Get Out of Debt Guy

Husband Unemployed and I Can't Make Ends Meet

Posted March 13, 2013

QUESTION:

Dear Steve,

My husband lost his job about 4 years ago.

We were in debt then and had started to make extra payments to try to get out of debt. With the loss of his income, I went back to just making minimum payments on everything. I took money out of my 401k just to help us pay bills on a monthly basis.

I am about out of that money now, and my bills are more than $1000 more than my income every month. Most of it is credit card debt. I have $36k in credit card debt, $3k in student loans and $6200 in car loans.

That doesn't include house payment, insurance, gas, utilities, groceries, etc. We hardly ever eat out, I have always taken my lunch to work. I am doing some of the right things, just not enough of them and I am scared to death right now.

We are trying to refinance the house and get that payment lowered, but that is only going to make about $200 difference. So I'm still short $900 a month.

What can I do? I have made all of my payments up to this point, so I'm not behind on anything, but I am not going to be able to pay all of my bills anymore. Please help me. I am desparate and scared right now. I have never been in this bad of a situation before.

Jan

ANSWER

Dear Jan,

I understand and can remember the fear I went through as well when I was living through my troubles.

Right now you are racing towards a cliff in a speeding car and wearing a blindfold. You know the edge is coming but just not when.

It's time to get real here. The borrowing from the 401k didn't solve anything, it just postponed things and left you broke. You were probably hopefully he'd find a new job and so in the beginning raiding the retirement money probably seemed like a temporary event.

In my experience, it is usually not. Instead what happens is people spend through their money dedicated for retirement and the problem doesn't get solved. Now they are retirement broke and still facing the real issue.

From what you've shared it seems like the real underlying issue here is the loss of income and the inability for you to live within your current income.

Bad debt problems are typically math problems wrapped in emotion. Or in this case, with a little or a lot of fear and panic tossed in as well.

Before you are totally tapped out, foreclosed on, and homeless, what do you say we face this beast head on and really deal with the situation?

I need for you to go from waiting to be hit by the bus to driving the bus and taking charge so changes occur on your timeline.

Change is difficult for many people. They hate change. They want things to remain as they are. But wishing and reality are not the same thing.

Rather than living in regret because of change, what if we embraced change and just saw this as a new chapter?

So here is the action plan I see that you need to roll out.

In the most loving way possible you need to kick your husband in the ass to go out and get any job to bring in more income so you can make ends meet. I'd give him 30 days to do that.

If he can't then we need to go to Plan B which is you will most likely need to sell the house and file bankruptcy to clear away the other debt. You'll have to find a place to rent that you can afford on your income and you can then start living within your income. This is going to be a big a difficult change.

However, if that is what happens, what you will find afterwards is your life will become significantly less stressful and you'll actually have some room in your budget where you can hopefully start saving again and you'll enjoy life more.

Until you take action this financial situation will erode your relationship, impact your work, and lead you to stress and depression.

The choice is yours. You can stay the course or embrace change and take action.

Please post your responses and follow-up messages to me on this in the comments section below.

Steve Rhode
WRAL Get Out of Debt Guy

If you have a credit or debt question you'd like to ask just use the online form. I'm happy to help you totally for free.

Original story.

13 Comments

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  • common tater Mar 14, 2013

    You're right...Hubby needs a swift kick...he shouldn't be out of work 4 years. My brother and his wife lost their jobs in WNC when the plant moved to Mexico, after 25 years working there. Since then he's had to move around to find plant elecrician work. Currently she lives in their WNC home, and he lives in SC in a cheap trailer and works across the state line in GA...they see each other on weekends. Not the best situaion, but their bills are paid. Years ago I couldn't find a job so I took a 2-year contract in another country, and kept searching here till I found one. If I were laid off tomorrow, I'm confident I could make at least $1100/month doing something.

  • steverhode Mar 13, 2013

    You are correct. It's one of the reasons I direct them to a bankruptcy attorney to specifically discuss their unique situation when it comes to that.

    I think we'd all agree, the husband out of work for four years needs to change. Heck, when I went though my own financial troubles in 1989 I went out and did some of the worst temp jobs in the world.

    Action creates activity and activity creates opportunity.

  • InTheNo Mar 13, 2013

    I'm monopolizing your blog and comments here but I think it just depends on the cow. For example, if they owned an 'Inside the Beltline' house in Raleigh and bought it several years ago then they would probably want to keep it with the market rebounding. A subdivision outside of town, then yeah, who cares... you can get back into one of those in - like you said - 2 or 3 years...

  • steverhode Mar 13, 2013

    That's cool. Even if you were disagreeing with me that would be fine. I like to talk these things out and help educate.

    If the choice cam down to holding onto the house or letting it go, regrouping and being able to start saving again, then I'd be fore letting the house go and living within the available income.

    Even if she does file bankruptcy, if she begins rebuilding her credit after the debt is discharged on day 90 then by the 2 or 3 year she'd be ready to buy again.

    Sometimes it is just better to regroup that let a sacred cow (house) drag you under.

  • InTheNo Mar 13, 2013

    Steve, I didn't mean to disagree with your advice. I just think that the home might be the most important asset they have and should keep that above all else, especially in this market. Pay the house payment first. And like you said, find a good attorney to get out from under the credit card debt. Nobody enjoys filing for bankruptcy but just like her husband's boss told him when they fired him... "Don't take it personally, it's just business!"

  • steverhode Mar 13, 2013

    Any 401(k) issue can be handled in the bankruptcy. You are correct, there may be an 401(k) withdrawal tax issue but we don't know if they withheld taxes as they took the money out. Since this has been going on for four years and she did not mention any lingering tax liability, my assumption is it has not created an ongoing problem.

    Sorry, all we get to deal with is what the reader submits.

    Based on what she shared she is -$1,100/mo (900+200) as is. We can calculate the credit card payments at $750/mo. Without those she is -$350/mo not including the car payment and student loans.

    That also does not take into account any savings, building an emergency fund, or rebuilding the lost retirement funds.

  • ezLikeSundayMorning Mar 13, 2013

    I hope I'm wrong, but if she fails to pay back the 401(k), isn't that going to genearte taxes and penalties on top of all her other problems?

    I'd love to see all the numbers. Is it possible to get expenses below income with some hard choices? I tend to think hold on to the house if you can make the math work. If not, the math should be pretty clear and determine if more sacrifice is required. Assuming it doesn't require daycare her husband needs to get a job, ANY job.

  • InTheNo Mar 13, 2013

    Also, take a little time to find the best bankruptcy attorney you can find. A good attorney will give you the help you need and give you a different perspective on things. In this real estate market, every month you can hold on to your house could put thousands in your pocket - if and when you must sell. Take the next month's credit card payment money and hire that attorney and get it done. Folks will start sending you applications for credit cards in a few months after your bankruptcy if finalized.

  • steverhode Mar 13, 2013

    But as I suggested, hopefully her husband can find a job and income. Otherwise, a month or so from now the 401(k) will be drained and she will be out of options.

  • steverhode Mar 13, 2013

    All I can do in an answer is use the facts given.

    We don't know how much an apartment is in her area. We can't assume she is in Raleigh. She did not disclose how much her mortgage payment was. We also don't know if she has much equity, if any at all.

    The bigger concern here is that even without her credit card debt she is still on the hook for the student loans and if she keeps the car then she will still be negative each month.

    If she can sell the car, great, but if she is upside down in the car then the only way to hand the car back and avoid a further liability would be to take care of the remainder due with bankruptcy.

    But let's say she files a chapter 13 bankruptcy to hold on to the house. She would still be short each month if she kept the house and car.

    The house payment does less to repair your credit after bankruptcy since it is a secured debt. The better approach is the secured card strategy following bankruptcy which will accelerate your credit restoration.

    But as I

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.