Dear Money Lady, I’m embarrassed to admit this, but I don’t know what to do. I have about $63,000 in credit card debt that I have been trying to pay off for over 2 years. Some of this is school debt, but mainly it’s just debt from everyday living. I just finished my university degree, but I hardly earn enough to pay rent and food every month. A friend said I should declare bankruptcy, but my parents think that I should keep trying to pay it off. I’m not a bad person, but I feel ashamed and overwhelmed. Help! Jen P. FL
Dear Jen – don’t listen to your parents (I know they mean well). YES, you should declare bankruptcy. Carrying debt for over two years with little hope of paying it off in the next year, is a sign that you need to stop the pain.
Consumer debt is a fact of life, but too much credit card debt can be debilitating. Many older GenZ’s and young Millennials unfortunately are in this position today. Life is expensive and it’s hard to look good, pay for rent, and enjoy some kind of social life on incomes today. I see many young professionals who can’t believe they are now in this situation and unfortunately, good budgeting and saving skills are often not learned from parents who may also be struggling. Jen, you’re not alone. Many young adults in their 20s and 30s, all with good jobs, and excellent prospects for their future are now being kept down by their debt loads. Some could have anywhere between $50,000 to $100,000 worth of credit card debt with no hope of ever paying this off. They find themselves at the mercy of the credit companies slapping on more interest every month, threatening collections and ruining their credit.
Most people in this situation suffer in silence, believing they can get ahead of it somehow by working more, waiting for a windfall, or even trying to ignore it, hoping it will in some way get better. Let me tell you, if you’re in this situation, you MUST take control and not allow the banks to continue eating away at your future while you languish in self-pity. I know you want to pay it off somehow and that you really wish you could, but if this is not a possibility in the next twelve months, then I want you to suck it up, and declare bankruptcy. I know this is not what your parents, friends or co-workers would advise, but sometimes this is the only way to stop the bleeding. If you don’t take control, then the creditors will – and this will not be the outcome you want. Let’s face it, your credit is probably already ruined, and declaring bankruptcy or seeking a consumer proposal will make you face up to your situation, taking a stand to finally be responsible for it. Now, there will be no free rides here when you do this. Of course, some of the debt will need to be paid, but at least it will close down the credit cards, stops the interest charges and force a settlement with the financial institutions.
Carrying large credit card balances month over month stunts your future growth. Let me tell you why. When you have a lot of debt and you are continually thinking about it, trying to hide it from your partner, or scheming to find ways to make a dent in it; you can’t do anything else. Mentally, the shame of carrying your debt and not being able to manage it makes you vulnerable to stress, depression and personal harm. Only when you release yourself from this mental burden, will you ever be able to be your best self. Creativity, entrepreneurship, advancement in your career, relationships with family and friends, care for your children – all will be tainted by your continuous efforts to try to manage your overwhelming debt.
Bankruptcies are not the end of your financial future – they should be viewed as the beginning. Once a bankruptcy has been completed, it may take a few years for it to be cleared. After that, you will work to establish new, more responsible credit, and over time the bankruptcy will drop from your credit altogether. I’m a great advocate for planning, for without a plan, how can we expect to have a future? Taking control of your current debt is all part of planning.
Good Luck and Best Wishes,
Money Lady
Christine Ibbotson is an Author and Finance Writer. If you have a money question you want answered FREE – send it to: [email protected].
