When Elizabeth and her husband filed for Chapter 13 bankruptcy, they thought they were making a smart decision to manage their growing debt. But after a few months, they are having serious doubts. Elizabeth explained during a call with Dave Ramsey, “We panicked and did some stupid things,” and that panic comes with a price: $91,000 in debt and two car payments they can barely afford.
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It all started when Elizabeth lost her job, leaving the couple juggling everything on one income. Trying to stay afloat, they made what she describes as “some stupid decisions” to dig deeper into debt rather than step back and evaluate the situation. They filed for Chapter 13 bankruptcy, which, in their words, “seemed like the only way out” at the time. However, as Elizabeth shared, they quickly realized that the payment plan tied to Chapter 13 was putting a strain on their monthly income, even after she got a better job.
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They’re working hard to turn things around – holding garage sales and selling everything they can – but there’s one big hurdle they can’t overcome: the Chapter 13 payment. You’ve become an unwanted guest at the table, eating up your money. income and stands in the way of your debt-free dreams.
“You have a hornet’s nest in the closet”
When Elizabeth called the Ramsey Show for advice, Dave Ramsey painted the whole picture for her. “Imagine you take a baseball bat and hit a hornet’s nest, throw it in a closet and close the door,” he said. If they dismiss your bankruptcy, you are “preparing to open the door” to all the creditors to whom you owe money: credit cards, personal loans, and those pesky car payments.
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In other words, those creditors won’t be happy. They will come after the couple “with everything they have.” And Elizabeth knew it: “Oh Lord,” she responded, immediately understanding the gravity of what that meant. Filing for Chapter 13 might have given your creditors pause, but dismissing the case would unleash the swarm and they would need a solid plan to deal with the consequences.
“Some stupid decisions” and $91,000 in debt
Let’s analyze the numbers. Elizabeth and her husband owe $30,000 on each of their two cars and have about $25,000 in credit card debt. On top of that, there are $6,000 in personal loans hanging over their heads. The irony? According to Elizabeth, these cars aren’t even worth what they owe: probably closer to $26,000 or $27,000.
Now that she’s back at work and they’ve stabilized their income, they’re ready to take control and get rid of their debt, but the bankruptcy payments are still choking their budget. With a combined monthly income of $5,100 after taxes, health insurance, and a rent payment of $1,400, those debts feel like an anchor they just can’t lift.
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The way forward: open the door to the Hornets
Dave’s advice? If they want to voluntarily dismiss Chapter 13 bankruptcy and avoid the hornets, they need a plan. “You have to have a plan to take care of each one of them if you’re going to open the door,” he explained. For starters, it’s time to sell those cars. And the good news is that Elizabeth and her husband have been saving at their garage sales and working like a buck. They have enough to cover the difference and pay for the cars.
Personal loans, according to Dave, will be the most difficult to deal with because those lenders are “bottom feeders” who will come after them hard and fast. On the other hand, credit card companies are “incompetent and inefficient,” which gives them a little more leeway to set up payment plans. But once bankruptcy protection wears off, the couple must stay on top of things and negotiate with creditors to keep the swarm at bay.
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Lesson learned
Looking back, Elizabeth and her husband wish they hadn’t panicked and rushed into bankruptcy. Now, with a clearer mind and some solid advice from Dave, they’re ready to get out of debt the old-fashioned way: with hard work, sacrifice, and patience. But one thing is for sure: they won’t forget Dave’s warning. They’ll be ready for anything that comes flying when they open that door.
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This article ‘You threw a hornet’s nest in the closet’: Couple buried in $91,000 debt turns to Dave Ramsey after panicking and worsening their situation originally appeared on Benzinga.com
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