My Anxiety is Being Triggered By The Amount of Debt We Owe


Dear Steve,

Let us start with two of our biggest expenses…my husband and I have newer vehicles and a new home. I recently graduated college and currently teach special education; additionally, I am still in college working towards my masters degree…hello student loans. Before I was a teacher I was a bartender and that has always been an unreliable job according to creditors due to how much income is reported.

Our Vehicles: We have a car, a truck, and a RZR 1000. We pay roughly 1,300 – 1,400 a month for these. Add another 300 for insurance and we have a large bill. We bought these because I have generalized anxiety disorder and non-reliable transportation is a huge trigger for me: will I make it to my destination? will it be safe,? will I break down and get in an accident?

Our Home: My husband and I built a home, in addition to getting married, a year ago. When he was pre-approved for the mortgage, we hit the ground running building our modest dream home. It is perfect. During this time I incurred roughly 10,000 worth of credit card debt: my wedding dress, our DIY projects for the house, and so on. (We still haven’t taken a honeymoon…not until our house is ours and we can save!) So, here we are in this pickle. When we went to close on our house, the mortgage company pulled away and we were left without a means to buy the home we built. We settled with a contract-for-deed offer and are paying just over 8% in interest (2200/monthly payments). We are desperately trying to get a mortgage to buy our home and lower our interest rate so we can get our heads above water. We are both HARD workers and do not spend frivolously. We wouldn’t have built our home if it wasn’t within our means. We hit a snag when the mortgage fell through and we choos e a contract for deed to save the home we built raising our monthly payments $600.

Income: Our combined income, after taxes, per month is roughly $5,000. I also bartend once a week for cash to use for groceries and gas. Our monthly expenses, with credit debt, is just under the $5,000 mark. This leaves us barely making ends meet.

Credit: My credit is 645 with a 56% credit usage rating… no derogatory marks or late payments. My husband is around 615 with one collections account (we are paying off) and a limited amount of credit variations. He is at 37% credit usage.

We are trying very hard to get a mortgage under my husband’s name because my DTI ratio is ridiculous. I have a 40,000 truck, 17,000 RZR, a 10,000 car, 4+ years of student loans, and 10,000+ worth of credit card debt in my name… on a “bartender” salary because I have not been a teacher for very long.

My question to you is… do you think I would qualify ANYWHERE for a mortgage in both of our names with the little information I gave you about my credit? My husband has had little success with a mortgage in his name because everytime he gets in the “all clear” range…another devil from the past sneaks up and shows under collections on his credit report. The latest one for $600 is a bill from when he had emergency surgery years ago. Before we can attempt a mortgage again, we need to pay that off and wait for it to reflect on his credit report.

Additionally, would applying for a debt consolidation loan be in my benefit? Are the interest rates ridiculous?

Lastly, is this an abnormal amount of debt for a 24 year old? Will it get any better or will I hate adulting for the rest of my life?

We know being debt free is VERY hard; we just want to work towards being above water to save for our future. We know the only way to work through this is to work, work, work… but we also don’t want to fixate on debt 24/7.



Dear Mitchell,

First thing I want you to do is slow down and take a deep breath. I have loved ones who suffer with anxiety disorder and I sense this stuff is driving you to the edge of an attack.

Let me tackle these in no particular order. On the mortgage, while your husband has a lower Debt-to-Income (DTI) ratio, he also has a lower credit score which will hurt your chances. I sense his issue is not as much about bad things being reported as having a lack of credit being reported to boost the score up.

Your goal should not be to live debt free. The reality is nobody can do that. You will always owe something from utility bills, tax bills, etc.

You can certainly strive to not take on more consumer credit than you can handle but that doesn’t mean you should avoid all credit. Using a credit card is fine as long as you can pay it off each month. It’s much safer to use than a debit card.

You didn’t mention if you had private or federal student loan debt. Maybe you can update me in the comments below. It’s important for me to know because if it is federal student loan debt there are some options on how to manage it.

There has never been a “normal” amount of debt for anyone. Every person has a different situation. I know people publish a lot of averages about what a budget should look like but I’ve yet to meet an average person.

On the contract for deed front, my advice is to make sure your contract is recorded at the courthouse so there is no dispute about what the deal is and it will prevent the property from being over mortgaged. Your contract for deed is a lien against the property and should be recorded as such to protect you.

The biggest debt you have here is not financial, but time. Right now you are limping along just making it from month to month. But what you are wasting the most of is time to save for retirement. You can always make more money. But you can’t make more time.

Let’s say it will take you five years to limp along and dig yourself out from this near drowning situation. Use my online calculator to see how much in millions of dollars you are throwing away in retirement.

The most logical ways to get out of debt are to work your way out and lose time or intervene in some way like bankruptcy, credit counseling, or settlement. You can see the pros and cons of each option using my Get Out of Debt Calculator.

Again, I really want to know more about your student loans but in general your situation has you teed up for bankruptcy as the logical solution.

Since you are buying your home with a contract for deed you really have no equity or real property at risk. the bankruptcy would let you give back the RZR 1000, eliminate the $10,000 of credit card debt, and kill anymore gremlins or historical surprises.

If you then focus on rebuilding your credit you can be in a much better position a year from now to qualify for a mortgage, have some money going into savings, and be living within your means which will reduce your stress and anxiety.

You might want to read Those That File Bankruptcy Do Better Than Those That Don’t to see hard facts why this may be the most logical approach given your current situation.

It doesn’t hurt for you to find a local bankruptcy attorney and go talk to them about your situation. Get some good answers so you can make an informed decision and have a better future.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.