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What Can I Do About My High Credit Card Debt – Case Study

We had a reader email us the other day asking what she could do about her high credit card debts. She said we could change the name and location and post the email. So here goes. We have paraphrased some of the content so the writing would be a little more understandable.

Hello Carol and CLF folks,

My name is Carly Fornia and my credit card debts are way out of control. I have department store credit cards as well, and my husband has 3 gas station card too. All in total, with the kid’s credit cards included, we have 16 charge cards in the household. I know – it kind of freaked me out too, when I realized how much debt we all were building over the last ten years.

We live in Pasadena, Ca (in LA really) and both my husband and I work. I work for one of the political parties in California Politics (and I won’t mention which one). Let’s leave politics out of this please. Let me give you a hint – I like elephants better than donkeys.

Anyway, our total debt on all these credit cards in our family is over $60,000 dollars. Adding up our total debt has been a stressful realization as you can imagine. The sheer amount of interest we are paying down is quite dramatic. I figured out that we are costing ourselves over $15,000 dollars in interest each year by only making the minimum payment each month on all cards. Some cards are not being abused, but some are. The interest rates vary from 6% to 18% with one that is a high risk card coming in at 23% which barely legal right – wrong? You tell me.

I know there are some new federal statutes coming down the pipe on consumer financial products, but I don’t think these new laws will have any effect on what we as a family are faced with in the accumulated debt from all these cards. We also have a line of credit for $45,000 dollars that only has $3000 left before it has hit the limit. So I need to know what I can do to get out of this situation and get our family finances back in order. We’re really frightened – afraid of losing our house and at the very least, losing our credit rating. It’s likely damaged by now anyway – right?

First Off – How We Ended Up So Deeply In Debt on Our Credit Cards

We were at one time clear of debt, and actually saving money, like good little “consumers”. That all changed when my husband lost his job as a software developer. He was one of thousands who lost their jobs this last year. We made a plan to tighten our belts and stick to a budget, knowing that we would be living off our savings, our credit cards, our line of credit, and my income. We also excepted that we would be growing debt every month until my husband found a job again. We thought that he would be employed within 6 months, and we were prepared to increase our debt that long without really making any payments to bring it down.

Well, one month turned into 2, and so on. It’s been 18 months now and we have only paid the minimum payments on all our family credit cards, and we have not decreased the principal debts by a single penny. Like I said, our line of credit is three thousand dollars from being maxed out, our overdrafts on our checking accounts are maxed as well. We don’t have much equity in our house, and even if we did have some equity, it wouldn’t sell in our neighborhood anyway. Pasadena is not exactly a booming market, and our house is in pretty rough shape – certainly not ready for selling without some renovations or fixing up.

My husband is becoming depressed as he sees our future slipping away before his eyes, and I seem to be carrying the emotional load these days. He makes me angry, because I need to have an equal and calm partner by my side so we can make some tough decisions. Can you believe he is still driving a Mercedes!!!!? Argh!! I told him he was going to have to get rid of that fancy car soon enough, but not once has a for sale sign gone up on it, and not a single ad has been put in the classified ads, or online. Very frustrating indeed.

Our kids are so spoiled from years of living the good life, and they have no idea what is going to hit them. I took their credit cards away from them last night and you can’t imagine what a scene that was. They completely lost it! I told them they would have to get jobs if they wanted extra money, and if they wanted to have their own credit cards. That went over really well too. Anyway – it’s a start I suppose.

What Can We Do To Get Out From Under These Credit Card Debts Without Damaging Our Credit Score(s)?

So my question is;

“What can we do to get out from under these credit card debts without damaging our credit score(s)?”

I have got my husband off to an anxiety specialist, tuned the kids in by taking away their credit cards, and I have gathered all of my husbands cards and my cards and froze them in a huge block of ice. I have not done much more than that. What would you suggest to be our action plan going forward, and in what order would we exact the plan?

I can’t get a raise with my job as a dog walker which I run from my house. I can’t take any more clients, and I’m not trained in anything else. The amount of equity we have in the house is not enough money to to even pay off the debt we have on the family credit cards. I feel like we could lose our home, our credit rating(s), and our minds. We really don’t want to end up with bad credit ratings either. Is there any way we can get out of this mess? Please help!!!