When Elizabeth and her husband filed for Chapter 13 bankruptcy, they thought they were making a smart move to keep their growing debts under control. But fast forward a few months and they have serious reservations. Elizabeth explained during a conversation with Dave Ramsey, “We panicked and did some stupid things,” and boy, has that panic come at a cost: $91,000 in debt and two car payments they can barely meet.
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It all started when Elizabeth lost her job, leaving the couple to juggle everything on one income. In an effort to stay afloat, they made what she describes as “some stupid decisions” to dig deeper into debt instead of taking a step back and assessing the situation. They filed for Chapter 13 bankruptcy, which, in their words, “seemed like the only way out” at the time. But as Elizabeth shared, they soon realized that the payment plan associated with Chapter 13 was squeezing their monthly income, even after she got a better job.
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They’re working hard to turn things around—they’re holding yard sales and selling everything they can—but there’s one big obstacle they can’t shake: that Chapter 13 payment. It has become an unwanted guest at the table, consuming their income and standing in the way of their debt-free dreams.
“You have a hornet’s nest in the closet”
Then Elizabeth called the Ramsey Show for adviceDave Ramsey painted quite a picture for her. “Pretend you took a baseball bat and hit a wasp nest, threw the wasp nest into a closet and closed the door,” he said. If they file for bankruptcy, you’re “getting ready to open the door” to all the creditors they owe money to: credit cards, personal loans, and those pesky car payments.
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In other words, those creditors will not be satisfied. They will come after the couple “with everything they have.” And Elizabeth knew: “O Lord,” she replied, and she understood at once the gravity of what that meant. Filing for Chapter 13 might have put their creditors on pause, but dismissing the case would loosen the swarm and they needed a solid plan to deal with the fallout.
“A few stupid decisions” and $91,000 in debt
Let’s break down 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, they have $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 dump 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, these debts feel like an anchor that they just can’t pull off.
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The path forward: opening 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 of them if you want 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 saved from their yard sale and ran in gazelle mode. They have enough to cover the difference and pay off the cars.
According to Dave, the personal loans will be the most difficult to deal with because these 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 some breathing room to set up payment plans. But once the Bankruptcy protection has disappearedthe couple must keep things under control and negotiate with creditors to keep the swarm at bay.
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Lesson learned
Looking back, Elizabeth and her husband wished they hadn’t panicked and gone bankrupt. Now that they have a clearer head and sound advice from Dave, they are ready get out of debt the old fashioned way – through hard work, sacrifice and patience. But one thing is certain: they won’t forget Dave’s warning. They are ready for whatever flies out when they open the door.
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This article ‘You threw a hornet’s nest in the closet’ – couple buried in $91,000 debts turn to Dave Ramsey after panic, making their situation worse originally appeared on Benzinga.com
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