When Elizabeth and her husband filed for Chapter 13 bankruptcy, they thought they were making a smart move to keep their growing debts under control. But fast forward a few months and they have serious reservations. Elizabeth explained during a phone call with Dave Ramsey, “We panicked and did some stupid things,” and boy, does that panic come at a price: $91,000 in debt and two car payments they can barely handle.
Don’t miss:
It all started when Elizabeth lost her job, leaving the couple to juggle everything on one income. In an effort to stay afloat, they made what she describes as “some stupid decisions” to dig deeper into debt instead of taking a step back and assessing the situation. They filed for Chapter 13 bankruptcy, which, in their words, “seemed like the only way out” at the time. But as Elizabeth shared, they soon realized that the payment plan associated with Chapter 13 was squeezing their monthly income, even after she got a better job.
See also: I am 62 years old and have saved $1.2 million. Is this enough to retire stress-free?
They’re working hard to turn things around—they’re holding flea markets and selling everything they can—but there’s one big obstacle they can’t shake: that Chapter 13 payment. It has become an unwanted guest at the table, consuming their income and standing in the way of their debt-free dreams.
“You have a hornet’s nest in the closet”
When Elizabeth asked The Ramsey Show for advice, Dave Ramsey painted quite a picture for her. “Pretend you took a baseball bat and hit a wasp nest, threw the wasp nest into a closet and closed the door,” he said. If they file for bankruptcy, you’re “getting ready to open the door” to all the creditors they owe money to: credit cards, personal loans, and those pesky car payments.
Trending: Many use this retirement income calculator to check if they’re on track – here’s an overview of what’s behind this formula.
In other words, those creditors will not be satisfied. They come after the couple “with everything they’ve got.” And Elizabeth knew: “O Lord,” she replied, and she understood at once the gravity of what that meant. Filing for Chapter 13 might have put their creditors on pause, but dismissing the case would loosen the swarm and they needed a solid plan to deal with the fallout.
“A few stupid decisions” and $91,000 in debt
Let’s break down the numbers. Elizabeth and her husband owe $30,000 on each of their two cars and have about $25,000 in credit card debt. On top of that, they have $6,000 in personal loans hanging over their heads. The irony? According to Elizabeth, these cars aren’t even worth what they owe – probably closer to $26,000 or $27,000.
Now that she’s back at work and they’ve stabilized their income, they’re ready to take control and dump their debt, but the bankruptcy payments are still choking their budget. With a combined monthly income of $5,100 after taxes, health insurance, and a rent payment of $1,400, these debts feel like an anchor that they just can’t pull off.
Trending: Research shows 50% of consumers think financial advisors cost much more than they do – To debunk this, this company offers free matching and a free initial consultation with the matched advisor.
The path forward: opening the door to the hornets
Dave’s advice? If they want to voluntarily dismiss Chapter 13 bankruptcy and avoid the hornets, they need a plan. “You have to have a plan to take care of each of them if you want to open the door,” he explained. For starters, it’s time to sell those cars. And the good news is that Elizabeth and her husband saved from their yard sale and ran in gazelle mode. They have enough to cover the difference and pay off the cars.
According to Dave, the personal loans will be the most difficult to deal with because these lenders are bottom feeders who will come after them hard and fast. On the other hand, credit card companies are “incompetent and inefficient,” which gives them some breathing room to set up payment plans. But once bankruptcy protection is over, the couple will have to keep an eye on things and negotiate with creditors to keep the swarm at bay.
Trending: How do billionaires pay less income tax than you? Tax deferral is their main strategy.
Lesson learned
Looking back, Elizabeth and her husband wished they hadn’t panicked and gone bankrupt. Now that they have clearer heads and sound advice from Dave, they’re ready to get out of debt the old-fashioned way: through hard work, sacrifice and patience. But one thing is certain: they won’t forget Dave’s warning. They are ready for whatever flies out when they open the door.
Read next:
Next: Transform your trading with Benzinga Edge’s unique market trading ideas and tools. Click now to access unique insights which can give you an edge in today’s competitive market.
Want the latest stock analysis from Benzinga?
This article ‘You Threw a Hornet’s Nest in the Closet’ – Couple Buried in $91,000 Debt, Turns to Dave Ramsey After Panicking, Making Their Situation Worse originally appeared on Benzinga.com
© 2024 Benzinga.nl. Benzinga does not provide investment advice. All rights reserved.
