How do I deal with this debt?

December 20, 2007 8:00 PM

So do we just stop paying our credit cards?

We're majorly in debt. Like 50% of our yearly income. Figure $66,000 ish.

It's all credit card debt.

We pay around 25% of our current income to simply cover the minimums.

As of now, we can afford this, but it kinda fucks our spending. At times we have to spend a touch on credit cards to make ends meet.

This is coupled with living overseas and having a fluctuating exchange rate. Debt is in dollars, pay is in pounds.

So..

We're current on everything, never been delinquent.

Our finances might be changing, putting us into a position where we can pay a much smaller fixed amount towards credit card debt.


Essentially from $2000 a month for cards to <$500 a month.

We physically won't have any more and if exchange rates change, 500 will be a stretch.


This new opportunity is potentially very good, and I need to get out from under this crazy amount of debt..

How do I unfuck myself? Credit counselor? Bankruptcy? Is this any different because I'm overseas?

Will these people even talk to me if I'm not overdue?

posted by anonymous to work & money (36 comments total)

pay half of whatever you can pay twice a month. this cuts down on the amount of interest you will pay overall. if they reduce the minimum amount, you're winning -- keep paying the original amount, increase when possible. Concentrate on paying off the credit card with the highest interest rate first.
posted by maulik at 8:15 PM on December 20, 2007

Bankruptcy is the section of law you want. There are many chapters of bankruptcy. I am not a lawyer so I won't advise you how to file or anything like that. Basically figure that you won't be able to get any new credit for a few years and keep in mind that you'll lose any fungible non-essential assets (you can generally keep a house, a car and some furniture)
posted by TeatimeGrommit at 8:17 PM on December 20, 2007

So from what I understand, if I'm reading your post right, you make about $132,000 a year. If a full quarter of that goes toward paying minimums, that's $33,000 a year paid on credit card debt. That's half of the current credit card debt you have. Unless your interest rates are insane, this doesn't seem right. It's possible that you mean you make only $66,000 a year and that would mean your debt is $33,000. Either way, the math doesn't really work.

There are a couple of key details that you left out here. What kind of other payments do you have, such as utilities? Are you renting or do you own, or do you have a mortgage? Where exactly are you living? Who is the "we" in this example?

I'm probably going to get throttled by AskMeFites for my suggestion... but I think you need to pick up a book by Dave Ramsey and give it a good read. I know that the "Ramsey method" is one you either love or hate, but it has really done some good in my life. I would recommend the book The Total Money Makeover to start. It's not anything more than "advanced common sense," but he organizes it all in a way anyone could understand, and also helps motivate you to actually get out there and do something.

If you want a general idea of what you're getting into, it's this: a lot of work. Taking part-time jobs and living like you're on welfare, mainly. From what you've said here, if it's accurate, you could probably be completely out of debt in 18 months or less if you play your cards right. I don't want to make any judgements about your lifestyle or the type of expenses associated with where or how you're living, but if I was making $132,000 a year, even with a house payment, utilities, food, gas, etc., I could probably manage to live on about half that. What's more important to you, a nice lifestyle or getting out from under this debt and relieving all the stress associated with it?

If you're looking for a less extreme solution, the best advice I can offer is to stay away from debt consolidations and whatnot. Again, don't want to make any judgements about what things are like in your part of the world, but in the States these things are complete scams.

To answer your last question, no, they probably won't even give you the time of day until you become a threat of not paying. There's really not much use in trying to pre-negotiate the fact that you're going to get behind. Give it a shot, but good luck to you.
posted by joshrholloway at 8:32 PM on December 20, 2007 [2 favorites]

If you're paid in pounds and your debt is in dollars, the weak dollar is helping you.

Get a financial adviser right away.
posted by The World Famous at 8:40 PM on December 20, 2007

Well, if you're overseas but your debt isn't, then you're set. Just quit paying and don't come back to the US for at least 7 years (until the problems drop off of your credit report). Make sure that your creditors don't know your address. You may have to move.

Before you do that though, just make triple sure that UK lenders don't check US credit history. They probably don't.
posted by crazycanuck at 9:17 PM on December 20, 2007

Well, if you're overseas but your debt isn't, then you're set. Just quit paying and don't come back to the US for at least 7 years (until the problems drop off of your credit report). Make sure that your creditors don't know your address.

Yes, that's really f-ing responsible. Do yourself a favor and ignore that advice.


First of all, stop spending money. I mean it:
That shirt you want? NO.
That 3-dollar latte? NO.
That shiny new electronic toy? NO NO NO.

Buy store-brand goods. Stop eating out entirely. Sell some of your possessions on Ebay.

You have to make some drastic changes in your lifestyle in order to free up enough money to pay down your credit cards. Focus on the higher interest cards first. Look into debt consolidation services, but research them carefully to make sure that you're not getting ripped off. If you have other ways to get a loan at a lower rate than your credit cards (credit union, bank, etc) do it, and then use that money to pay off the cards.

Find a good book on financial responsibility and read it. You created this problem for yourself, and now you have to educate yourself on how to get out from under the debt, and more importantly, avoid getting into this kind of mess again.
posted by chrisamiller at 9:52 PM on December 20, 2007 [1 favorite]

(Not a lawyer at all.)
The US revised its bankruptcy laws a couple of years ago, as I understand it largely to make it harder to declare bankruptcy as a way of getting out of credit card debt. I don't think you should expect that the debt will disappear with a magical 7 year wait. If you're contemplating any such route, talk to someone whose credentials you can see in front of you, not just random people on the internet. Talk to someone who actually knows the relevant laws in the US and the UK.
posted by LobsterMitten at 10:15 PM on December 20, 2007

Have you looked into a debt consolidation loan from a financial institution? Typically you'd get one of those and pay a much lower interest rate. Though if you've got 66K in debt, you'd probably still be looking at payments in the $1300 range over 5 years. But that would be five years to a clean slate, and each payment you made would be taking a significant chunk out of your debt instead of just treading water with the minimums. If you could talk a bank into doing it over 10 years instead, that'd make your payments around $750 instead, which is more managable as per your mentioned change in financial status.

Note however if you do this, cut up your cards. I've known friends who have done this route and left the cards around which led to them getting themselves right back into CC debt AND servicing a loan.
posted by barc0001 at 10:24 PM on December 20, 2007

I'm not sure if I understand this new opportunity. Does it mean that your debt could be consolidated and drop from 2000 to 500? Or does it mean that now you are no longer able to afford 2000 and can now only afford 500?

Either way, here's how I would approach it in the short term:

1) Make a budget this weekend. Don't put it off past Sunday. Figure out how much you spend on each category, and figure out what you can cut back on. Try to cut everything back by at least twenty percent. So, here are some examples:

A) Electricity. Can you switch your power and gas provider to a lower rate? Can you reduce your kWh you use each month? Top ways include turning down the fridge, using your AC less and opening the windows more (or wearing more or less clothing), washing dishes by hand, using a clothes line and not a dryer, and using the warm setting on your washer, not the hot setting.

B) Phone. Can you use less minutes? Switch to a cheaper provider with your same phone? Switch plans to a lower per minute fee? Use more minutes in the offpeak?

C) Gas. Can you take public transportation? Even better, can you take public transportation and sell an extra car to pay down the debt and get rid of the car note? Although it isn't fun, you probably want to sell the car that has the highest note, not the one that you like the least.

D) Food. Stop eating out. Start eating cheaply. Here are three dollar recipes. Soup can be very cheap. Buy veggies at the farmer's market when it's about to close. They don't want to cart the extra produce back and may offer you a discount.

E) Insurance - Put some of your savings for the first two or three months into a savings account that you have to swear never to touch. Then, up your premiums on your insurance by the amount of your savings. Having higher premiums reduces your insurance company's risk, and thereby reduces your rate.

F) Entertainment is non-essential. However, you probably want to be entertained. Art openings, bands that don't have a cover, the library, and exercising are great ways to do this as cheaply as possible. Also, sex with your partner is not only entertaining, but also a reminder that focusing on your relationship is very important when you are struggling with money. Countless good relationships have broken under the strain of money issues.

2) Look at your debt. Which cards have the highest rate? Pay only the minimum of all of the cards that don't have the highest rate. Then, pay the maximum you can possibly afford on the card with the highest rate. Use everything you saved from your Great Budget Planning Session this weekend to pay down those nasty credit cards. Only consolidate if it will actually save you on the interest rate, not because you don't have to pay as many bills. Continue this process until they are all paid off. Later, you can spend more (but sustainably) and put some of the savings into, well, savings.

None of this is any fun, but you will feel much better debt free.
posted by Pants! at 10:38 PM on December 20, 2007 [1 favorite]

IF you have a good bank or a credit union, you may be able to work out a refinance with your bank at a lower rate, IF you can change the credit card debt to some other form of loan, like (for example) home equity. I nearly did this with my credit union some years ago -- they seemed amenable to doing this even though I didn't own a home, but I have a nearly 20-year-history with them and a good credit rating. You may have to discontinue your credit cards at the same time, and/or have a payment plan.

Some banks may not be willing to do this, since it (you hope) leads to them making _less_ money from you.
posted by amtho at 10:55 PM on December 20, 2007

Yeah, I'll second barc0001. To me, the smart move would be to consolidate your debt with a bank, if at all possible. (Make sure it's an actual bank, since there are debt consolidation scams.) You might have to get a co-signer, depending on your credit and assets.

Before that, I'd see if you can cut down the interest you are paying. It sounds like it might be pretty high. Call the cards and ask for a lower rate (the best way to do this is if you can say you're being offered something lower elsewhere). Also, you could maybe transfer some of the debt to introductory 12-month-no-interest balance transfer things (though being careful that you don't boost your total minimum payments by opening a bunch of additional accounts).

Also, I don't know if they have credit unions over there, but mine offers one free meeting with a financial planner every year (and maybe major banks do this too, I don't know). They'd be a place to start.

One additional tip on unfucking yourself: read personal finance blogs every day. Just bookmark a half dozen or put them in your RSS feed and skim through them when you want to goof off. You'll learn a lot really quickly. Here are some recommendations:
Get Rich Slowly
I Will Teach You To Be Rich
Five Cent Nickel
Free Money Finance
The Simple Dollar
2 million's personal finance blog
Zen Personal Finance
Broken Credit
Money Under 30
posted by salvia at 11:01 PM on December 20, 2007 [29 favorites]

OP here.

The issue with the numbers is as follows.

2 cards with manageable balances.
Min payments of a few hundred. Interest rates @ 4.9
Figure at aggressive repayments, we can get these cleared in a year or 2.

1 Card at a huge balance.

The minimum payment is >1300 dollars. Interest rate just got dropped slightly, but it's >14%.

Currently all of these are manageable, but if/when our finances change, not so much.

It's not really a question of cutting costs here and there.

We already cook everything from scratch, focus on cheap meals that we can eat throughout the week.

No Car, No mobiles, no recurring costs. Renting a small house, focusing on managing electricity, gas, water.

The simple cost of living is the issue.

Where we are right now is relatively stable, but it's making minimal progress. (Relatively minimal)

Once you factor in these potential changes, I'm not sure what to do.

The Big card folks aren't even slightly interested in a repayment plan. The interest rate drop was 2%, which while helpful, isn't a meaningful amount.

I'm considering focusing on the 2 small cards, getting them done, paying less on the huge card. This'll fuck up our credit, piss off the big card, but we'll get the small ones cleaned.

Then we can monkey with the big card.

I'm also looking to find a financial advisor/lawyer/whatever who can give me pointers as to a realistic plan for this stuff..
posted by Lord_Pall at 12:07 AM on December 21, 2007

I'd focus on the high interest one before I worried about the 4.9% ones. The later you pay off the high interest one, the more you'll pay in interest. It might make you feel better to get the two littler ones paid off first, and then put more money towards the big one, but I think you'd end up paying more if you do it that way.

I'd also consider consolidating the debt into one loan, which should have the benefit of less than 14% APR.

Good on you for not living extravagantly. I'd consider cutting up some of your credit cards (especially the high interest one!), so that you can't add to the debt that you're trying to whittle down.
posted by philomathoholic at 12:27 AM on December 21, 2007

After I split with my husband, I took on all our debt, which amounted to around £25,000 ($50,000). I became what is known in the UK as a 'rate tart'. I transferred all the balances onto a card that had a 0% interest rate concession for several months. Before the concession was up, I'd look for a new 0% deal, transfer the balance onto the new card, and so on. That way, I knew that the payments I was making were reducing the balance, not servicing interest.

I NEVER, EVER USED THE CARDS THAT CAME WITH THESE DEALS. The idea was to pay off the debt, not accrue more. Every card I was sent was cut up immediately.

It took me five years to pay off the debt, and, especially once it got below £5,000, I became ruthless about it - every spare penny went to paying it off.

I learned to live on a budget. This didn't mean I never went out or had fun, but it meant I had to think about how I was spending money. Lunches every day in the cafe at work, plus a coffee every day = a night out at the cinema and a pizza. So I had to make choices.

It also helped to look at why I and my (by then ex-husband) had accrued so much debt - buying things to 'fix' ourselves and our failing marriage. So it was more than just a fiscal exercise, it was a learning experience, and one which was not always pleasant.

The day I made the final payment I danced and whooped around my living room.

Now I have one credit card, I use it only for things I can pay off immediately, and which cost more than £100 (so I can get the protection offered by the Consumer Credit Act).

Before you decide to pay less on the big card, speak to them first and see if they'll agree to a plan for the time being - many companies will freeze interest for a few months in cases of hardship. Just not paying will result in penalty charges and reports to credit reference agencies, which may screw you for credit in the future.
posted by essexjan at 12:37 AM on December 21, 2007 [3 favorites]

I don't think I can get a non-collateralized loan for consolidation. Or am I crazy?
posted by Lord_Pall at 12:42 AM on December 21, 2007

So even if I can't hit the full minimum payment, focus on the big card?
posted by Lord_Pall at 12:44 AM on December 21, 2007

Ok, I'm an American living in London. I suspect you live in the UK as well. Assuming you don't have significant US based assets I'd suggest your lenders have a problem, you don't.

Your income and other personal assets that might be used to satisfy a judgment are in the UK. This is an entirely different collection problem that most card companies are setup to deal with. The fundamental problem will be getting UK based employers and financial institutions to honour a foreign judgment. Not impossible, but adds to the complexity / cost ratio.

You've got to make the point, repeatedly, that you don't want to default but for reasons beyond your control if they won't work with you to restructure the debt into something more managable than you've got no choise.

You also have to point out - repeatedly, and perhaps in writing - they've got no recourse, as your income and assets are effectively out of their reach.

Now - if you've got significant savings or other financial assets in the UK get them offshore immediately, but with another financial institution; introducing a third sovereign domain would markedly increase collection costs should this thing go the wrong way.

Which it won't. You've got all the power here. If they want their money they have to work with you. I suspect you're dealing with the ordinary front line staff todate, who don't grasp the significance of the problem in hand. To be fair to them, they are undoubtedly reading from a script and you've just got to get this in front of the right people.

Curious - do your credit card companies know you're in the UK? When I left the US in 1997 a couple immediately dropped me, and another (offered by my at the time broker actually) sharply restricted my limits. I'm surprised they'd let themselves get this big a problem when collection would be difficult or perhaps impossible for the sums involved.

re:comments up thread about the weak dollar: £/$ broke below two yesterday. We've been going through a period of strong pound, and now it's starting to backtrack
posted by Mutant at 12:45 AM on December 21, 2007

I've mentioned that I'm in the UK to a few of them. The big card doesn't seem to understand it.

One of the smaller ones is registered to the UK address.

We don't have any assets in the US. Just debt. Well, and a few things in a storage facility. I'm not clear if they can seize those though.


We've got some cash in the UK, in the same bank that has our credit card in the US. I'm unsure if that actually matters. (It's citibank btw)

It's not significant, but it's more than 0. I can cycle things to other banks if need be.


I want to work with these people to repay this debt, but they seem to be making it difficult. When I called them yesterday they went on a schpiel about how people with this card don't care about interest rates because you get miles.

I figure I'll call this evening and lock the account so they know I'm serious. I'm not going to play customer service games with these fuckos while I'm trying to do the right thing. (Instead of waiting until we're delinquent).
posted by Lord_Pall at 1:20 AM on December 21, 2007

You definitely want to make only the minimum payments on the 4.9% cards and throw everything at the big one. You are buying money here, and why would you buy something for $14 when you can get the exact same thing for $5? You should probably try to get your limit increased on these lower interest cards. One thing to think about is that some cards have a universal default clause, where if you miss payments on one card the others will raise your rates as well, so your 4.9% rate could go up significantly if you get in trouble with your large card.

One option to think about is to transfer your debt into pounds so you do not have to worry about the exchange rate. I'm not sure how it works where you are, but some banks offer cards in foreign currencies, so it may be possible to get a card in pounds from a US bank. You may even qualify for credit where you live. I doubt the rates would be in your favor to do this, but it might be worth checking in to.

On preview, I was going to mention that you might be able to switch to a different type of card with the same bank that doesn't offer any perks (miles, cashback) but has a lower rate. Research the cards they offer and instead of asking for a lower rate, ask to switch to the card that offers the best rate. You may lose some of the points you accumulated, I don't know.

Dave Ramsey was mentioned. You can probably stream his radio show and call or email him with your dilemma.
posted by Yorrick at 1:54 AM on December 21, 2007

Ok, I'm an aggressive New Yorker so I'd play it this way - but please choose your course of action accordingly.

If you don't already you have notes of your calls (names, dates, times, what was dicussed, etc), make them from your memory, covering at least your most recent conversations. The more details the better. Check your phone logs for help.

Call again today, getting the requisite details of the conversation documented. Tell them you can't pay any longer and you need to work out a plan. If they fob you off again, no problem.

Write a letter to the appropriate card issuers, telling them you're stopping payments and why. Include details of your conversations, mentioning that you've been trying to work this out. That you've made multiple good faith efforts to setup a payment plan to work this out, but the front line staff refused to acknowledge your concerns.

Then stand tough. Refuse to pay until they work this out on terms you find acceptable. Do you homework first. Make sure you create a budget and know (realistically) what you can pay per month. I think you'd probably get one chance at this, and someone at those credit card companies will get concerned when they realise they've got unsecured debts and a foreign obligor.

And save that cash flow that would otherwise go towards debt service!! You may need to make a single, large up front, good faith payment once they've agreed to your terms.

Opening an offshore account can be done simply by walking into a High Street bank branch with thhe appropriate documentation proving identity, residence & employment (i.e., passport, UK utility bills, etc). I set my accounts up face to face, but it may be possible to do this online now - I'm not sure.

I'd suggest doing this at a bank your paycheque isn't deposited into, if only to insure a single judgement (assuming a UK bank would honour a foreign judgement, which isn't totally certain at all) can't freeze all your liquid assets.

Good luck. As I mentioned before, your lenders have the problem. Not you.

On preview: "ransfer your debt into pounds so you do not have to worry about the exchange rate". Unless you're planning to remain in the UK indefinitely, this would be a bad idea. You'd effectively be taking a view on Sterling vs other currencies, and this bet might move against you. Better to deal with the single problem you've got now than introduce a second (i.e., currency flutuations) uncertanty.
posted by Mutant at 2:11 AM on December 21, 2007

The advice such as

"
Well, if you're overseas but your debt isn't, then you're set. Just quit paying and don't come back to the US for at least 7 years (until the problems drop off of your credit report). Make sure that your creditors don't know your address. You may have to move.

Before you do that though, just make triple sure that UK lenders don't check US credit history. They probably don't."

is bullshit.

Companies SELL debt between countries.

e.g. I owed money to a swiss hospital: just 5k. They sold the debt to intrum justitia, which has branches all over the world: the organisation the uses its legalpresence in that country its in to come after you. They came after me in the US. Ebay/paypal use them, and C.Card companies do this too.

Globalisation has its downsides. Don't ignore the debt.
posted by lalochezia at 2:23 AM on December 21, 2007 [3 favorites]

This has been hinted at, but I think it deserves explicitness: Unless you stop living beyond your means, you will continue to have this problem.

The critical issue is not the debt (which is repayable given a few years and lots of sacrifices), it is that you are continuing to add to that debt. You say: "At times we have to spend a touch on credit cards to make ends meet." That means that if your mysterious rich uncle paid off all your debt today, you'd be back in debt tomorrow.

You have to solve the fundamental, underlying issue of living beyond your means before your decisions about which cards to pay will have any meaning. That might mean cutting your costs, taking on more jobs, moving to a place with higher pay and lower costs, etc. Anything else -- consolidation loans, renegotiating these cards, etc -- is just a temporary stop-gap, which might give you some breathing room, but won't resolve the real issue.

I lived in Europe at a point when the dollar was fairly weak. We were getting paid in dollars and each month things got tighter -- getting caught between exchange rates can be brutal. But using credit cards to finance your lifestyle is not an option that will work over the long haul, as you are finding.
posted by Forktine at 4:02 AM on December 21, 2007 [1 favorite]

I believe we've got that under control. We're cash only now for living.

Therein lies the problem.

Our actual spending is reasonable in the scheme of things. It's frugal and focused. When you spend all of your money to simply maintain a huge credit card balance and an unexpected cost comes up (broken cycle, sick cat, etc), you already put your monthly cash onto the cards.

It's not actually growing the balance. In fact, the balances themselves are decreasing slowly..

But that slow decrease is contingent on a staggering amount of money going to the cards.

That money is going to become smaller in the future.

If it becomes smaller, minimum payments don't get met and so on.

Therein lies the problem.

I'm not disavowing responsibility for stupid shit I did earlier. But this isn't a question of "Oh I have to have a new car and go on a trip" or " I love to eat at restaurants".

This is a question as to what is a good course of action when your single greatest expense with a simple lifestyle is credit card debt, and your finances are potentially changing, removing the ability to support the debt repayment habit..
posted by Lord_Pall at 4:30 AM on December 21, 2007

I think what is confusing people is that you are making around double what the average family in the UK makes (£32,779 according to 5 seconds on google) There must be something you can cut down on, even though that might mean making hard decisions and even moving to someplace cheaper. So, I would suggest seriously cutting down to the point where you are living on the smallest amount of money you might be making minus your minimum payments, and also look into refinancing options that will reduce the interest.
posted by fermezporte at 5:17 AM on December 21, 2007

At times we have to spend a touch on credit cards to make ends meet.

I'm guessing you really don't. Stop using your credit card. Chop it up.
posted by chunking express at 6:12 AM on December 21, 2007

I'm confused by the great opportunity - it sounds like you have the option to take a career path that would be more personally satisfying, with a huge pay cut. I'm not sure that assumption is correct, but assuming it is - I'm sorry, you can't afford to. I think you need to stop thinking about it. I know that sounds harsh, but if you're not making significant strides paying the debt now, how can you even responsibly consider a pay cut? Such are the sacrifices we have to make in life, you know?

At any rate, the "rate tart" game mentioned above is a good bet. As a result of financial troubles of my own some years ago (nearly declaring bankruptcy), although my household income, savings, and recent bill payment history are excellent, I have a fairly pathetic credit score. In addition, I have $90,000 in student loan debt and a car financed for $20,000. Nevertheless, I obtained a brand new $10k card from Bank of America that has 0% interest on balance transfers for 12 months (and 0% on purchases for 6 months, but you WILL be following the WISE advice to cut up the card on receipt and not use it for purchases). In looking for a card, many others had 1-year interest free balance transfer offers, including: Citibank, Capital One, HSBC, PNC Bank and more. Use BankRate.com and other financial comparison sites to look for these offers. I did that, and also called every credit card company I could think of and asked "Do you have such and such an offer?" and if not, hung up.

A 12-month holiday from interest on even a portion of that debt would REALLY help you out. REALLY, REALLY, REALLY. Just remember you must make the minimum payments to retain the rate; so make them, but after you get the part time "pay off my debt" job where all earnings go directly to the debt, focus on paying off the higher interest debt first, and continue to move as much of it to lower-interest debt as you can.

I really feel for you, having gone through this, it is just a horrible, horrible panicked feeling.
posted by bunnycup at 6:43 AM on December 21, 2007 [1 favorite]

I have to agree with the confusion about the "great opportunity". Your first responsibility is to pay off the debt that you accrued. If that means you miss this great opportunity, oh well. You made your bed, now lay in it. Or lie in it. Never could get that straight.

I hate to see those "Hey you are in the UK, forget the debt!" suggestions. Whatever happened to personal integrity. Stay at your current high paying job, cut expenses to the bone, pay your debts and once you take care of that, look for new great opportunities.
posted by genefinder at 7:26 AM on December 21, 2007

Yeah, for real. Why is the cash dropping off so precipitously? If it's for any reason other than death or layoffs or like, being drafted, don't do it.

In fact, what you probably should be doing is getting a second job, and using the snowball method for paying off your debt.

You can't just walk away from it. It's your debt, you accrued it, you've got to pay it off.
posted by mckenney at 8:26 AM on December 21, 2007

When I was young, I made only $9600 a year in a part time job and I had $14,000 in credit card debt. I did a few things:
-I cut up the credit cards.
-I transfered the balance of the higher rated card to the lower rated one.
-I quit my "career"(which was acting in NYC).
-Then I got a full time job for $36,000. I lived in my folk's apartment in the living room on a futon.
-Every paycheck, I put half of it into the credit card.

After 2 years, not only had I paid off the credit cards, I had saved enough money to for a down payment on a condo of my own.
posted by CrazyJoel at 10:31 AM on December 21, 2007

1) Since you're willing to put this information out there under an Internet pseudo, I'd also suggest taking it to the Motley Fool Credit Card and Consumer Debt board. Those guys are a pretty impressive source of collective wisdom about these kind of issues. You'll get a lot of people saying "cut spending" but there are a lot of other people who know angles, ins, outs and little tidbits that are highly useful.

2) Here's my read on what you've posted: Right now you're barely making ends meet. You're considering making a change - you don't say what it is or why - that's going to pretty much put you in default. Eventually the collections folks will catch up with you in default - I doubt that living in the UK will shield you, especially since your bank has operations there - and with the amount of debt you have you'll probably have to declare bankruptcy.

In other words, I'm not sure what the change is you're considering making, but it's going to bankrupt you. This change would have to be either pretty darn beneficial or or completely unavoidable to make it a good trade-off to bankruptcy in my book. I'd think long and hard about other options.
posted by ikkyu2 at 10:48 AM on December 21, 2007 [1 favorite]

If it's possible to transfer balances to lower interest cards, do. Cut up all but 1 card. Freeze it in a block of ice, and use it only for the most dire emergency, like tickets to your parent's funeral. Get your expenses down much further. Much further. Read the sites salvia listed. Follow the frugality advice from essexjan and others. Others have done this, and you can too.

After the cards are paid off, keep going and build up a down payment for a home.
posted by theora55 at 10:49 AM on December 21, 2007

Maintain a minimum payment on all cards except for the card with the most debt. Pay multiples of the minimum on that one card until it is gone. Once it is paid off, continue to pay off the other highest-debt card using the SAME amount you used to pay off the first one PLUS the amount you are now no longer required to pay. Continue for the rest. Example:

Four cards, minimums are $10 each.

On the most-debt card, pay $50, the rest $10 each.
Once most-debt card is paid off, pay $60 for the next highest card.
Once the next card is paid off, pay $70 each month on the next.

You will end up spending the same amount each month until you are debt free this way, and still being able to get out of the debt quite surely.

Also, keep a daily spending journal with your spouse. If you are both required to report all spendatures honestly, you will not spend in the impulse moment knowing that you will have to confess it later that night.
posted by Quarter Pincher at 11:08 AM on December 21, 2007 [1 favorite]

I don't think I can get a non-collateralized loan for consolidation. Or am I crazy?

I do think you can. A family member of mine did. However, he had to get a co-signer. But he also had bad credit.

In the meantime, what about trying the 0% card / "rate tart" approach? 14% interest is a lot.
posted by salvia at 10:43 PM on December 21, 2007

Whatever you do, do not just stop paying. Find a credit counselor or some such *legitimate* place that can assist you in talking with the credit card companies. Bankruptcy may be an option as well. If you simply do not pay however, the credit card companies will tack on more and more fees, which can add thousands of dollars of debt in as little as a year. They can and likely will sue you if you simply stop paying - speaking from personal experience.
posted by pontouf at 9:58 AM on December 22, 2007

Anonymous, if you Mefi Mail me your real-life e-mail address, I can send you an Excel spreadsheet I've been using for years for both long-term and short-term budget planning. I'll brag a little bit and say that I think it's fairly good. :)
posted by WCityMike at 10:53 AM on December 22, 2007

Also - haven't used this, but here's a free budget spreadsheet from BankRate.com and an online budget calculator (I don't know about you, but I wouldn't have the attention span for this one...) from Kiplinger.
posted by jenh at 3:34 PM on December 30, 2007