How 4 Families Conquered Their Credit Problems

How these savings-challenged families freed up cash—and how you can, too.

Erasing debt on notepad.

Kandy and Russell Hildebrandt

New Richmond, Wisc.

Debt: $123,000

Russell Hildebrandt, 50, made a promise to his wife before the birth of their twin daughters. "I told her if she wanted to be a stay-at-home mother, I would do whatever it took to make that possible," he said. The twins are now 17, and he's honored that promise, even though it has meant working nights, and sometimes sleeping in his car to avoid commuting, to pay off $123,000 in personal-loan and credit card debt.

"Our mistake was that we never cut back on expenses or replaced my income after I left my job," says Kandy, 46. Russell's income, then $71,000, wasn't enough to compensate, and one day in 2004, Kandy was shocked to realize that the monthly finance charges alone on their 11 cards added up to $1,500 a month.

To come up with the $2,300 payment they calculated they would need to get out from under in five years, Kandy offered to get a job—three times. But "I'd made a promise," says Russell. "I was going to get us out of this debt or die trying."

Already working 60 hours a week as a manager at an environmental testing firm in Minneapolis, 50 miles away, he added a night job as a janitor at a grocery store. By working midnight to 4:30 a.m., he added $800 a month to their income. "During the day, he was a professional. Nobody knew that at night he mopped floors and scrubbed toilets," Kandy says. Sometimes he'd doze off at work; his coworkers were occasionally startled when Russell's head loudly hit the desk. To save on gas the days he didn't work the second job, he would sometimes stay in Minneapolis and sleep in his car.

At home, Kandy stopped buying clothes and cut out fresh foods. Three times a week, she tapped a vast store of defective dehydrated potatoes available to a relative ("our manna from heaven"), originally meant for a restaurant. "I'd use it in soups, casseroles, mixed with eggs for breakfast,"she says.

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Halfway to home plate, fate threw a curveball: Kandy became pregnant and, in 2006, son Joey was born. "You'd think a baby's the last thing you'd need when you're paying off debt, but he was exactly what our family needed," she says. "He brought a lot of joy and humor into the house." Driving back from work one day, Russell spotted a for-sale sign on a house almost three times the size of their rented townhome with a lovely garden. Although Kandy had her doubts, they went to an open house and met the realtor.

A few months later, the realtor called with the offer of a rent-to-own agreement. The family would pay about $1,000 a month—$200 more than their current rent—but 20 percent of it would go into escrow for a down payment. In January 2009, just a few months before making their final credit-card payment, they moved into the house, which they now own. "One great thing about paying off debt instead of declaring bankruptcy is that it let us save our credit rating," says Kandy. "So we could buy the house with a loan at 5 percent."

Another benefit: They've permanently changed their spending habits and, with Russell now earning $81,000 at his one main job and contributing to a 401(k) plan, the family's financial future looks brighter. Still, Kandy keeps an unopened box of dehydrated potatoes tucked away "to remind us where we've been."

Molly Stillman

Hillsborough, N.C.

Debt: $36,000 

By December 2010, Molly Buckley was sure she'd found The One. She'd been dating her friend and co-worker, John Stillman, for about six months, and knew he felt the same. But she had a terrible secret. "I had this enormous credit card debt I was paying off, and I didn't want to tell him," she says. "Some guys would go running."

Finally, she found the nerve to come clean. During college, she'd charged $36,000. Although she'd spent the past two and half years chipping the balance down to $12,598, she struggled to make payments.

John didn't run. "She made bad decisions and bounced back from them," he says. "That was one of the things that made me realize she was the marrying type."