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Ask Dave

Amputation Situation

Between his credit card debt and car payment, Robert is facing a mountain of a problem.

QUESTION: Robert has $100,000 in credit card debt and was sued by MBNA. They make $100,000 a year and have a $1,700 house payment. He owes $60,000 on 2 cars and $48,000 on student loans. They could sell their house for $140,000, but they owe $150,000 on it. Dave gets seriously fired up here.

ANSWER: Dude, you’re in a MESS! If you are ready to change and seriously amputate the lifestyle, then you can turn this around. Bankruptcy won’t do you any good because you haven’t fixed YOU yet. If you were debt free and kept up this crap, you’d be right back in trouble. You’re going to have a very painful 12 months ahead of you, and you need to be extra affectionate with your wife because she’ll be scared.

The cars have to go. They are absolutely ridiculous; they are gone. Sell them and buy a couple of $1,000 beaters within 90 days. You’ll have to borrow or work to make up the difference. It will take some time, but you have $1,500 a month in car payments. The house payment isn’t a problem, so after you take care of essentials like food and utilities, you can be largely out of debt in 12 months.

Don’t turn in your car on a voluntary repossession, because they will sell it for dirt cheap and chase you for the difference. You keep control of everything. In this situation, if you see something that looks like an easy way out, it’s probably wrong. You can be completely debt free and ready to move back up in car in 2 years.