My Dumb Financial Mistakes Put Me In $100,000 of Debt

Brought to you by the EveryDollar app. Start budgeting for free today. I've accumulated about a hundred thousand dollars in debt and I'm wondering if chapter seven is going to be the best way to kind of take care of that. It's never the best way. It is a way and it's a very painful way. When you first start thinking about and looking at it, it feels like it's not painful. I've been through it and I wouldn't wish it on my worst enemy. What kind of debt do you have? What kind of is the hundred thousand dollars? So about $32,000 is hospital and I have $10,000 in student loans and the biggest chunk of it is from a car accident I got into without insurance. And so $32,000 is $42,000. So that's like $65,000 or $68,000. And then there's another $12,000 and just another debt my apartment got broken into and we just didn't deal with it the correct way. So you did not have insurance on your car? Correct. Why? It was just pretty expensive at the time and I know it's just an excuse. But like $60,000 expensive. Same with the renter's insurance. You didn't have renter's insurance. Is that what caused the $12,000 on the apartment? Well, we did have renter's insurance, but it was a $2,500 deductible and they were trying to charge us much more than that. And at the time, my fiance and I, we had a baby on the way, so we didn't have enough cash to fix the door and pay rent. So we ended up just getting a new place. Got it. All right. So $60,000 approximately on the car debt. All right. And what do you guys make for a living? How much do you make? I bring in somewhere around $72,000 self-employed. And your wife? My fiance, she makes around $30,000. What kind of self-employed work do you do? What is it? I run a handyman business. Okay, good. That means you can do a lot of that. What about your fiance? What kind of work does she do? She works in health and beauty. What's that mean? She's an anesthetician? She's a waxer. Yeah. Okay. When's the wedding? Not sure. I've been kind of stacking up cash right now. I have about $20,000 in cash. Is all this in her name? Yes. None of it's in her name. Correct. Okay. All right. Well, I view bankruptcy in the same bucket as divorce. You do every possible thing you can to avoid it. And then sometimes you can't anyway, but you try everything. You leave it all on the field. And then if you file, you don't have quite the sense of regret or guilt that you would have if you just file. Okay. Now, if you file Chapter 7 bankruptcy, you're self-employed making $72,000 a year, your student loan is not bankruptable. So it's going to be there regardless. Okay. The rest of this can probably be wiped out if you pass what's called the means test. And the attorney can tell you that. They check to see if based on your income, you could pay something towards your debt. If you can pay something towards your debt based on this mathematical formula that's in the legal system, then they will not allow you to file Chapter 7. They will put you into a Chapter 13 where you pay minimum, you pay a certain number of dollars, a certain, and say, say you're a hundred thousand, you're 90,000 because student loans aren't in it, are repaid at a 40% rate, only 40,000 of it's repaid or, or whatever. And it's over five years. Okay. And, um, it takes forever and, and it's a pain in the butt. And so I'm a little bit afraid you're going to bump into that with your income being pretty decent. I might be wrong, but I don't know in, um, in Texas, what the, the guidelines going to be on the means test. And so you're going to have to find that out. If you want to investigate this further, what I will tell you is that with $20,000, you can probably clean up. Um, the medical, you can probably clean up most of this debt. You can probably pay this debt off at somewhere around. If you could pay it off at somewhere around 20 cents on the dollar, you could be debt free by negotiating each one of these to 20 cents on the dollar. Now, some of them are going to be a little more, some of them are going to be a little less, but, uh, when a debt buyer buys old credit card debt, for instance, bad debt, they typically buy it at a nickel on the dollar. And we see, we see these deals settled all the time for pennies on the dollar, and you could take the 20,000 and work your way through it. That's one way you could go at this. Um, so in other words, I think if you called the car wreck, I assume that's an insurance company, right? Who do you owe the money to state farm or who? Uh, yeah, it was progressive. And then they ended up selling it to a company. I've tried really, really hard, uh, uh, negotiating with them, but they didn't come down any. And it's how old is it? It's from 2022. Yeah. We'll call them again. It's been a while. You tried at the time really, really hard, but now, now they've been sitting on this and they haven't gotten a dime and you call up and go, Hey, I've got a little money, but I'm going to file chapter seven and you're going to get nothing. So instead of doing that, let's cut a deal and I'll offer you $6,000 for this position. And then let's start the negotiation. And I'll bet you can settle it for, you know, somewhere around $10,000, really 10 or $15,000, somewhere in there. That's, you know, it's since 2022, all you got to do, Dean is put yourself in that company's position. They bought a bad debt from progressive from a 24 year old guy who wrecked his car and didn't even have insurance. They don't expect to collect anything. Well, they paid almost nothing. They paid almost nothing for it. And they don't really expect to collect anything. So that anything they get is going to be like, wow, we just scored. That's where they're coming from. Now they're not going to act like that when you call them, but that's where they are. They probably paid 2,000, 3,000 bucks for this debt. Got it. Okay. So I'm going to try all of that. And, um, this, that will definitely work with the medical. I was going to say, same thing with the medical, the medical, it'll definitely work. And I think you could clean up the vast majority of this for the round 20 grand. And, and what you can't clean up, you can put on payments and work out. That's what I would do. That'd be my first choice. Also, before you do anything, I'm going to put you on hold and Christian's going to hook you up with guardian litigation, which is one of our sponsors and they negotiate with all kinds of debt. I don't know that they can help with your unusual mix, but you can ask them and we can ask them for you. They're a sponsor of ours. They typically take somebody who's got 50 or a hundred thousand dollars worth of credit card debt. And it's just a little bit behind and they're, they're freaking out and they think they're bankrupt and they're not, and they can work through those deals real easy. It's what they do, but they might be able to help with this and we'll give them a shot at it. But if they say, Hey Dean, we're, it's really not our thing. Then if I'm you, I'm going to go settle most of this for this 20 grand. And by the way, you can get married for free at the justice of the peace this weekend, but I would not, I would not get married this weekend. If you're thinking about filing bankruptcy, I would wait until I wait until bankruptcy is off the table because you're making some progress on some of these negotiations. And you need the cap. You need that 20,000 caps. Yeah. Do you need it to, to, and by the way, I don't know what the personal exemption is in Texas. In Tennessee, it's $7,500. If you have more than $7,500, you have to throw it in the pot and lose it. And in Texas, it might be $15,000. It might be 20. Texas has homestead exemption unlimited. If you own a home in Texas, you get to keep it regardless of what it costs or how much it's worth. But in Florida does, they're the only two States that have that in a chapter seven. But, um, look all of that up, look up, look up your personal exemption in a chapter seven, you may be losing the 20 grand anyway, or a large portion of it. So let's work on settling it. Let's work on guardian litigation and, uh, spend five months, three months fighting and arguing with these people. And let's get this out of your life. Oh, and buy insurance, create your free every dollar budget today. The simplest way to budget for your life.