I Might Have to Sell My House to Face Bankruptcy. – Rosemarie

“Dear Steve,

I have been out of work for over 18 months. I own apx 46,000 to credit card companies. I am still collecting unemployment but not sure when it will run out. I own a house with equity in it but cannot get a refinance or home equity loan because I am not working. My debt is building and I can no longer pay even the min, payments I was told by a lawyer that if I file for BK they will make me sell my house. I have to try a debt reduction company. My current credit score is around 740 and I am current on all of my bills including the credit cards.

Can you suggest a legitimate company that does debt reduction. I understand how the programs work and I know that my credit score will take a huge hit but I don’t see any other way out. Can you suggest something?

Rosemarie”

The Answer:

Dear Rosemarie,

To be honest, you will be eager bait for most debt reduction companies that will try to sell you some B.S. magic debt reduction program because they will recognize you are scared and have set certain limits on what you want to do, the house. They will promise you they can get you out of debt without selling your home but they will be lying to you.

Unless you find a job and replace your lost income, no debt program is going to work for you since your income will expire before the debt does.

Rosemarie, it sounds like you’ve got a valuable asset there, your home, and before this all comes tumbling down and you potentially lose the home you need to seriously consider selling it, take the equity, resolve your debts, and start over.

If you don’t take action the creditors will sue you for your delinquent debts and attempt to place liens against your home. Don’t let this situation roll over you, get in front of this, and sell.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

Big Hug!

I Might Have to Sell My House to Face Bankruptcy. Rosemarie unemployment home equity cant file bankruptcy ask the get out of debt expert
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  • Steve Rhode

    The cash in hand is a problem and even if you invested it in a new property and later went bankrupt then the transaction could be reversed to extract the cash.

    If you decide to settle the debt with the cash on hand that is a possibility but you can save yourself about $5,000 in fees to settle if you contact Damon Day and let him guide you down this narrow path.

  • Roetoz

    Hi Steve, I sold my house, or at least it is in legal review…now more questions…I have 2 choices I am trying to get an inexpensive 55+ coop, I can pay for it cash but I don’t know if I’ll pass their credit limits. I did get a job but I only make 15.00 an hour and with bonus and incentives may get 38K a year, not really enough to live on. If I can get it, should I purchase the coop and use the balance of money from the sale to pay off the debt or should I just invest the money and rent somewhere and hope to get a better paying job? I also received a call fro Debt Mediation Network who says they work with Legal Helpers, they say I can settle my 45k for 26,100…and that includes their fee. I would use the proceeds from the house to pay it. What is my best options now? Waiting patiently for your reply….

  • Rosemarie

    Steve
    I checked on line and houses comparable to mine are listed for 235,000 to 240,000, my mortgage balance is 108,000. I thought if drop my price to 220K so I can sell fast and come out with 210K after expenses I can pay off the mortgage and credit cards and even my car and be left with about 40K in cash. I would have to pay a years rent, about 12K up front and I would still have some cash for emergencies. I will still have to pay my car loan until the house is sold and maintain utilities. I can’t think of any thing else, do you have any other ideas?

    • http://GetOutOfDebt.org Steve Rhode

      That sounds like a good plan given the circumstances.

      When interviewing real estate agents make sure you find one that has experience handling quick sales. Most will tell you they can get a higher price only to let it languish on the market. Right now, time is of the essence. You need to find an agent that will market it hard.

      Steve

      • Rosemarie

        I don’t know if I did the right thing. Chase put my account in pre-litigation and told me that if I didn’t pay something it would cost me thousands more to go to court. I promised to give them a little under $400 a month for the next three months, it will keep my account current and keep me out of the legal department. I will not be able to pay my mortgage but I think I can somehow make these payments and living expenses. I can cancel any of them with a 24 hour notice. I am still trying to hold onto the house to avoid losing an additional 20K to 25K. I keep getting job interviews which keep my hopes up but than nothing happens and the cycle starts all over again. Right now I am trying to get 2 or 3 part time jobs to increase my income. If I cancel the payment and I go to court I am afraid that I won’t be able to get a job when employers check my credit history. I seem to be in a catch 22 situation. Do you think I did the right thing?

      • Roetoz

        Hi Steve, I sold my house, or at least it is in legal review…now more questions…I have 2 choices I am trying to get an inexpensive 55+ coop, I can pay for it cash but I don’t know if I’ll pass their credit limits. I did get a job but I only make 15.00 an hour and with bonus and incentives may get 38K a year, not really enough to live on. If I can get it, should I purchase the coop and use the balance of money from the sale to pay off the debt or should I just invest the money and rent somewhere and hope to get a better paying job? I also received a call fro Debt Mediation Network who says they work with Legal Helpers, they say I can settle my 45k for 26,100…and that includes their fee. I would use the proceeds from the house to pay it. What is my best options now? Waiting patiently for your reply….

      • http://GetOutOfDebt.org Steve Rhode

        The cash in hand is a problem and even if you invested it in a new property and later went bankrupt then the transaction could be reversed to extract the cash.

        If you decide to settle the debt with the cash on hand that is a possibility but you can save yourself about $5,000 in fees to settle if you contact Damon Day and let him guide you down this narrow path.

  • roe

    Steve,
    I was just reading about homestead exemptions under the federal bk rules, I see the adjusted amount as 146,450. Can you explain to me what that means?

    Rosemarie

    • http://GetOutOfDebt.org Steve Rhode

      Go talk to a local bankruptcy lawyer and you will get a specific legal opinion about the exemptions and your situation.

      Steve

      • Rosemarie

        Hi Steve, It’s been three months since I last wrote to you. I cannot file a chapter 7 bankruptcy because I have too much equity in my house and I can’t file chapter 13 because I don’t have a steady income. I did get a promise of a job, but after signing the offer letter I was told that the company was not filling that position so I am still without income. My debt is now over 50K, my car loan is in hardship but starting Sept 1st I am back to regular payments. One CC company is letting me pay 100.00 a month interest free for 3 months but that ends next month. The others I have given a few hundred dollars to just to keep them from reporting me to the credit reporting agencies. I have no choice but to put my house up for sale and and try to sell it quickly by taking a loss on it. I paid 240.00 a year and a half ago and the units are selling for the same amount now but if I sell for 200K I can pay off my mortgage and all of my debt and still have enough to pay a years worth of rent (I won’t be able to get a lease without a job) and have about 20K left to help if an emergency comes up. I can than get a lower paying job since I won’t have all the monthly expenses and try to get back on my feet again My question is if I stop paying the credit card companies completely and stop taking their calls (they call me every day) what happens? If they sue me and I haven’t sold the house yet can they force me to sell for a lot less jut to pay off creditors? Should I continue to pay my mortgage (which is current right now) or use what money I do have to live on? My unemployment ends in 6 weeks and there are no more extensions so I will have no income. I told my creditors to put a lien on my house and when I sell they can get their money it but they said they can’t do that unless they sue me. What do I have to do to get them to sue.

      • http://GetOutOfDebt.org Steve Rhode

        Sorry to hear about the offer.

        Right now any cash you have in the bank is precious. You should stop making all your payments if there is no expectation you can start making an income soon. You’ll need to spend that remaining cash very carefully and use it only for the necessities to help you live until you find a job.

        But even if you sell the property, without any income you are going to be stuck for a place to live without income.

        The credit card companies can’t force you to sell your property so don’t worry about that. The primary focus now has to be income replacement with unemployment ending in six weeks.

        Even if you stop making your mortgage payments right now, it will take months, or longer, for the lender to foreclose on you. In the mean time you can live in the property for free.

        How much equity do you have in the property?

        Steve

    • http://Website Tom

      Rosemarie, Don’t know what state you’re in, but there’s a choice in selecting either the federal OR the state exemption schedule. Sometimes the state schedule is better; in other cases the federal is better. Most of this info you can find online or you can consult a text like one of Nolo’s – most libraries have these in their reference section, but they also inexpensive to purchase.

  • http://debtbytes.consumerrecoverynetwork.com/ Michael

    Rosemarie,

    When calling your creditors and sharing your hardship you may find that they say no to any reduction and then lower your available credit to what you owe.
    No big deal if you are not going to be making additional charges, but it will further impact the credit utilization part of your score.

    If you are certain that you will be unable to continue to make timely payments then there is really no harm in your effort to get them to reduce the minimum payment, but you may hit a brick wall in your effort initially.

    If you are denied a workable payment plan and ultimately you do miss a payment, call back in a couple of weeks and you will likely find that they will be able to offer 6/12 month hardship payment plans or balance liquidation plans (BLP) where they amortize your balance over 60 months at a fairly low interest rate.

    Not all creditors offer BLP’s and the payment reductions and lengths of hardship plans can vary.

    Best wishes for your personal financial turnaround!
    .-= Michael´s last blog ..Debt Settlement in Michigan =-.

  • roe

    That’s how I got in this mess in the first place, I’ll never do that again. I am going to call all of the credit card companies and see if they will at least stop the interest from accumulating and give me a smaller payment each month. I’ll let you know what happens. Thank you for your help

    Rosemarie

    • http://GetOutOfDebt.org Steve Rhode

      Roe,

      Let me know what they say.

      Steve

    • http://Website Tom

      @Rosemarie, you can call the credit card companies’ customer service, but that’s often a waste of time. I recommend you write letters to the CEO or executive responsible for credit card services/consumer lending at each bank with whom you have an account. Tell them your situation,how you’ve been a good customer and want to remain so, why you cannot afford the payments as is, tell them what you want and how it will benefit them. You should get response letters/phone calls. You should be mentally prepared to just quit paying if necessary, even though it will harm your credit rating. Depending on the bank, they may write it off and sell to debt collection company, or may try to sue you. If you’re sued (and served), then you can still settle, or you can file a chapter. I would get a second opinion from another bankruptcy attorney on keeping your house. Depending on your state and exemption schedule, the BK court will allow you to keep your house if the equity is exempt, and you’re current with your mortgage lender.
      There may come a time, when you will need to make a difficult choice and your credit will suffer. However, once that happens, you may feel liberated because creditors can no longer threaten you with a negative report. Collectors almost always use that threat as leverage. Once you no longer care, it no longer has its intended effect. Sometimes doing nothing, i.e. not paying those bills, is much more preferable than filing BK. If, and when, you stop paying, just don’t answer calls from collection agents. Do not talk with them unless it’s only to tell them to stop calling. Do not give them any truthful info at all, especially where you live. Good luck!

  • roe

    Thank you for your reply. I am still holding hope that I get a job soon and can get back on track. Since I am not late on any payments I figure I have a month or two yet to find an income, once I do that I’ll have to reassess everything and try to get a second mortgage or refinance otherwise I can sell at that time.

    • http://GetOutOfDebt.org Steve Rhode

      Roe,

      Just make sure you do not use cards to pay for day-to-day expenses you can pay in cash or to pay other cards. If you do that, in reality, you are already way behind.

      Steve

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