We Owe $80,000 On Credit Cards – Where To Start?

Laura writes in with the following plea for help with getting out of credit card debt:

I came across your web site today and I love it!  My husband was out of work for nearly 2 years.  We always had enough money to pay our bills so our credit line was very high.  Well, I used it, all of it.  I paid the phone, the car, taxes, one credit card paid another and so on.  I know I broke every cardinal rule but I did what I had to survive.

My husband is now working.  We are paying the mortgage company every week $500.00 to catch up.  My credit cards are over $80,000.00.

Here is my question…Now that we are getting back on our feet, how do we square up with the credit cards with out ending up in the same position?  I can give them each (all ten of them) 40.00 a month, but that won’t make a dent and I don’t even think they will take that low of an amount.

Laura, thank you for taking the time to share your story. It sounds like you and your husband have had a rough couple years, financially, but there will be brighter days ahead. My first piece of advice has little to do with finances, and more with your relationship with your husband.

I want to encourage you to fully disclose your financial situation to your husband. Perhaps you have already done so, but in your email you indicated “I used it, all of it. I paid the phone, the car, taxes…” I just want to make sure you and your husband understand the situation fully, and understand that while you did what you had to survive, we must now work together to clean it up.

Kudos to you for working to get the mortgage caught up, and for making that a top priority. So many times people in your situation make payments to credit cards before the mortgage payment because some obnoxious credit card collector is breathing down their neck. Prioritize the income you now have coming in putting things like food, shelter, lights, and transportation at the top. You’ll work around to the credit cards when you can, but those things must be paid first.

Consolidate Your Accounts

With ten credit cards you do have an uphill battle, but paying them off is not impossible. You didn’t share exact numbers/balances with me, but I understand your current budget only allows for $400 to go towards repaying the credit cards (hopefully you’ll have even more once the mortgage is caught up).

Spread across 10 cards, that $400 budget only leaves $40 per card. You might consider a consolidation loan with Lending Club to reduce the number of accounts (and minimum payments) you are required to pay each month.

If you can successfully consolidate your accounts, but sure to close or tear up the cards of those that are paid off. Else you may revert back to old habits and begin using them again.

Sell Stuff to Raise Cash for an Emergency Fund

It would be great if you could build up a small emergency fund of a couple thousand dollars before starting your debt repayment plan. I worry the next emergency will lead you back to credit cards, and zap any progress you’ve made towards paying them off.

Do you have anything you could sell to fund this emergency fund? An extra vehicle? Old jewelry you no longer wear, but may have cash value? Appliances? Electronics? Consider hosting a yard sale or two. I’m not advocating you sell all the contents of your home, but this step will require an extreme measure or two to get an emergency fund in place.

The Debt Snowball

Here’s my advice for handling the remaining credit cards. Start with the traditional debt snowball. List your cards smallest to largest according to their current balance. The standard advice here is to pay the minimums on all accounts to keep them current, and pay anything extra on the smallest debt. In your situation, I’m not sure that’s possible, considering the sum of all minimum payments is likely much higher than $400.

I’d advise you to consider making a substantial payment – at least a couple hundred dollars – on the account with the lowest balance. Use any remaining funds to pay minimums on the next card or two. Hopefully, that card with the lowest balance can be paid off within a couple months, and when it is, walk that money right up the debt snowball to the account with the next lowest debt, and so on. The guys at the end of the list will probably be kicking and screaming for payments, but if you can’t get to them, you just can’t get to them.

Increase Your Income

While working this debt snowball, it would be great if you could find creative ways to increase your income. Perhaps you or your husband could work some overtime or a part-time job, or work from home in off hours. As you acknowledged, you are in a pretty big hole, so increasing the size of your shovel would certainly help get out of credit card debt that much faster!

I wish you and your husband the best on your journey to debt freedom. It will be a long road, but as someone who has just recently experienced debt freedom, I can tell you that every sacrifice is completely worth it!

Ask the Readers: Do you have any additional advice for Laura? Words of encouragement?


  1. In my opinion, the first thing to look at is the expense load. From the letter, it sounds as if their current expense level is $40K per year. Can that be reduced in some way? What sort of car–is it feasible to change it for one that is paid for, even if less prestigious? Paying the mortgage is one thing–but is the house itself capable to be exchanged for a less expensive one? (We have no way of knowing from the description).
    Your advice to try to increase income is a good one, but it can be difficult to implement today with so many out of work and so many businesses at a low level. However, it may still be possible–and creatively searching for a side job of some sort is an exceptional idea.
    I would not wait to cut up some of the cards, either. Just because they need paying off, that can be done by paper or online–but remove the ability to charge more. Just be careful of the predatory “work at home” schemes or those seeking you to spend money you don’t have for some sort of “business” that has no real potential.

  2. I get the impression from the article that the wife doesn’t work..I presume to take care of kids?

    One last tip. Don’t be above doing menial work. Waitressing on a Friday night can be $100 in tips. Working 1 or 2 nights a week can make a huge difference.

    Although I’m glad I don’t have to work weekends anymore, I’d do it in a heartbeat if it was the difference between teetering on the brink of bankruptcy and stability.

  3. I just wanted to say to Laura: don’t give up. You can do this. when my husband and I graduated from college, we had $40K in credit card debt (I know, I know…). 4 years later, that is down to $6K and dwindling fast. It seems incredibly daunting, but slow and steady will do it. Put every dollar you possibly can toward the balance and you will be surprised at how much progress you can make.

  4. Excellent post… I got caught up with debt on credit cards and I have finally entered a debt management plan which has significantly reduced my payments and gotten me heading back in the right direction. First things First I am establishing an emergency fund.

    I’m also making a rule that if I want to buy anything I need at least double the cash spare (not including a few thousand in an emergency fund).

  5. Change the phone number so the creditors can’t find you. Then, I would completely stop paying the credit cards until the every last penny is caught up with the mortgage.
    Once the mortgage is current, contact the credit card companies and try to work with them.

  6. You might also try to contact the credit card companies and negotiate a better rate, lower monthly payment, or a lower balance altogether. Call them, tell them what your payment plans are for the upcoming year, and they’ll work with you. If they call you, then unfortunately, that’s not the best situation.

  7. Excellent advice! And I totally agree with Renae’s post – mortgage 1st, let the chips fall where they may on the credit cards. Maybe join Dave Ramsey’s total money makeover which is a great emotional boost and helps keep things in balance, not even just the money stuff but the emotion of sleeping at night with this big weight on your shoulders! Or at minimum buy one of his books. And I love Frugal Dad’s advice at the top – be honest with husband (you probably already have) and HUG each other alot. Hang in there, you are not alone!!

  8. I think the point about increasing income should have come first.

    Minimum payments on credit are usually 2% (or more). That’s $1,600 per month – a lot more than the $400 they can currently direct. It’s hard to hear, but $400 will just never repay that debt.

  9. You might consider a balance transfer to a new card so you’d have at least 6 months of no interest. Your credit will need to be decent for this to work however. Also, balance transfers typically cost around 3% of the balance you transfer (although I’ve seen many have a fee limit of around $100), so that might not be manageable.

  10. Bah, I’m pretty sure that my phone ate my comment. So here is a much shorter version. If it were me I’d cut expenses like crazy (you don’t need a phone, for example, especially when it’s going to be mostly creditors calling.) Use the neighbor’s in an emergency.

    I’d stick to a prioritzed budget and start by making sure the house, food, and electric was paid. Everything after that is optional. It doesn’t sound like the credit cards will be happy with those super low minimums anyway (nor will they make a dent) so I’d probably not pay most of them anything right now. I’d send as big a sum as posssible to the lowest one, and maybe pay one or two other minimums.

    I’d bring in as much extra money as possible: walk dogs, petsit, babysit, write articles, get 2nd jobs, ask for a raise, sell stuff. I would not borrow any money again, not even to consolidate.

  11. We were in a similar situation a few years ago, and thanks to a very generous friend we were able to get our heads above water. She didn’t GIVE us the money, but loaned it a rate higher than a bank, but lower than our CC’s. We then started calling our credit cards companies, and it was amazing what they were willing to do, especially if we were more than 3 months past due. Nearly all of them wrote of a larger chunk (50% or more in most cases), changed the loan type to a traditional loan with a crazy low rate (Chase), or forgave the debt altogether.

    Two things to keep in mind:
    1) The debt write off counts as income, so you will get dinged pretty hard by the IRS and State govs.

    2) CALL YOU CREDIT CARD COMPANIES! It is amazing what they will do when you speak with customer retention managers and debt officers. They want to a) get as much money back as they can, and b) keep you as a customer.


  12. Am I the only one that thinks at least talking to a bankruptcy attorney is in order. Not necessarily to actually file but for assistance with debt reduction (and maybe an assessment whether bankruptcy is the only option).

    I have no idea what her husband earns but it may not be enough to pay off 80K in debts. I know it is not the best solution and not one I would want to have to face but I would do it if it was the only way my family could recover from such a devestating financial position.

    If not an option, stop paying the credit cards until the mortgage is set (her credit is shot anyway right now so don’t let that stop you). Next–cut, cut, cut every expense and finally do everything possible for a part time job to bring in more money.

    Good luck, Laura. I wish you and your family the very best in this.

  13. I would totally disagree about paying the mortgage first. I also point out that we don’t have enough information about the situation.

    How much equity do you have in your house? If it’s little or none, you may want to consider letting the mortgage go.

    $500/week is over $2,000/month–you can probably rent a similar property for far less.

    Should you default on your mortgage, you’ll get anywhere from 6-18 months of “free rent”–that’d be a great time to put that $2K/month toward your credit cards and dig out of the hole faster.

    Eventually, you’ll lose the house–but if you have no equity and can rent for less, I’d say that’s a net win.

    If you have equity, I’d advise a sale, and then renting for less. You can probably find a house in your same neighborhood for rent so you don’t have to move far.

    Also second the idea of selling furniture, clothes, shoes, everything…get really familiar with eBay.


  14. I wasn’t going to comment, but then I saw Erica’s (#11) and had to respond.


    They are telling you to be foreclosed on, lose your house, and end up with even more debt. Stupid! And irresponsible!

    Just because you stop paying on your mortgage doesn’t mean you’re totally done with it. No, you still may have to pay on it.

    So yes, keep paying your mortgage and try to keep it current.

    See if you can negotiate lower interest rates on your credit cards.

    Do the Dave Ramsey method of paying smallest to largest. You need to eliminate some of those 10 cards so you won’t be spread so thin.

    Now, if you think that you should sell your house and rent in the meantime, go ahead. But be responsible.

  15. Why use the “Debt Snowball” method when she would save thousands of dollars in interest if she would start by paying off the cards from the highest interest rate down to the lowest?

    I realize that Dave Ramsey is the man and all and I have a lot of respect for him but let’s be honest.

    The Debt Snowball method is a poor choice in this and any situation because it will literally cost her thousands of dollars more in interest charges over the life of the balances than if she had just started at the card with the highest interest rate and worked her way down.

    Sorry Dave!


  16. I’d stick with putting the mortgage first. That’s your house, your shelter, and you probably have an emotional connection to it, too. It should be a higher priority than the credit card debt.

    Plus, #11 (Kacie) is right – foreclosure doesn’t mean you’re home free, so to speak. Not only would it wreck your credit score for many, many years, yes, you might still have to pay the bank:


    Work with your husband to devise a plan for repaying the credit card debt (can you call the credit card companies with a repayment plan proposal and ask for lower interest rates?), and do not let the collections people freak you out:


  17. Even though I’m not a fan of not paying one’s debt, Krista’s post #8 has a good point. In fact it is likely even worse than what she stated. Krista calculated $1600 in monthly payments on those cards at a 2% monthly minimum payment.

    Recently the big bank players doubled their minimum monthly payments from 2% to 4%. That means Laura would need to come up with $3200 a month for those cards. $400 a month isn’t even going to cover the interest.

    So the reality is she probably needs to pick 3 or so of the 10 and pay on those. Credit card companies generally won’t negotiate until you are pretty far behind already. So unless that is the case, negotiating probably won’t yield any interest rate reductions at this point.

  18. Great suggestions in the post and the comments from other readers.

    From the “Increase your Income” category…if you’re in good health and not squeamish about blood…becoming a plasma donor will pay you pretty good money for doing nothing but sitting around. I’ve known couples who have earned around $400 a month (varies according to location) because they both went twice a week.

    That’s pretty good grocery money, or debt reduction money!

  19. Also — what is the vehicle situation? Paid off? I had about $50K in cc debt at my highest, and I am ALMOST done paying it all off… I got started because I had a car that I did not have a payment on, and got a loan against my car from the credit union. With that money, I was able to pay off a huge chunk of debt, and that windfall got me into a place where everything else was much more affordable.

  20. I’m sure they can do it if they work together on the debt. It would be nice if you could follow their getting out of debt story. There are a lot of us trying to get away from credit card debt now.

  21. I’ve got to say, I think I agree with Erica (#13) on this.
    It’s unfortunate that unemployment hit Laura’s family, but an $80,000 hole plus back mortgage payments seems to be too deep of a hole to come out of and keep everything.
    Something’s got to give and, unless Laura wants to file for bankruptcy, it seems the house is the thing that will have to go.

  22. Okay, first and foremost, how many months behind in your mortgage are you? I’m guessing only a couple — more than that, and you’d have been foreclosed on. But I also know that mortgage companies tend to then demand some money in abeyance, in case this happens again.

    So: Sit down and figure out when you’ll be caught up. Let’s say it’s in September.

    Call the card companies and explain the situation. Tell them that you’re looking into more work/selling stuff/getting a consolidation loan, but if none of that pans out, you can only pay $40 a month until September. At that time, you can pay $200 more each month — again, barring any extra funds from income. Ask what they can do to work with you.

    Also, when it comes to raising cash:

    I never thought we had anything to sell/spare. We lived close to the bone. Then we had to move states. Turns out we had a lot more than we could take with us. It all had to fit in a 10’x11’X12′ container or in the car. We got rid of most of our things. If we hadn’t had a mattress that would cost more to replace than move, we might’ve gone without any kind of container.

    Point is: We got rid of TONS of things. None of it was worth much separately. Yet we made almost $300 from a yard sale that got started late and was late in the year. We donated stuff that, even going conservative on value, was worth about $2,000.

    So go through your house and ask yourself, if you had to fit everything into a container like ours, what would you take? Try to sell anything that doesn’t make the list. (If you have kids, obviously, you can allow a bit more room.) Have yard sales every week and put stuff on Craigslist. You will probably make a surprising amount of money — even if you don’t have any big-ticket items.

    You don’t say if you work right now or not. I’ll assume you do. (If you don’t, start looking. At least for part-time work.) Look for stuff you or your husband (or both) could do in your spare time.

    People love older babysitters. At age 48, my mom was making $9-10 an hour for 3-4 hours (min) a night. And usually, the kids were in bed 1-2 hours after she got there. Put up fliers at your local gym/community center/ etc. Stress your age and whether you have kids of your own. (If they’re not small enough to leave on their own, offer discount rates for bringing your own kids along. Everyone likes a bargain!)

    If you like (or can stand and do decently at) cooking or cleaning, try selling those services. People could pay for weekly batches of food. They buy the groceries (or, if you’re good with coupons, you can add that in for a fee) and you cook.

    Or either you or your husband could deliver pizzas or newspapers. There are a lot of part-time jobs available. Offer to walk neighbors’ dogs during the day. Make sure people know you’re available as a house/pet sitter.

    I guess the point is: Break any old boundaries you have. Look for any way to make an extra buck or two. I am sure you think you’ve already revised to death. But check again and be opportunistic!

  23. Wow, I am impressed you are able to amass $80,000 in credit card bills!

    I only have two credit cards, and my personal CC only has a $35,000 credit card limit.

    I’m assuming that if you can borrow $80,000 in credit cards, you must have a very high six figure income?

    What is your interest rate?

  24. I just wanted to thank Abigail for her comments. So many good ideas for all of us! When in dire straights – and I think we can all agree that 80k in the hole is dire – then we’ve got to even consider selling the mattress and sleeping on the floor. It is better for your back if you are a back sleeper anyway!

    Live like a very poor, or even homeless person (sell your home and live with a family member) for 2 years and you’ll be back on your feet after that. It really does call for drastic measures. You may find, like many people do, that you are a stronger person after all is said and done.

  25. We don’t know enough of the specifics. That being said, I agree with one of the earlier posters that a bankruptcy to discharge the credit card debt might be in order. Keep paying the mortgage.

    What’s the worst that happens? Your credit rating is shot? For what, seven years? How many years would it take you to pay off the 80k in CC debt. Even if your credit rating goes to the floor, if you have a fixed rate mortgage, it’s not like that rate will change.

    There’s no shame in it. You ran into a rough patch, you did what you had to do, you’re working hard now, you’re trying to do the right thing, but it might just be too much debt. Businesses declare bankruptcy all the time, discharge their debts, and then they keep on doing business the next day.

    Your mortgage lender gave you a loan, and along with that loan was the agreement that if you didn’t pay them back, they would take the house. So pay them back. On the other hand, the credit card lender banks gave you unsecured loans, and they priced the credit according to the higher risk of default. Guess what?–sometimes defaults will happen.

    Do the best you can for your family, but run your family like a business, not as a slave to some moral principle that banks pressure individuals to adhere to when businesses don’t. If you can pay back the debt comfortably, do it. If not, talk to a good bankruptcy attorney or counselor–DISCLAIMER–I have NO experience with this whatsoever.

    But for Heaven’s sake, if you are going to pay off the debt, don’t do the “debt snowball.” Even the people who subscribe to that will admit that it sacrifices money (interest saved) for a psychological boost. Maybe it’s great for the undisciplined spendthrift. You weren’t undisciplined, your husband was just without work. So pay off the highest interest first, if that’s the route you choose to take. Sheesh.

    Best wishes for you, Laura, honestly.

  26. In reference to the credit cards, an option is definitely to contact the credit card companies. Despite the bad rap that many debt collectors have, many of the major companies have hardship programs available and are willing to work with consumers who are proactive and express a willingness to pay the debt rather than avoiding them.

  27. In response to the anti-debt snowball people, my wife has personal experience with dealing with credit card companies and their “finance charges” interest.

    We had $20 on one credit card and forgot to pay it over a year and a half. We ended up owing over $300 due to finance charges and interest. She called them up and told them she forgot and had all the finance charges and interest dropped.

    So I think if you work with each individual credit card company they would drop the interest and finance charges… dunno if it would work with over $80,000 in debt, but it worked with our $20.

    In this way, doing the debt snowball would be most logical way of getting rid of one creditor at a time.

  28. Get some professional advice before you write another check to the credit-card companies.

    I suspect your best option involves making the card companies unhappy and keeping your house, but it depends on a lot of other information we don’t have.

  29. I can’t believe not one person mentioned contacting a certified, not for profit, credit counseling agency. I realize most people are down on the fact that they charge a fee, but I can personally tell you that there are great benefits also. We worked with one for 7 years to pay off a $250,000 medical bill, and related expenses. As soon as we signed the contract, they contacted all of our creditors, many stopped the interest accruing at that point, and ALL of the phone calls stopped. It was worth it for that alone! They negotiated with many of the account holders, and in the end we payed a little over $27,000 in total, and our credit report was as clean as a whistle! Many have a free consultation, give one a call and see what they could do for you!

  30. My wife and I were $70,000 in credit card debt four years ago. We worked with Money Management International (http://www.moneymanagement.org/) to consolidate our debt and reduce the interest – not the principal. We are now at 23,000. $1,440 is automatically withdrawn each month. Our credit rating has gone up and we were able to refinance our house to get a lower interest rate a few months ago. We no longer use credit cards and if we cannot afford we do not buy it. Don’t loose heart, be patient and be willing to hold a couple jobs. Things will eventually turn around. Use caution when selecting a debt management company, some are scams. Also, be careful considering taking a reduction in the principal since it will considered income by the IRS. Will you be able to pay the taxes, interest and penalties? The IRS can be pretty unforgiving, but you can work out payment plans.

  31. Dave always gives good advice and the snowball effect does indeed work. You should also attempt to negotiate your debt down as much as possible.

  32. Wow, I think there’s a lot more to go over here. I’ve recently gone through a similar situation with my parents. They were under water on their house, have roughly $25,000 in credit card debt, which might seem doable, except for their advancing age and health problems. End result? They’re doing a short sale on their house and have moved into an apartment. Check your states tax laws to see how a short sale or walking away would affect you. They now can pay down the credit card debt and sleep at night.

    Forget the emotional attachment to the house. It’s an object. It’s not your soul.

    I also agree with another poster about seeking counsel. That’s a lot of money to spend without getting some guidence.

    Also, talk to the credit card companies (after getting credit counseling). In my own experience from hospital bills, you can generally pull the “poor” card and they’ll reduce. My emergency surgery went from $32,000 to $10,000 just by me asking, and holding out on paying for a few months. My appendix will be payed off this November! Woot! Mainly, they just want to make sure they get something from you, even if it’s not as much as they’d like.

    My parents are so much happier and healthier without the constant struggle. Did they do this to themelves? Of course! Did they think they would be fine and work forever without there ever being a problem? Yep. Do they know better now? You bet.