Sorry for the long post, but I am sick to my stomach, can't sleep, and don't know what to do! Can any of you please help me with this? My brother has gotten himself in an awful financial mess (again!), and he just laid it all out for me finally, after hinting at it vaguely for a few months. He's consulted two attorneys who are both recommending bankruptcy, but I hate to see him do that. This is a run down of what I know, I am missing some bits of info such as minimum payments on some things and interest rates (he said they are all high, so I'm assuming 20%?). I think I've worked out a snowball plan, and it is very tight for him, and it is flat out ignoring one loan (more on that later). Can you please let me know if I am missing something glaring, or if there is a better option? I don't want to tell him to try this on his own if it's really not possible and he really should be declaring bankruptcy.
Ok, after basic monthly expenses, so no entertainment, no clothing, etc, (which I am hoping he will cut another $100-150), he has about $800-900 left over to pay debt. (That may be too restrictive for him, but I'm going for the most aggressive approach.) he's about 3 months behind on everything right now.
He has $1,694 in medical bills owed to 4 different Drs/PT places. Can he pay the smallest amount possible to them, say $100 divided among them, until it's paid off? I've heard that as long as you're paying something to medical things they won't turn you over to collections.
He has these loans, minimum payments in parentheses:
1) $2985 ($146)
2) $10,141 ($429, 30% interest! He has been paying on this loan forever and has already paid more than the original loan amount back already, this is the one I can't fit into a snowball plan, more below on my idea)
3) $470
4) $2497
5) $1,847
He is selling a couple of things and expects to have about $5000 from that this week. It can pay off loans 3, 4, and 5. With the little left over, and a little from his next paycheck, he can pay off credit card 1 below:
Credit cards:
Lowes: $228.96
Care Credit: $407
Barclay: $1,233.39
Chase: $1,473.42
PayPal: $1,733.57
Other:
Vet: $200
Clothing store: $9,623.76 (I.cant.even.ask.him.how.this.is.possible!)
Ok, so assuming that the credit cards are 20% interest, he does not have enough money to even make all of the minimum payments, which is why the attorneys are recommending bankruptcy. He's called all the loans and cc, none of them are willing to negotiate at this point being "only" 3 mos behind.
I think I have figured out that (please let me know if I'm way off!), on paper which leaves little wiggle room for Murphy or more spontaneous spending, and with ignoring the $10k+ loan, he could:
-Pay off the 3 loans and Lowes credit card immediately with the sale of those things;
-Pay each medical bill $25/month, pay off in 17 mos (will this be allowed, though?);
-Use a snowball method of paying minimums (appx $450, at first) on everything while attacking ($400 at first, up to $700 towards end) lowest balance (unless there's an even more outrageous interest rate and he needs to rearrange order); he will roughly pay off a credit card every 3-4 months like this and be done with the $2985 loan by January 2018;
-save roughly $100 per month, plus a little more in the pay off months when he doesn't quite have the full budgeted left to pay on whatever credit card or loan he's focusing on;
So, does that look reasonable? Am I making any math errors? Or just missing something obvious?
He said the clothing store will let him pay a low amount, so I only put $100 a month on that. If they require more (he is obviously in denial about many things), that changes the plan for the worse.
Now, for the $10k+ loan that I mentioned above. I would normally never tell anyone to try to settle a debt, but at this interest rate and what he's already paid, the company would only be losing some of their criminally exorbitant interest and penalties (he's already repaid the original loan amount and a good bit of interest). They are not willing to work with him right now. He cannot pay the minimum and get anything else accomplished at $429. We have bailed him out before, to the tune of $30k, but we bought a business last year and, for the first time in our married lives, are in debt with that business and it has taken all of our personal savings. It'll be in the black soon, and Im sure will eventually be very profitable, but in the meantime, the best I can offer him is a check from one of my credit cards to at least give him some interest free time to get a dent in it. Does anyone think they may settle for less? If so,at what time- point should we ask again? And, how much should we offer? What would happen if he just doesn't pay it at all? Is this just a horrible blemish forever on his credit, or will he be taken to court?
A few other concerning points that make me cringe in thinking about things working out like I've got it on paper:
-He has likened his habits to that of an alcoholic. He spends to compensate for other things, he gives money/things away like crazy (the clothing, I am sure, is for all of these charity and Mardi Gras balls he attends), etc. so, I'm very afraid that he will continue to make very big errors, which is why I hesitate to let him use some of our credit checks to pay anything off.
-I have no idea how his vehicle is still running. My DH works on it for him all the time and he's constantly putting money into it. There is no wiggle room in this plan for a new vehicle, and he wouldn't be able to finance one, regardless.
-he has severe degenerative disc disease that requires fusing his entire spine. Much of this debt is medical bills and PT. He wants the surgery, but he cannot afford it. He is in severe pain constantly (this is what he thinks contributes to his over spending; I think it's this along with other things), so I don't know that he can just stop going to PT or put the surgery off much longer, neither of which are in my payoff plan. This will probably also prevent him from bringing in extra income.
-he works in the oil industry, which is very depressed right now. He's in constant fear of losing his job.
-he owes another $3700 to "a scam of a 'dr' who doesn't even have a degree," who he told he was not going to pay (after discovering that he was a scam). This has been "charged off" of his credit report, so he's not worried about it, but I looked up charge offs and see that you still owe them, so I'm worried he may be taken to court over this, too. But, I didn't add it to the payoff plan.
So, what do you think? Bankruptcy, or attempt to snowball it first? It sounds like bankruptcy will tie up every penny he has for 5 years, so I don't know that it'll take the pressure off of him financially, but I don't know how all that works. I also worry that it won't help him fix his spending issues.
Sorry again for the rambles, it's really late and I've been staring at this for hours. I would love any advice! Thank you!!
Ok, after basic monthly expenses, so no entertainment, no clothing, etc, (which I am hoping he will cut another $100-150), he has about $800-900 left over to pay debt. (That may be too restrictive for him, but I'm going for the most aggressive approach.) he's about 3 months behind on everything right now.
He has $1,694 in medical bills owed to 4 different Drs/PT places. Can he pay the smallest amount possible to them, say $100 divided among them, until it's paid off? I've heard that as long as you're paying something to medical things they won't turn you over to collections.
He has these loans, minimum payments in parentheses:
1) $2985 ($146)
2) $10,141 ($429, 30% interest! He has been paying on this loan forever and has already paid more than the original loan amount back already, this is the one I can't fit into a snowball plan, more below on my idea)
3) $470
4) $2497
5) $1,847
He is selling a couple of things and expects to have about $5000 from that this week. It can pay off loans 3, 4, and 5. With the little left over, and a little from his next paycheck, he can pay off credit card 1 below:
Credit cards:
Lowes: $228.96
Care Credit: $407
Barclay: $1,233.39
Chase: $1,473.42
PayPal: $1,733.57
Other:
Vet: $200
Clothing store: $9,623.76 (I.cant.even.ask.him.how.this.is.possible!)
Ok, so assuming that the credit cards are 20% interest, he does not have enough money to even make all of the minimum payments, which is why the attorneys are recommending bankruptcy. He's called all the loans and cc, none of them are willing to negotiate at this point being "only" 3 mos behind.
I think I have figured out that (please let me know if I'm way off!), on paper which leaves little wiggle room for Murphy or more spontaneous spending, and with ignoring the $10k+ loan, he could:
-Pay off the 3 loans and Lowes credit card immediately with the sale of those things;
-Pay each medical bill $25/month, pay off in 17 mos (will this be allowed, though?);
-Use a snowball method of paying minimums (appx $450, at first) on everything while attacking ($400 at first, up to $700 towards end) lowest balance (unless there's an even more outrageous interest rate and he needs to rearrange order); he will roughly pay off a credit card every 3-4 months like this and be done with the $2985 loan by January 2018;
-save roughly $100 per month, plus a little more in the pay off months when he doesn't quite have the full budgeted left to pay on whatever credit card or loan he's focusing on;
So, does that look reasonable? Am I making any math errors? Or just missing something obvious?
He said the clothing store will let him pay a low amount, so I only put $100 a month on that. If they require more (he is obviously in denial about many things), that changes the plan for the worse.
Now, for the $10k+ loan that I mentioned above. I would normally never tell anyone to try to settle a debt, but at this interest rate and what he's already paid, the company would only be losing some of their criminally exorbitant interest and penalties (he's already repaid the original loan amount and a good bit of interest). They are not willing to work with him right now. He cannot pay the minimum and get anything else accomplished at $429. We have bailed him out before, to the tune of $30k, but we bought a business last year and, for the first time in our married lives, are in debt with that business and it has taken all of our personal savings. It'll be in the black soon, and Im sure will eventually be very profitable, but in the meantime, the best I can offer him is a check from one of my credit cards to at least give him some interest free time to get a dent in it. Does anyone think they may settle for less? If so,at what time- point should we ask again? And, how much should we offer? What would happen if he just doesn't pay it at all? Is this just a horrible blemish forever on his credit, or will he be taken to court?
A few other concerning points that make me cringe in thinking about things working out like I've got it on paper:
-He has likened his habits to that of an alcoholic. He spends to compensate for other things, he gives money/things away like crazy (the clothing, I am sure, is for all of these charity and Mardi Gras balls he attends), etc. so, I'm very afraid that he will continue to make very big errors, which is why I hesitate to let him use some of our credit checks to pay anything off.
-I have no idea how his vehicle is still running. My DH works on it for him all the time and he's constantly putting money into it. There is no wiggle room in this plan for a new vehicle, and he wouldn't be able to finance one, regardless.
-he has severe degenerative disc disease that requires fusing his entire spine. Much of this debt is medical bills and PT. He wants the surgery, but he cannot afford it. He is in severe pain constantly (this is what he thinks contributes to his over spending; I think it's this along with other things), so I don't know that he can just stop going to PT or put the surgery off much longer, neither of which are in my payoff plan. This will probably also prevent him from bringing in extra income.
-he works in the oil industry, which is very depressed right now. He's in constant fear of losing his job.
-he owes another $3700 to "a scam of a 'dr' who doesn't even have a degree," who he told he was not going to pay (after discovering that he was a scam). This has been "charged off" of his credit report, so he's not worried about it, but I looked up charge offs and see that you still owe them, so I'm worried he may be taken to court over this, too. But, I didn't add it to the payoff plan.
So, what do you think? Bankruptcy, or attempt to snowball it first? It sounds like bankruptcy will tie up every penny he has for 5 years, so I don't know that it'll take the pressure off of him financially, but I don't know how all that works. I also worry that it won't help him fix his spending issues.
Sorry again for the rambles, it's really late and I've been staring at this for hours. I would love any advice! Thank you!!
