I’ve been updating my debt spreadsheet to prepare for a meeting that my father has insisted (and that I am interested in to some extent, options are good things) with a bankruptcy attorney. I’m trying to get the meeting set up for early next week.
I’ve divided the debt into two categories that help me look at the bigger picture:
revolving debt (monthly payments) and “one-time” debts (chunks large and small that need to be paid)
Revolving Debt
- Mom – Total: $147,000 – Payment: $400/mo 0%*
- Debt Management Plan – Total: $54,177 – Payment: $1480/mo 5.5% est
- WAMU SBA Loan – Total: $29,363 – Payment: $612/mo 12.8%
- WellsFargo Business – Total: $20,891 – Payment: $347/mo 19%
- CitiBusiness (4 cards) – Total: $27,069 – Payment: $342/mo 0%**
- Toyota Financial (car) – Total: $17,333 – Payment: $369/mo 5.8%
- CitiStudent Card – Total: $3,598 – Payment: $36/mo 0%**
- WellFargo Student – Total: $473 – Payment: $29/mo 23%
- Union 76 Gas Card – Total: $220 – Payment: $26/mo 32%
Total Revolving Debt: $300,125
Subtract estimated value of car ($13,000)
Total Unsecured Revolving Debt: $287,125 – Payment: $3,641/mo
* My mother will not charge me interest (bless her soul). But I intend on paying her back with a fair interest rate.
** Citi’s hardship program. Negotiated 0% for 12 months.
One Time Debts
- IRS (2006) Estimated: $12,000
- IRS (2007) Estimated: $4,000
- Outstanding Utility Bills: $1800
- NCO Financial (Staples Card Charge Off): $1,132
- IRS (2005): $1,025 – due June 28 2007
- ER Solutions: $369
- RMS: $168
- AllianceOne: $75
- Fedex: $16.4
Total One Time Payments (estimated): $20,585
Total Unsecured Debt: $307,711
Yikes. At least I’ve consolidated quite a few things here. I did not include any mortgage debt in this even though I am quite upside down in my house. My reasoning for that is that with the short sale of the house, that debt different between the sale price and my current mortgage debts will be forgiven.
That may add tax consequences, but we will deal with that later (I also read that if you are considered “insolvent” you will not have to pay taxes on the forgiven amount. Their definition of insolvent is either you are in bankruptcy or have debts exceeding assets. That’s me for sure)
Mom Debt
One thing about the $147,000 I owe my mother. This was never a loan from my mom to me. I was put in charge of managing her investment accounts and that number is the amount of my losses in her accounts. It doesn’t make it any better, worse actually, but there you go. I traded away not only my own money. Of all the mistakes I’ve made, this one kills the most.
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{ 14 comments… read them below or add one }
A bankruptcy attorney will always tell you to file bankruptcy. Big surprise. As Dave Ramsey says, “It’s like asking a dog if he’s hungry.” That’s how they make money, and that’s their orientation toward financial issues.
I suggest you focus your efforts on earning money, which you seem capable of doing, and paying off your debts.
Another thought…I just read in your “about” blog section that “a man must be responsible for his actions”. Yet another good motivation to focus on earning money, cutting out any lifestyle, and paying your own debts off.
I’m sure you drive a better car than I do. Not sure how that makes me feel about your pain. what’s that bumper sticker… “don’t laugh… it’s paid for.”
Kristina,
I agree with you 100% on the bankruptcy attorney. I’m very against a BK because I think I have a decent (not great, lets be honest, business isn’t easy) shot at making enough money to pay everything. My father is insisting…and since he investing some in getting my business going, he can call a few shots (and I respect the crap out of him).
John,
Yeah…I bought the car new. Dumb mistake. (one of many during 2005…)
While your debts are substantial, they are not astronomical. You’re merely orbiting the globe, not locked away in a little capsule blasting toward the Oort Belt never to return like Casey Serin. It’s sort of like you have a mortgage to a non-existent house–the amount owed is in that range (granted, it is unsecured)–not unfathomable.
And if you had to, you could probably put paying your mom back on hold until you paid off your other, less sympathetic lenders, and that would make the necessary monthly payments a lot easier.
Well, i will second everyone else… debt is a lot like alcoholism or any other addiction… you have to admit theres a problem first before you can get better.
I wouldn’t short your mom, then you would be just like your roommates that stiffed you.
I would pay her something, consitantly and faithfully every month.
I aggree with you about bankruptcy… it looks like a fair amount of your debts are small business loans… if you get everything disharged, does that mean you’d be out of business and have to start over? Of course, that may just be the consequence… either way, you have to pay your mom back. bankruptcy wont make her stop being your mom.
so sell the car. i don’t get it. seventeen thousand is more than i have ever paid for a car. i believe i paid sixteen thousand for a jetta once. now i drive a cheap honda. maybe good hondas aren’t so easy to find. but a three thousand dollar car is. that’s ten thousand right there. that’s right, i live in the upscale Roanoke neighborhood, and drive the biggest junker on the block. it beats working. budgets mean sacrifice, or they aren’t really budgets.
My $400 payment to my mother is priority #1. She depends on that $ each month, so whatever cash I have goes to her first and then down the line of priority I’ve established.
The car is only worth 12 maybe 13K. I owe 17+ on it.
I would pay more attention to the IRS, because they can nail you for 3% + 3% penalty per month. On the other hand, you can make a deal with them in most cases. Put them close to the top of the stack. They are the only creditor who can put you in jail.
A couple of things you may already know, but there they are anyway:
1. The debt to your mother will be on an equal footing with other debts if you do a bankruptcy: you cannot favor some lenders over other lenders. So don’t think you can “BK” (as the term du jour seems to be) your debts to WAMU, credit card companies, etc., and then preferentially pay back your mother. Your BK lawyer will probably have the details on this.
2. The “insolvency” issue on taxes owed doesn’t apply to back taxes already owed (or current year taxes). It may apply to “forgiven debt,” which will not get treated as taxable income, but insolvency doesn’t erase IRS or state tax debts (or payroll taxes for your business).
And given your monthly income, which is fairly substantial (even if your outflow is also substantial), you may have a hard time convincing the IRS you are “insolvent.”
Merely having debts exceeding assets is not insolvency, as tens of millions of Americans are in this boat.
NAT
I know it’s been a year but hows that bankruptcy going
@ Jim – The bankruptcy got discharged a few months back. So, all done on that front!