# paying off debt - what's fair?



## golfergirl (Dec 8, 2010)

H and I are disagreeing. Due to health issues we racked up our credit cards and now have opportunity to pay them off. We have $35,000 debt in credit cards and overdraft. I'm confident we won't rack them up again because it was due to situation, no wreckless spending. We have $50,000 coming to us. We have 2 vehicles with approx $13,000 owing on each. We call them 'his' and 'mine' but we both pay for them, it's just what each drives more. I offered we pay his initially because his rate is higher, but he wants to keep it as a loan in his name to rebuild his credit from past. We both pay it monthly as well as we both pay 'my' vehicle. I want to pay off a vehicle and split the remaining money. H says it's not fair, he wants to split the $15,000 remaining from the debt and if I choose to use my $7500 to put towards 'my' vehicle, that's my choice. I don't think that's fair. 
I think as a couple paying off as much as we can makes more sense.
_Posted via Mobile Device_


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## dojo (Jul 4, 2011)

Paying off debt is a good idea, but you can also save the money into an account that would give you a better interest. You need to think about this with care. 

PERSONALLY: I would pay the debt. And I would make sure I NEVER GET THERE AGAIN. I have car payments for the next 8 months. It's been a 4 year contract. It's been hell and I hate myself for doing this, when I could have gotten a second hand vehicle and stay out of the debt. 

My plan now is to pay the money (not all at once, since I'd have to pay more in commissions), but get done with it in May. And I WILL NEVER EVER AGAIN USE MONEY THAT'S NOT MINE.

If you've maxed up your cards, I assume you also pay a lot in interest. I don't have overdraft on my cards and we have a different system in my country, but I'd think it would be good to solve the debt that's causing MORE INTEREST to be paid by you. 

It would also be a great idea to put some of the money in a savings account or something like this. So that you won't be left with nothing when you need to solve another 'accident'.


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## michzz (Jun 6, 2008)

golfergirl said:


> H We have $35,000 debt in credit cards and overdraft. I'm confident we won't rack them up again because it was due to situation, no wreckless spending. We have $50,000 coming to us.


Pay the taxes on the money you are receiving first (fed/state).

Then pay off as much of the credit card debt as possible. 

Your auto loans you already pay on a regular basis, keep up with payments.

Do not think of this $50K as a way to finally have some play money.

Your monthly outflow will drop a lot from paying off the credit card debt.

Use that wisely.


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## Halien (Feb 20, 2011)

First, I'd strongly recommend that you investigate the tax implications of the money. Many situations put you into a heavier tax burden, like a gift tax. 

The health situation is a good example of why many financial advisors recommend keeping up to three months salary in reserve, but in a fund that can't be easily spent. I keep my reserve in money market and regular savings. The reason is that these special situations tend to pop up every few years. 

So, given that, I'd recommend getting rid of the credit card, then any money over the reserve fund amount could be put into the higher interest loan. Sure, the reserve fund doesn't factor into the credit rating, but it keeps you out of a future credit card scenario.

I work in the automotive industry in new product development. What I personally find relief in is that quality and design improvements allow cars to live for many more miles than in the past, with greater maintenance intervals. In the future, maybe the goal can be to avoid car loans altogether by buying used cars with the intent of keeping them for longer.


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## magnoliagal (Mar 30, 2011)

The only taxes I'm aware of that you'd have to pay would be federal and state. This isn't a gift tax it sounds like an inheritance and that usually has a huge exclusion before estate taxes kick in. Don't know the number offhand but it's well in excess of $50K.

If that were me ALL the money would go towards debt.


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## Halien (Feb 20, 2011)

magnoliagal said:


> The only taxes I'm aware of that you'd have to pay would be federal and state. This isn't a gift tax it sounds like an inheritance and that usually has a huge exclusion before estate taxes kick in. Don't know the number offhand but it's well in excess of $50K.
> 
> If that were me ALL the money would go towards debt.


Sorry, didn't know it was an inheritance. Profit-sharing, bonuses and even relocation allowances all get hit with gift taxes, so I just suggested exploring tax ramifications.


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## golfergirl (Dec 8, 2010)

_Posted via Mobile Device_

I threw out some numbers taking into account the taxes etc. See debt was made when H got sick and was off for a year and was 3 days short of company benefits. I return to work in a few months. Paying everything off ups our cash by $1000 a month and my returning from mat leave another $800. We are for sure getting the 3 months salary put away. He is upset because even though we both pay both vehicles payments, we are paying off 'mine'.
I would rather elimate as much debt as possible and save the nest egg. He's talking sauna, trip, new laptop, so not paying 'my car' would just be play money for him. All these things he wants could be saved for in a matter of months with increased cash flow rather than p!ssed away.


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## Homemaker_Numero_Uno (Jan 18, 2011)

With your net, I would pay off the vehicles to the point where you are in a positive position on them with regard to their blue book/resale value, and then refi them. 

Your medical bills I would put on a payment plan with the creditors. These are usually very low or no interest with many years you can pay off. 

Credit card debt, pay it off but if you cannot do it entirely and have leftover (6 months basic expenses in savings) then pay off only what you can with still having that amount of money left over, and move it to a lower paying interest rate...using the collateral of the 6 months savings (put them in 6-month or 1-year CDs) to do that...i.e. you can get a credit union credit card and buy the CD's at the same credit union and use the CD's as collateral for the credit card line. 

With the medical bills, don't think that because it was a 1-time deal so far as you are concerned, that it will be so far as a bank is concerned or your credit score. Some places will see medical bills and there are 'smart' programs now that factor that into credit score or even insurance rates. Maybe it will take some time for that to catch up with you, if at all.

Definitely enroll in credit score monitoring/identity protection and keep an eye on your credit score. 

Woowee, sorry about the health issues but congrats on your windfall. Oh, with the health care bills, depending on your income and your debt and so forth, it's possible to apply for financial aid, some places are very generous...and one benefit of being on a no-interest or very low interest payment plan is that if your situation changes for the worse, you can apply to have that loan forgiven, outside of something as extreme as bankruptcy. I plan to apply to have my ER bills for anaphylaxis forgiven after I have left marriage and have documentation to submit to the hospital. (The misdiagnosed anaphylaxis so I got charged for all kinds of rule outs including testing for many different kinds of illegal drugs, pregnancy, thyroid condition, even a CT scan, and a psych eval.) For what they did, I think it was cheap, like maybe 5K instead of the 20K I'd been worried about...anyway, I'm alive to pay the bill (or not). So being poor is not so troubling.


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## magnoliagal (Mar 30, 2011)

Halien said:


> Sorry, didn't know it was an inheritance. Profit-sharing, bonuses and even relocation allowances all get hit with gift taxes, so I just suggested exploring tax ramifications.


Eh what do I know I haven't done a gift tax return in 8 years. I'm a little rusty on my tax law. I'm not sure it was an inheritance or not I assumed.

Bonuses and relocation are gifts now? I thought those just got reported as ordinary income. From memory gifts are when an individual gifts money while they are still alive to reduce their estate before they die to avoid hefty estate taxes.

But definately they need to consider taxes because I'm sure Uncle Sam is going to want his share. lol


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## mikey11 (May 31, 2011)

if i was in your position i would use the money 100% to pay off any debts you can....why pay more intrest than you have to?....this is assuming you have "comfortable savings" and good credit....if you get into any trouble in the near future you can always take a loan or cash advance a card....no point in holding onto this money in my opinion....


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## Halien (Feb 20, 2011)

magnoliagal said:


> Eh what do I know I haven't done a gift tax return in 8 years. I'm a little rusty on my tax law. I'm not sure it was an inheritance or not I assumed.
> 
> Bonuses and relocation are gifts now? I thought those just got reported as ordinary income. From memory gifts are when an individual gifts money while they are still alive to reduce their estate before they die to avoid hefty estate taxes.
> 
> But definately they need to consider taxes because I'm sure Uncle Sam is going to want his share. lol


Without taking this off thread, there is an increasing tendancy in the business world to get bonuses. I saw recently that about 35% of similar business like mine give them. Everyone, from top to bottom, of my company gets annual bonuses when we meet annual goals. Uncle Sam slaps an extra ten percent tax on these, and we in the trenches call them gift taxes. When I relocate, it costs about $60k, so my company taxes it up an extra ten percent over normal withholding because so many people were getting stung at tax time before this.


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## Runs like Dog (Feb 25, 2011)

Yes imputed income is awesome. When my insurance premiums go up 15% year over year, the delta of my employers share of that is counted as imputed income to me.


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## moonangel (Jan 19, 2011)

I think it's okay to pay of the cc then split the money and do whatever you want with it. It's pointless to argue about something he refuses to do. Take your half and put it toward your car that way you'll have that one paid off first and then just his to worry about.

Nothing's wrong with this way. You end up losing more money to the car that owes more interest but so what. At least you are slowly getting them paid off. And as long as you don't go into debt like that again, you should be fine. Don't let debt ruin something that isn't so bad....like losing a business or more medical bills in the near future.


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## norajane (Feb 7, 2012)

> I would rather elimate as much debt as possible and save the nest egg. He's talking sauna, trip, new laptop, so not paying 'my car' would just be play money for him. All these things he wants could be saved for in a matter of months with increased cash flow rather than p!ssed away.


So, you two are not approaching this as a team, one for all and all for one. You don't see eye to eye on managing money - how to save and what to spend it on. And he seems to be more profligate than you are - wanting to spend on toys when you are throwing money away on debt interest every month. That's a quick way to get back into debt before you've even climbed all the way out.

Who taught him about money? Are his parents the types that spend too much? 

The only thing I can suggest is to speak to a financial planner or tax lawyer to help you get through to him that maintaining debt in order to buy saunas is a bad plan. 

The rule is:

Pay your bills
Pay yourself - allocate a specific amount of money for savings every month and stick to it...this is your emergency fund and a long-term fund (like if you want to buy a house some day)
Pay your highest interest debts off first
Pay other debts off
Put money into a 401(k) or other retirement plan
Save money for items you want but don't need - sauna, laptop - don't buy this stuff on credit!

By these rules, whatever you and your H don't put into paying off your credit card debt and car loans should go into beefing up your SAVINGS. If he can't see that, he is being short-sighted. I can't understand that since you two just went through a very CLEAR example of what happens if you don't have enough money saved up to cover unexpected expenses. What happens if he gets his sauna and another medical emergency comes along next month where YOU end up in the hospital and can't go back to work?

You two aren't even on your feet yet, and he's ready to spend it all! Can you at least ask him to WAIT 6 months or so to start spending money on saunas and laptops? Maybe that will have given you a chance to save some money and make sure things go right at your job.

And remind him that it's not "unfair" to pay off "your" car or whatever. You are married. He may think of the money as "his" or "yours" but the truth is you are BOTH responsible for your debts, legally, thus regardless of who spends it and on what, it is ultimately on BOTH of you.


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## SadSamIAm (Oct 29, 2010)

I think you should talk this out with your husband and come up with some kind of compromise that you can both agree to. Going back to your husband saying a bunch of strangers on the internet agree with you isn't going to be received too well.

It also kind of depends on how you have been living. If you have been scraping by and not able to spend anything, then maybe it is time to treat each other a bit. 

I vote for using most of the money for paying off debt. Find out what your husband wants (laptop, etc.) and try to come to an agreement that you can both live with in regards to buying you each something.

But the big message is discuss this respectfully with your husband. Take his opinion into account as well.


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## sirdano (Dec 30, 2011)

Not sure if I miss something but did you stop paying on the credit cards?
If yes you can settle for 10% on the money owed. We had to do this since I had to move, house would not sell(finially short saled it), cut in pay, wife lost her job. So we had to stop paying on the CC for a while until we could get some money saved up to close them out.
Don't ever use a "we can help settle your debt company" You can do the samething yourself for free.


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