Get Out of Debt Guy

Overloaded in Debt and Not Sure Where to Turn. - Dan

Posted April 12, 2013

WRAL Reader Question

Hello Steve,

Sorry for the long message. I don't know where to go or where to start. Here goes.... Have major student loans, IRS, some credit cards, and a lot of medical bills.

My student loans are in default as I was unemployed for over a year, during that time I was in the hospital I think 5 times with no insurance (2012), 3 times due a heart condition (one of those incidents I was life flighted with no insurance) (I have a heart condition) the other two was double Pneumonia (Nov 2012 & Feb 2013). It's been rough going to say the least.

My medical bills are so much I am not even sure how to find the total amount. My student loans are now approximately $88,000 (with I am sure include a boat load of late fees). I owe the IRS 15,000 from using 401k money when unemployed. I have worked out a payment plan $315.00 a month with them, although I was laid off a little over a month ago and now behind on that.

I have other misc credit card bills perhaps around $5000. It's all so depressing I have been paralyzed with depression and fear.

I am starting a new job April 15. I will make $46.00 per hour as a contractor, however, as a contractor you get no benefits (e.g. medical insurance, sick days, vacation time, etc...) so yes if I work everyday on my one year contract (this is not a permanent position), I would make $95,000. But obviously with my health as previously stated and just needing a break (to try to stay healthy), I will not work every day and perhaps take a week or two off over the year - hopefully I can stay healthy.

I honestly think the stress of all of this has severely effected my heart condition this past year.

I moved to Texas for work last year for work and literally almost became homeless in the beginning. Like others, I feel so trapped, I see no way out of this mess. I am 52, I used what money I had in my 401k so I have no retirement or savings, but instead an IRS bill. I will have no retirement.

I am definitely considering bankruptcy for all my medical bills and other debt.

My questions are:

1) Are there any options to reducing this student loans debt (I understand bankruptcy is not an option?) I live in Texas (just an FYI, thought I read Texas is debt friendly state with their laws.)

2) My other question is (and it may sound strange), how do I find out my total debt? I've been so overwhelmed with all this I haven't saved all my bills.

3) Dumb question, do you agree bankruptcy is my only way out for some relief and reduction of debt?

Again, sorry for such a long winded email, I am hopeless and need guidance.




Hi Dan,

Thanks for reaching out to me here on WRAL. We are a Raleigh, North Carolina television station that is run by the nicest people. Too bad you can't enjoy us on a daily basis.

I'm happy to help you. Debt knows no boundaries.

Bankruptcy is a real and viable consideration for you in your situation. If you do decide to file, do it quickly. You'd want to qualify under a chapter 7 bankruptcy to give you the best shot at a fresh start.

In my guide on how to tackle student loan debt I talk about debt reduction programs that are available as well as the fact sometimes you just have to clear the decks of the other debt to make room to repay the student loans. Especially government backed student loan debt is a priority debt. Defaulting on the debt can add up to 20 percent on to the balance, your tax returns refunds can be seized, and you can have your wages garnished without them going to court.

On top of those considerations you also have some extenuating factors that make bankruptcy a logical consideration. For example, you have the stress, impact on your heart and mental health, and your uncertain employment. But the factor that has me the most worried might be the fact you are 52 and have no retirement or savings. There are real concerns about the level of support that will be available for you and I when we retire. Social Security might be reduced and without savings, who is going to care for you?

The best way to locate all of your reported debt is by getting a consolidated credit report. You can get a free credit report from each credit bureaus by visiting

By the way, IRS debt over three years old can be discharged in bankruptcy as well.

In an effort to help clear up myths about bankruptcy and let you see it clearly, please read So You Are Going to File Bankruptcy. That’s Good News. Congratulations.

I think if you follow this advice, you will wind up in better mental and physical health.

Steve Rhode

WRAL Get Out of Debt Guy

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  • steverhode Apr 15, 2013

    I would like to beg to differ. Some student loans are dischargeable in bankruptcy. Federal loans are dischargeable under hardship and private loans are dischargeable after the statute of limitations has expired.

    People can contact the Department of Education directly for free help with payment options. Consumers need to be careful these days, there are so many companies that are trying to charge people for student loan help they can get for free.

  • peter14 Apr 15, 2013

    Just to let you know, student loans aren't discharged in bankruptcy. That doesn't mean there aren't ways to manage defaulted student loans. Loan rehabilitation is the way to go. If you can make 10 on-time payments of a reasonable amount (could be $50-100 a month) your loan will come out of collections and you can apply normal student loan plans (IBR, deferments, forbearance).


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.