The Insane Story of a Family Who Paid Off $45K of Debt in Just 10 Months

Should i declare bankruptcy

Tabitha Philen was at the end of her rope.

Years of poor spending decisions had led her and her husband into a deep hole of overwhelming debt — one they thought they’d never escape.

The tipping point came when they one day found themselves unable to afford gas or groceries.

They saw a bankruptcy commercial on TV, and imagined it’d be their saving grace. But they soon realized it was the biggest mistake of their lives.

Keep reading for the incredible story of how this family left bankruptcy, negotiated their debt down by 40% and paid off $45,000… in less than a year.

Digging a $175,000 Hole

“My parents never taught us anything about personal finance,” Philen says. “The only thing I knew about finance was that my mother would occasionally write bad checks, and tell me not to tell my dad.”

When she left for college, not only did she take out student loans, she also maxed out eight different credit cards.

Her husband’s situation wasn’t much better.

“Neither one of us had been trained on how to do well financially,” she says. “We thought debt was the American way.”

They eventually got married and moved into a townhouse in Mobile, Alabama. Philen soon became pregnant with their first child. Six months later, disaster struck: He was laid off, and her income was cut in half.

“You’d think that would be our wake-up call,” she says, “but actually we thought maybe the answer was buying a house.”

Now, on top of $75,000 of debt — divided equally between a personal line of credit, credit card debt and student loans — they had a $100,000 mortgage.

At 29 and 31, with a baby on the way, they were $175,000 in debt.

Still, they didn’t realize they needed to change their ways.

“We were just living off credit cards,” she says. “We were using them to pay for anything and everything.”

On a typical date night, they’d go out to dinner and then each spend $50 at the mall, all funded by plastic.

Their much-needed wake-up call didn’t come for three years — when they could no longer afford gas or groceries with their maxed-out credit cards.

“We stripped everything,” she says.

“We didn’t have cable, we got rid of our pets, we didn’t have cell phones. We had nothing variable in our budget at all. We were relying on people at church who would occasionally put $100 in our mailbox to help us buy groceries.”

Philen sold The Pampered Chef from home, and her husband worked as the assistant band director at a local high school.

Together, they brought home about $3,000 a month for their family of four — too much to qualify for government assistance, but not enough to pay their bills.

“The amount of debt was sucking up any income that we made, she says. “It was taking everything.

Only making the minimum payments on their bills, they continued to fall “further and further behind.”

“It just didn’t seem like there was an answer,” she says.

The Truth About Bankruptcy

Then they started to notice commercials advertising bankruptcy.

“[They] made bankruptcy sound like a fresh start, which is a complete lie, but we took the bait,” she says. 

On a “very cold” December day, with a newborn baby in tow, they signed the papers and declared Chapter 13.

Their monthly bills now amounted to $950 to the trustee — an increase from pre-bankruptcy, since now they were paying more than the minimum — plus $815 for their mortgage, because they’d left their house out of the filing.

They quickly realized bankruptcy wasn’t the “easy way out” they’d been promised.  

“Bankruptcy was so opposite of what we wanted to be,” she says. “It changes who you are. You can’t be generous; you can’t do simple things that you used to do.”

For the Philens, their biggest issues were restrictions that didn’t allow you to give to charity or have a savings account.

Three years later, they received a $7,000 tax refund — which Philen saw as their way out.  

She “just couldn’t stand” the thought of being confined by bankruptcy for another four years, so she turned to her husband and asked:

“What if we just bailed out of bankruptcy — what if we just left?”

And that’s what they did.

To say the least, it was an unconventional decision. Although their attorney tried to have their bankruptcy reinstated against their will, they stood their ground.  

Because they left the bankruptcy early, they had to pay back nearly all of the debt they’d entered with.

Translation? Those $900 payments they’d made every month for three years essentially vanished into thin air.

Negotiating Their Debt Down by 40%

As soon as the Philens left bankruptcy, creditors began calling and demanding their money… now.

So Philen read everything she could about debt, and soon discovered these collections agencies had only paid 10-30 cents for each dollar of her debt.

Armed with this knowledge, she began to negotiate.

“Whenever they called, I acted like I knew more than I did,” she says. “I told them, ‘I know you didn’t pay full price for this debt, and I’m not going to pay you full price either.’”

Leveraging her $7,000 tax refund as a down payment, she convinced the creditors to allow her a 10-month payment plan…

And also reduce the amount she owed by 40%.

Paying Off $38,000 in 10 Months

Thanks to the tax refund and Philen’s negotiating skills, they now owed $38,000 — instead of $75,000 — and had 10 months to pay it off.

“We looked around at what we had and we sold it,” she says. “And then we thought about talent.”

Her husband was a musician, so he called “every person he knew to see if they needed a live musician at their event.” He also taught private lessons after school.

Philen used her cooking skills, selling gourmet apples and cinnamon rolls out of the house. She also researched photography on the internet and started taking senior portraits.  

“We did so much,” she says. “It was anything and everything we could do.”

“Child care, washing people’s laundry… we were hustling all the time. I wrote my first book for Kindle, and put it on Amazon.”

She did all this while raising an infant and a 2-year-old, and homeschooling her 8- and 5-year-olds.

“I would teach the kids in the morning,” she says. “In the afternoon I’d tell them, ‘OK, this is mommy’s P&Q time.’ Peace and quiet time. They had to be in their beds with their feet up, reading a book.”

“I didn’t sleep,” she admits with a laugh. “I did not sleep. Literally, I’d be up until 2 or 3 a.m.”

A Truly Fresh Start and Perspective

Somehow, this intense experience didn’t tear their family apart — it actually made them stronger.  

“It really taught us the value of family, and of marriage, because things didn’t mean as much to us anymore,” she says.

Now, instead of going deeper into debt, the couple’s date nights consist of “cuddling up on the couch” with a DVD.

“It just really changed our priorities,” she says. “It’s no longer important to try to keep up with people — we’re content with what we have.”

Want to read more about Philen’s inspiring journey? Curious how you can negotiate with credit card companies?

Click here to visit her blog Meet Penny.

Susan Shain is a freelance writer and digital nomad. She covers travel, food and personal finance (basically, how to save money so you can travel more and eat more). Visit her blog at, or say hi on Twitter @susan_shain.