When I was in the Marines, I was young and dumb. I bought a car and went to this place called Freedom Furniture and financed a stereo system and computer. It was only about $1500 back then but now because of the interest it's over $11,000. They finally caught up with me about 2 years ago and all I can afford to pay them is $110 a month which only really covers the interest, maybe about $5 towards the principle. Should I just stop the payments? What would they do? I'm a full time student now and really can't go on paying them like this. What should I do??
Well at least you learned from your decision. In any case you have two choices:
1) make the payments and cut out other stuff in your life/get a job (maybe this means eating more raman, etc.)
2) default on the loan and go into bankruptcy. This is a real hassle and if a judge determines that you really do have the money to pay them, or could get it fairly easily, you will have to pay it anyway. In all likelyhood the judge will make you pay 30%-60% of it (although that is a very rough estimate, it will depend on your personal situation)
The other downside to #2 is that you won't be able to buy a house for about half a decade, and then you will probably have to get a higher interest rate on it than otherwise.
That said I would suggest that you attempt a third option, which is to go to the company and tell them that you can't pay all of that, and ask them to forgive some of your debt. This will lower your credit score but it isn't as bad as bankruptcy (I think) and you don't have to deal with the hassles of bankruptcy.
Hope that helps.
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