid late charges.

It will take time, but you can beat this.


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Yes, i still have the muscle car. its in the shop right now getting ready for to sell it. I will be graduating in May of 2001. I want to get into car sales of all things b/c thats where i can make the most money quick. I gotta come up with 3500 bucks here next week, which i have, to get it out of the shop so i can put it up for sale. Then, once i sell that, im going to take the proceeds and try and unload my cadillac for whatever i can get quick and just pay the difference. Thanks all for the help.....I was working two jobs, and going to school, but it just took too much of a toll on myself and my fiance and i nearly lost her.
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thanks for the reply, but what is the LBYM board? Yes, all of my payments are current, never been late. Once i get my car out of the shop i am selling the stupid thing. I dont really own anything thing else. I did have a motorcycle, but some lady just totalled it and her insurance company is going to pay the note off. yea, that cadillac was the dumbest thing ive ever done. My g/f at the time insisted i had to have it and i just followed right along into the trap. How soon can you call back and refinance?
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It sounds like you are on the right track, just don't consider bankruptcy. I was in a worse position than you with 60,000 in law school debt and about 20,000 in car debt. I haven't used my credit cards since I graduated law school and found that spending was the key to reducing my debt. My credit card debt is about gone and I even managed to buy a 97 Accord and now only owe 4,000. I will attack my law school notes next. Good luck.

GO VOLS
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Don't even think about refinancing the caddy! You 've just learned {I hope} a lesson that many people never learn. That is, a bad deal never improves with age. The cars have you in a box. Sell 'em and you stop the leaking. After you get established, go to work on the cc.
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I've read all the replies about your situation and they all assume one thing. That you *need* a car.

I'm not saying that you don't, truly, but it is something to consider. Can you get around for a few months or a year on a bike or by public transportation? If your home, job and school are all pretty close, you probably can do fine with bike and bus. Some communities even make it easy to take your bike on a bus for those times when the weather turns unexpectedly sour or the distance is just a bit too far.

Bikes are cheap if you buy them used, and easy to do your own maintenance. Bus passes vary, but in most places away from huge metropolises are less than $100/month (sometimes FAR less). Gearing up for cycling isn't too expensive, either. Mostly you need helmet, lights (yes you need lights, a sub-section of Murphy's Law states you will work late into the night with no other transportation options if you don't have them), and good lock. Say ... $60-75 for the whole kit.

Anyhow, good luck with your situation. If you were smart enough to run your own business, I'm sure you're smart enough to get yourself out of this situation.

Hugs!
t.
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I have to agree with the rest of the posters so far. Sell the muscle car. You may take a loss on it but you are taking a loss every month that interest compounds on those credit cards. Sell it and pay as much as you can on the credit cards...minus an emergency fund as aja91 suggested. Once you are out of debt and can afford it, you can get another muscle care and restore it, with cash!

The Caddy is your option. If you keep it and pay off your loan, you are still going to end up paying the extra $8000 that you owe over what it is worth. If you sell it you will still have to pay off the $8000 and buy another car. Either way, even if you buy another car for $2000 it will still cost you approximately $500 extra per month on the amount of money that is *not* being applied to the cc debt. You save $400 per month, but you are driving a $2000 car that will probably need to be replaced in a few years. On the other hand, that $400 can go a long way in paying off the remainder cc debt.

Good luck,

Ester
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"thanks for the reply, but what is the LBYM board? Yes, all of my payments are current, never been late. Once i get my car out of the shop i am selling the stupid thing. I dont really own anything thing else. I did have a motorcycle, but some lady just totalled it and her insurance company is going to pay the note off. yea, that cadillac was the dumbest thing ive ever done. My g/f at the time insisted i had to have it and i just followed right along into the trap. How soon can you call back and refinance?"

First, please don't EVER let a GF define who you are by the car you drive.

Second, since your still current and still have good FICO score? you can go to a bank, credit union, (no sleezy places that want alot of interest) you should be looking at the MAX at around 10% or so interest and with good credit lower. You just basically rebuy your car. I would not suggest this under normal conditions but you could refinace a 1 year old car for 48 if not 60 months. This should be done ONLY if it looks like you will have trouble selling the car. DO NOT allow someone to just assume the payments. If they default the banks sometimes come back to you who originally financed it wanting money. No offense but it sounds like you have to much car for the money.

Third, my husband is a muscle car fanatic (Dodge). I know that there are magazines out there (I can ask him for some names of them if you need them) that serious collectors read. We sold one 340 Duster that someone drove from Ohio to Texas and back to pick up. You might get maximum money from advertising in the right place.

Fourth, I agree it's WAY to early to talk about BK. Someone else could probably link you, but if you go back to the managing your finances board, the Living Below Your Means is one of the choices of boards. We get off topic alot but there are many great ideas on how to save money. One idea is to get a notebook and write down EVERY penny you spend for a couple of months. It just makes you more aware of where you're spending your money. You'll be surprised at how much of your money is wasted. Then setting up a budget is really KEY to getting your finances under control. Like I said before many have paid off HUGE amounts of debt, some not thinking they had enough money to do it, but you know they DID DO IT.

Stockbuyer2
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"Don't even think about refinancing the caddy!"

The economy is not that great and he might have a hard time selling such an expensive car and one I assume might not be that great on gas. He is upside down in his loan. If they repossess the car they will sue to make him pay for a car he no longer has. Refinancing could lower his payment enough to at least be able to pay it untill he can sell it and if he can make the payments he won't ruin his credit. It would perhaps give him a little breathing room, though I agree with you that he bought more car than he could afford and should try to sell it first.

Stockbuyer2
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thanks for the reply, but what is the LBYM board?

LBYM=Living Below Your Means. Here's a link: http://boards.fool.com/Messages.asp?mid=15004092&bid=100158
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Stockbuyer,

I still think his immediate problem is the $1100/month in car and insurance payments. That $8000 definency is not going to get better 30 or 60 or 90 days from now. Now, I see where he wants to sell cars so, I assume he is working as a car salesman now. Most auto dealerships will give their salepeople a demo car to drive. If that is the situation with him, his transport problems could be solved as long as he is working for the dealer.
If that's not the case, he'll still be way ahead selling the muscle car and selling the caddy and cleaning up the definency and buying a used car. A lower interest rate won't fix his problem. He doesn't need a lower payment, he needs no payment. As we say in my business, there is no disgrace in being wrong but there is disgrace in staying wrong.
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Most states allow you to keep a car and "some" states even allow you to keep a primary residence (not all states do this although most people believe it to be so).

More typically, states will allow you to keep up to a certain amount of equity (its value minus what you owe on it) in an automobile, and also (different amount) in a primary residence. However, if you do this, you'll also keep (and continue to pay) the loans on those items.

Cars and homes are usually sold on secured loans. You do NOT get to keep the security on a loan, and discharge the loan, in any version of bankruptcy law I've ever heard about.

In this case, you have no equity in the car, and no primary residence. An issue you have is that if you declare bankruptcy and don't decide to keep the vehicle you are currently upside down on, you may need to buy a vehicle (look at public transit in your area) and you won't be able to borrow on it until after the bankruptcy is complely discharged (probably 4-6 months after you file). And then it'll be quite chancy that you'll be able to borrow for several years, unless you can put 30% or more down.

However... THE MOMENT YOU FILE, you are protected from creditors for past debts. That includes your car loan and your credit cards. It'll probably be 1-2 months before you lose the car. In that time, dump your credit-card and car payments into a savings account, and then look at picking up a car where you can lay down half to 3/4 of your savings and drive out owning it free and clear.

(If creditors call you after you file, inform them that you've filed and give them your bankruptcy attorney's name and phone number. If the same creditor calls again, repeat. On the third call, start saying the magic words... "you are in violation of federal bankruptcy laws" and "harrassment" are good magic words...)

That said... if you are making at least minimum payments on everything and still have a couple hundred dollars left at the end of the month, start throwing them into savings until you have at least a month's worth of after-tax income in savings. Then start throwing the monthly surplus at your highest-interest debt. You aren't in totally over your head... close, but not quite.

Also go visit the Fool's Living Below Your Means board. And do a search for the Snowball Calculator; you may be surprised at how quickly you can get clear, if you act in the most intelligent manner.
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I'll go out on a limb, here, since no one has mentioned this yet.

It seems to me that if you were able to establish a business at the age of 17 in which you made $50K a year, you must be a smart person with a lot of initiative and entrepreneurial skills.

Might you tap into whatever those talents are again...perhaps put school on hold temporarily...and use your skills to regenerate some of that income to tackle your current debt load? After you stabilize the situation, go back to school and finish.

Just a thought from a fellow entrepreneur who also withdrew from school for a short while for various reasons. It didn't kill me.
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"Stockbuyer,

I still think his immediate problem is the $1100/month in car and insurance payments. That $8000 definency is not going to get better 30 or 60 or 90 days from now. Now, I see where he wants to sell cars so, I assume he is working as a car salesman now. Most auto dealerships will give their salepeople a demo car to drive. If that is the situation with him, his transport problems could be solved as long as he is working for the dealer.
If that's not the case, he'll still be way ahead selling the muscle car and selling the caddy and cleaning up the definency and buying a used car. A lower interest rate won't fix his problem. He doesn't need a lower payment, he needs no payment. As we say in my business, there is no disgrace in being wrong but there is disgrace in staying wrong."

First let me say that I agree with you that he needs to sell the cars. That being said, he also stated that he is current with his payments, I'm assuming he has good credit, so he must be paying the payments somehow. I think in this economy with those in power saying gas could go to $3 a gal that he might have a hard time finding someone to buy a large SUV, though maybe not and if he can sell it GREAT. I agree that's what he should do. Also, I agree he should sell the muscle car, but then again it's a tight economy, but if he can GREAT. Car dealerships do usually allow salespeople to drive demos and if he sales his car that is GREAT. BUT, he is $8000 upside down in the car loan. He has the choice of 1. selling car 2. letting car go back 3. refinancing car. If he lets the car go back the company who loaned him the money will sue him, get a judgement, he'll have to still pay for the car and won't have the car. All I was saying was that IF he couldn't sell then he might could refinance to lower his payments enough to keep the car till 1. he can find a buyer 2. get right enough in his loan to get a more affordable car.

"He doesn't need a lower payment, he needs no payment."

Why? He has a job, is apparently making the payments now, and is graduating in a few weeks. How do you "clean up" a definency with a creditor without it staying on your record for 7 years?

Stockbuyer2

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I used the term cleanup in the sense that he pays the definency with the proceeds from the sale of the muscle car. No way did I mean he should default on the balance.
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Hey there,

I am in a similar situation. I am 23 and have 20,000, in CC debit. I don't have the car payment, but I can understand. There is not an easy answer to this. In fact the answer is s l o w. But you can pay off all these debits without a BK. I have been slowly but surelly paying off my CC's. In fact for support and ideas I post weekly. Just jus t a ow are you but the nitty gritty. Payments ( no matter how small ) and charges. Balances, go up and down. But the readers here always have suggestions. Some I use other I don't, but they are all vaild.

I encourage you to take a deep breath. Get a solid survey of what position you are in, then take one step at a time. Rest assured that we at this board are here to help.

Have you thought about a plan? I have heard several good options posted here. I understand that you may not be able to act on them ASAP, but consider them. IF you want to keep your car, how about taking a roomate. Is your place to small for that? Are you in a lease? If not move now. If you are start researching a place to go when it is up. As one of the previous posters pointed out that could be a 500 savings !! ( sounds like food money to me !)

Phone service: Basic only Cancel the caller ID, Call waiting etc.
NOTE: cancel your long distance and buy Pre-paid calling cards at Costo or Sam's
Cell phone: cancel it, if you are under a contract, cancel itas soon as it is up. Don't use it till then.
Garage Sale: You can sell your older cloths, kitchen items, stereo equipment etc.
Ebay Sell stuff that way.


Anyway that is just my suggestion for a place to start. Remeber don't just PANIC. Stop, Breath, Survey, Plan.


Ho-Lo


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I know that it seems like you are in way over your head. But with a little hard work and some determination tou can get out of debt. I agree with what everyone is telling you. Just keep your head up and when you start to get down come to the board and ask for some help. You are not the only person out there that is, has, or will ever go through this. Trust me!! If others can do it then so can you!!
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jsn7

I just want to apologize if I misunderstood what you were saying. These days, not only is not being able to get credit tied to our credit rating, but sometimes our ability to rent an apartment, get some jobs, and even get auto insurance. This makes it all so much more important to keep our credit ratings as great as possible.

Stockbuyer2
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No apology necessary stockbuyer. I often get in a hurry and don't express my thoughts clearly. Bottom line is, a lot of people are trying to help. Hopefully he'll find a few things that will apply to his situation.
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I too was in your situation at one point. I am now debt free, except for some furniture I bought, which I do not have to pay until October, interest free!

My advice to you is try to sell the car. You did not mention how much you spend on gas, but I imagine it must be a ridiculous amount of money. An Escalade is a big car! Once you sell the car, by yourself a small, fuel-efficient, low maintenance vehicle. That way you do not have to worry about the car for a long time. If you sell the car for less than you owe on the loan, take those 1100 a month you spend on car payments na dpay it off quickly. It might take a few months, and it might suck, but at least in the end you take the burden of that huge car off your shoulders.

Next, after you get rid of the car, start making large payments to credit cards. Tackle one at a time, I recommend the one with the highest APR first. And don't use them anymore, only deal in CASH!!!

And last but not least, don't despair! Money and possesions are not the primary thing in life! I am 23 a recent grad myself and busted my butt paying all my debt off as soon as I could so I do not have to be like many of my freinds parents! In Debt at 50!
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Can your parents or other family help?
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