Latest Posts
Home > Ask The Get Out of Debt Experts > My Wife is Divorcing Me. – Mark

My Wife is Divorcing Me. – Mark

“Dear Steve,

Wife of 25 years is divorcing me (We’ve been together since high school – the only love in my life). Home primary mortgage $225,930 Secondary $63,790 both with GMAC. Value of home est. is $190,000. Offerred to settle secondary for $12,500 and refi the primary at a lower interest rate (currently 5 3/8 30 yr fixed). GMAC refused the secondary and wants my wife to sign a quitclaim deed before they even consider a refi. That seems moot since they rejected the secondary part of the offer. Own vacation condo in northern MI and this is going better. Condo primary $142,450 with PNC who has agreed to short sale. Secondary with Citibank was $9600 but they settled for $3000 so this is closed.

I make about $100,000. Two credit cards Citibank at $11,500 zero interest for a few more months and Discover at about $7000. I have never missed or been late on a payment in my life (47 years old). All bills current. My Roth IRA worth 28,000, My IRA = $1 1,300, Wifes Roth $23,200 (but she took out $15,000 to pay Citibank $3000 and is using the rest to live in her new home she rents). My 401K = $71,600 but I have a $20,750 loan on it. Car loan 1 has a balance of $8900. Car 2 has a $325/mo lease that ends in December.

With the impending divorce I won’t be able to continue this way. I need help with GMAC. I’m afraid to ruin my credit, but can’t pay them in the future – it would make sense to reduce the debt on my home and stay here for the kids (two teenage daughters) but GMAC is tough. I get a letter stating “we service your loan on behalf of an investor or group of investors that has not given us authority to modify your loan under the program requested”.

I’m an emotional wreck but have to deal with this. I would give up everything if my wife would just try to work things out but she is so focused. She is already depleating IRA money I had established for both of us for retirement and the kids college fund (Roths). I would be glad to offer more info or talk. I will take any help you would be willing to offer. My wife only works part time and will get about $900 in child support (50/50 split between us) and $1200 spousal support. Lots of other bills as well. I am so lost. I was making major progress in cutting our debt but the immediacy of liquidating for a divorce under the current economic conditions is too much to recover from. Thank you so much for any assistance you can provide.

Mark”

Don’t miss our free Get Out of Debt – “How To” Guide Series on a number of topics, for loads of practical advice, tips, and help to beat back debt. – Click Here

The Answer

Dear Mark,

I certainly can feel your pain in what you shared. At times like this it becomes very hard to continue a combined past life on a new separated future life.

Let’s begin by prioritizing things a bit.

When you look forward into your future, what is more important, living within your income and meeting your obligations or trying to make all of the past stuff work based on your new financial reality? Does that make sense?

Post your response in the comments below and I’ll reply. I’m willing to help you plot a course but first we need to figure out which direction we are headed.

Big Hug!

My Wife is Divorcing Me.   Mark
Get Out of Debt Guy – Twitter, G+, Facebook

If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

My Wife is Divorcing Me. - Mark by

Share This and Spread the Word

About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Steve Rhode

    Great tip Gerri. I had not thought of that one.

  • Gerri

    Mark,

    I, too, am really sorry to hear what you’re going though and the tough decisions you have to make. But Steve and Charles are both top experts in their fields, they care, and they can help you through this bad situation.

    There’s one thing I want to clarify from the above conversation. It sounds like GMAC is talking to you about refinancing your first mortgage under the Making Home Affordable Refinance Program (HARP). It’s a good program, and I’ve written about it in several places. But there are some very specific requirements for that program.

    I want to point out that you don’t necessarily have to go through your current lender to refinance under HARP, if that’s the program they are talking about with you. I am not sure what kind of benefit there would be if you do decide to use them to refi, but I’d also caution that you are trying to negotiate your second with them so it might be smart to get advice from another lender that does a lot of these loans to make sure you are getting straight answers. (Another lender might also help you understand whether you really do qualify for HARP or whether they are dangling a carrot in front of you to get you to stay current.)

    Hang in there.

    Gerri

  • Steve Rhode

    Mark,

    A lot of great people are here to help and car. Please keep us posted.

  • Teletuna

    Thank you guys!  I appreciate your assistance.
    Mark

  • Teletuna

    Thank you guys!  I appreciate your assistance.
    Mark

    • http://GetOutOfDebt.org Steve Rhode

      Mark,

      A lot of great people are here to help and car. Please keep us posted.

      • http://www.credit.com/blog/2011/01/misconceptions-may-keep-homeowners-from-getting-low-rate-refis/ Gerri

        Mark,

        I, too, am really sorry to hear what you’re going though and the tough decisions you have to make. But Steve and Charles are both top experts in their fields, they care, and they can help you through this bad situation.

        There’s one thing I want to clarify from the above conversation. It sounds like GMAC is talking to you about refinancing your first mortgage under the Making Home Affordable Refinance Program (HARP). It’s a good program, and I’ve written about it in several places. But there are some very specific requirements for that program.

        I want to point out that you don’t necessarily have to go through your current lender to refinance under HARP, if that’s the program they are talking about with you. I am not sure what kind of benefit there would be if you do decide to use them to refi, but I’d also caution that you are trying to negotiate your second with them so it might be smart to get advice from another lender that does a lot of these loans to make sure you are getting straight answers. (Another lender might also help you understand whether you really do qualify for HARP or whether they are dangling a carrot in front of you to get you to stay current.)

        Hang in there.

        Gerri

      • http://GetOutOfDebt.org Steve Rhode

        Great tip Gerri. I had not thought of that one.

  • Steve Rhode

    I hope Mark recognizes what totally awesome advice you just gave him. Spot on.

  • Charles Phelan

    Mark, I recommend you hold off on #4 on your list. There is an entire set of tactics to absorb before you take on the credit card settlement process, and announcing your intention in advance will get you nowhere and possibly backfire by getting the account routed sooner rather than later to third-party collections. The reality is that the condo settlement (while in current standing) was unusual, and Citi probably based that decision on a pattern of similar actions for vacation units in that hard-hit area. It’s a totally different story when it comes to credit cards and usually with second mortgages as well. With credit cards, you usually have to be at least 90 days late and headed toward charge-off at 180 days to get the best settlement available. It’s largely a mechanical system, and you won’t get them to deviate from it on the basis of financial difficulty due to a divorce.

    The lawsuit fear is something that 100% of settlement clients face, and of course there is always risk when you are in default on a debt obligation. But the reality is that lawsuits before the charge-off deadline are the exception rather than the rule, and can normally be avoided provided you have adequate resources to settle with as the opportunities develop. The worst-case scenario for any given account is that you work out a repayment agreement with altered terms. Given some income to work with, there is no reason to sit still for lawsuits.

    Also, I don’t want to leave the impression that I am saying you should absolutely do settlement no matter what. If you can soldier on and not fall behind anywhere as you transition through this process, that would alleviate any stress associated with falling credit score or collection hassles. However, my concern here is that you will deplete what resources you do have trying to stay current, so unless you can aggressively restructure your budget quickly, this approach carries its own risk. It also would be prudent to at least sit down with a BK attorney and chat through the situation. This is always a smart move even if you are determined to avoid filing bankruptcy, because it gives you a clear view of “Plan B” and therefore gives you more confidence while continuing to negotiate privately. And of course, you’re welcome to come by ZipDebt.com to learn more about how we approach this whole process.

  • Mark

    Charles, you are right about chapter 13. Bankruptcy is not the way for me, regardless of the emotional aspect of it. So to summarize my plan:1. I should continue paying on the condo as we wait for a short sale.2. Stop payments on my home HELOC and make another attempt to settle after about two months. 3. I will consult with another on the quitclaim deed for the home mortgage. If that doesn’t cause me further problems in the divorce I’ll attempt to finish up this current request with GMAC for the refi. If they refuse me again, I’ll stop payments and try in another 2 months.4. I will contact the two credit card companies and let them know my situation and attempt to settle with them as well. I was really hoping I could do all of this without being late on payments – that the financial numbers I provided the lenders coupled to the impending divorce would be enough to work things out. It worked with Citibank on the condo HELOC. Are some companies that much more flexible/inflexible than others? It seems that there would be some general business practice that most would follow under these circumstances. Maybe my wife is better at putting together the hardship information – she’s the one who worked the condo agreement. Maybe GMAC is just tougher to deal with.One concern I have with stopping payments is that I have a good job and make a nice income. I’m afraid they will come after me and legally make my life miserable (lawsuits, garnishment, etc.). Any comments on this?

  • Steve Rhode

    I just wanted to make sure he was not laboring under any misconceptions or assumptions like so many have.

  • Charles Phelan

    Good point, Steve. In Mark’s case though I’m sure he would be stuck with Ch. 13 just based on his gross annual income.

  • Charles Phelan

    Yes, I would continue to cooperate with the lender since they are working with you on the short sale. But if the unit does not sell quickly, it would definitely be appropriate to revisit the strategy on the first mortgage.

  • Charles Phelan

    The thing to understand about credit damage is that it only takes one hole to sink the ship. Default on a second mortgage alone will cause your score to take a drastic plunge, but if you were to opt to settle additional accounts like the credit cards, the incremental damage to your credit score would not be a significant factor. Also, it really should be the arithmetic that leads to your decision rather than a focus on credit. If bankruptcy will clear out more of the debt faster for less money out of your pocket, then that is the mathematically correct answer. That is almost always the case when Chapter 7 is available. Chapter 13 is another story, and under that version of BK you are required to pay back a percentage of the debt (determined by the court based on your actual income and IRS-allowed expenses), usually over a 5-year period. The major advantage with a private settlement strategy is that it’s not a public record matter like bankruptcy, and it gives you much more control over the process. Further, armed with sufficient resources, you can complete the project in 12 months or less rather than 3-5 years.
     
    To your question, yes, you would take the first and second mortgages as though you were dealing with two completely different lenders, continuing to pursue the mod on the first while positioning for a settlement on the second. However, if you are current on the first while pursuing a modification, the odds are very much against an approval. It’s generally the case that you need to be 1-2 months behind to be taken seriously on a loan mod request. The quit claim demand is really just a stall tactic by GMAC, and I don’t think it’s wise to proceed with that just yet. If you have not done so already, you should review any potential impact a quit claim deed might have on your pending divorce case. Also, I frankly don’t see why it’s necessary, and if you were also 1-2 payments behind on the first mortgage, you might get a different response on that subject. :-)

  • Steve Rhode

    I just want to correct one misconception. A bankruptcy may be the quickest way back on track. If you qualify for a Chapter 7 the debt will be discharged in months, retirement savings will be protected and the credit rebuilt within a couple of years. In fact it is stupid easy to rebuild the credit. See this article.

  • MB-in-MI

    One other question, with our vacation condo we did manage to settle the Citibank HELOC (and yes payments were current) and PNC has given us permission to short sell to resolve the primary mortgage.  Since PNC is working with us, is it appropriate to make my mortgage payment in full while the unit is for sale?  If we don’t sell it within a short period of time (Sept per my wife, March is my preference but that has not been hammered out in our divorce agreement yet) we’ll ultimately have to do a deed in lieu or foreclosure.

  • MB-in-MI

    Steve is right about having a fresh start.  If I am to eliminate some of the overhanging debt, this is the most appropriate time.  I have the largest debt burden right now, I have the hardship of divorce, and the economy has placed me among a huge group of Americans with similar issues so I don’t “stand out” from the crowd like I would have only 2 or 3 years ago.  I’m just one of many, so in relative terms if I take credit hits I don’t look so bad.  As you point out, this may be the time to take care of the credit cards too.  I have two major credit cards at $7,000 and $10,600 so maybe I should settle those rather than paying them off in full with my retirement IRAs and 401K.  I would like to minimize credit damage though - I don’t want to go bankrupt (especially at my income level it would be more restructuring) and want avoid foreclosure.  I think I can settle a lot of debt, take some damage to my credit rating, and be in a good position to bring my credit standing back up relatively quickly. 

    If I let the HELOC go bad with the objective of settling, do I still pay on the primary mortgage while I continue to work with GMAC on a refi plan? Note that the primary and secondary HELOC are both GMAC but different organizations within the company. 

    Also, GMAC stated that they will not consider a refi until my wife files a quitclaim deed to relinquish her interest in the home (she of course does not relinquish the debt on the home until I refi under my own name).  I offered the quitclaim deed contingent upon them offering a low rate refi but they are demanding the quitclaim first.  They will not even review the refi until a quitclaim deed is in hand.  Is there any danger in my wife providing the quitclaim deed?

    Thank you Mr. Phelan.

  • Charles Phelan

    Hi Mark, I’m very sorry to hear about your dilemma, but will do my best to help with advice. Steve asked me to comment on the HELOC aspect of your situation, but I first want to touch on the issue of credit. When I speak with consumers about their debt challenges, most of the conversations start out with, “I’ve never missed a payment in my life.” Understandably, after a lifetime of responsible financial management, it’s difficult and embarrasing to watch a hard-won FICO score start to slip when you fall behind on bills. However, when you are faced with a legitimate financial crisis, and something has to give, then it’s time to take a hard look at what preserving that FICO score is going to cost you — emotionally as well as in dollars. In this case, I can tell you with certainty that GMAC will never agree to settle the second mortgage while you are current with them on payments. In most cases, it is necessary to default on the HELOC and allow it to go past charge-off in order to get a settlement. But that is a definite possibility with GMAC, and as tough as they appear to be to you now, their tune will change drastically if you force the issue. We’ve been seeing settlements of 10-15% on HELOCs, and although I can’t guarantee you will see that result, I’m confident that you can get it settled with the resources available to you. Also, since the “Good Ship FICO” will also be sitting at the bottom of the ocean while the mortgage negotiation is under way, you may as well feel free to drill a few more holes in the hull while she is down there. :-) What I mean is that you could also include the unsecured credit card accounts in the same strategy and settle those as well. But there is no question that you have to be prepared to allow the credit score to slip. After you have restructured all the debts and have a workable budget again, then you can take steps to rebuild your credit again.

  • Steve Rhode

    Mark,

    When people get divorced they mistakenly think the divorce agreement, where one spouse agrees to pay one debt or another, is binding on the creditor. It’s not. You divorce your spouse and not your joint liabilities.

    You said, “I am in no position to accept my wife’s portion of our joint obligations.” But you need to be prepared to do that or file bankruptcy.

    All your wife needs to do is file bankruptcy herself and all of those joint debts become your sole responsibility.

    One line of thought is that if your relationship life is getting a fresh start that you should resolve your financial life at the same time and make a total clean break to give you the best chance at starting over moving forward.

    Recently Charles Phelan from ZipDebt.com posted an article about settling HELOC’s, “Why It Makes Sense to Consider Debt Settlement for Second Mortgages and HELOCs.”

    I’ll email Charles and ask him to come comment on your article. We can then approach this as you described, as a decision tree.

  • Mark

    Steve, You ask a very relevant question but really tough to answer.  I’m thinking to myself, “How do I make choices about the future when everything I had planned is evaporating before my very eyes?”  

    If I am understanding you correctly – I would like to make the past stuff work, but only up to a point.  Explanation is in order here.  The condo debt is being taken care of: the secondary HELOC was settled and the bank has allowed a short sale for the primary.  If it doesn’t sell we can do a deed-in-lieu or foreclosure but in any case the wheels are in motion to clear that out of the picture.  The big problem is my home, which I would like to keep, but not at any cost.  I thought that if I could settle the secondary ($63,790 HELOC) and refi the house at 125% appraised value with a super low interest rate (program GMAC has available) then everything would fall into place.  That leads me to the contingency, if I can eliminate part of the debt for my home I want to save it.  If my only choice is to just pay it off, then it would be foolish to stay.  I would in effect be buying a $190,000 home from my future ex wife for $290,000 (as she would ultimately be released from both mortgages).  Steve, I fully accept my debt obligations, but with the impending divorce I am in no position to accept my wife’s portion of our joint obligations (and she is not willing or able to accept her part).  

    I’m wondering how to get GMAC to work with me on the HELOC after they’ve stated their investor hasn’t given them the authority for a settlement.  I offered about 20% to settle which is much more than they will get from short sale or foreclosure. Is my approach wrong?  Is a debt settlement agent more likely to succeed?  Any other options to settle the HELOC? 

    I almost need a decision tree:Figure out a way to settle the HELOC.  If they won’t settle, my request to refi the primary becomes moot.  The next step would be to try a short sale, but the HELOC would still need to be settled.  If that doesn’t work, then I would have to try a deed-in-lieu or foreclosure.  GMAC would then have to divvy up proceeds between the primary and secondary HELOC. 

    A few questions: How is the HELOC handled during short sale, deed in lieu, or foreclosure?What happens if I let my home or the condo go to foreclosure here in Michigan?  

    Also of note: I’m at 5 3/8% on a fixed 30 for the primary mortgage so even if they won’t refi I’m still in a good place with that loan.  

    I hope I answered your question and gave you more insight so you can better assess my situation.  Thanks again. 

  • Mark

    Steve, You ask a very relevant question but really tough to answer.  I’m thinking to myself, “How do I make choices about the future when everything I had planned is evaporating before my very eyes?”  If I am understanding you correctly – I would like to make the past stuff work, but only up to a point.  Explanation is in order here.  The condo debt is being taken care of: the secondary HELOC was settled and the bank has allowed a short sale for the primary.  If it doesn’t sell we can do a deed-in-lieu or foreclosure but in any case the wheels are in motion to clear that out of the picture.  The big problem is my home, which I would like to keep, but not at any cost.  I thought that if I could settle the secondary ($63,790 HELOC) and refi the house at 125% appraised value with a super low interest rate (program GMAC has available) then everything would fall into place.  That leads me to the contingency, if I can eliminate part of the debt for my home I want to save it.  If my only choice is to just pay it off, then it would be foolish to stay.  I would in effect be buying a $190,000 home from my future ex wife for $290,000 (as she would ultimately be released from both mortgages).  Steve, I fully accept my debt obligations, but with the impending divorce I am in no position to accept my wife’s portion of our joint obligations (and she is not willing or able to accept her part).  I’m wondering how to get GMAC to work with me on the HELOC after they’ve stated their investor hasn’t given them the authority for a settlement.  I offered about 20% to settle which is much more than they will get from short sale or foreclosure. Is my approach wrong?  Is a debt settlement agent more likely to succeed?  Any other options to settle the HELOC? I almost need a decision tree:Figure out a way to settle the HELOC.  If they won’t settle, my request to refi the primary becomes moot.  The next step would be to try a short sale, but the HELOC would still need to be settled.  If that doesn’t work, then I would have to try a deed-in-lieu or foreclosure.  GMAC would then have to divvy up proceeds between the primary and secondary HELOC. A few questions: How is the HELOC handled during short sale, deed in lieu, or foreclosure?What happens if I let my home or the condo go to foreclosure here in Michigan?  Also of note: I’m at 5 3/8% on a fixed 30 for the primary mortgage so even if they won’t refi I’m still in a good place with that loan.  I hope I answered your question and gave you more insight so you can better assess my situation.  Thanks again. 

    • http://GetOutOfDebt.org Steve Rhode

      Mark,

      When people get divorced they mistakenly think the divorce agreement, where one spouse agrees to pay one debt or another, is binding on the creditor. It’s not. You divorce your spouse and not your joint liabilities.

      You said, “I am in no position to accept my wife’s portion of our joint obligations.” But you need to be prepared to do that or file bankruptcy.

      All your wife needs to do is file bankruptcy herself and all of those joint debts become your sole responsibility.

      One line of thought is that if your relationship life is getting a fresh start that you should resolve your financial life at the same time and make a total clean break to give you the best chance at starting over moving forward.

      Recently Charles Phelan from ZipDebt.com posted an article about settling HELOC’s, “Why It Makes Sense to Consider Debt Settlement for Second Mortgages and HELOCs.”

      I’ll email Charles and ask him to come comment on your article. We can then approach this as you described, as a decision tree.

    • Charles Phelan

      Hi Mark, I’m very sorry to hear about your dilemma, but will do my best to help with advice. Steve asked me to comment on the HELOC aspect of your situation, but I first want to touch on the issue of credit. When I speak with consumers about their debt challenges, most of the conversations start out with, “I’ve never missed a payment in my life.” Understandably, after a lifetime of responsible financial management, it’s difficult and embarrasing to watch a hard-won FICO score start to slip when you fall behind on bills. However, when you are faced with a legitimate financial crisis, and something has to give, then it’s time to take a hard look at what preserving that FICO score is going to cost you — emotionally as well as in dollars. In this case, I can tell you with certainty that GMAC will never agree to settle the second mortgage while you are current with them on payments. In most cases, it is necessary to default on the HELOC and allow it to go past charge-off in order to get a settlement. But that is a definite possibility with GMAC, and as tough as they appear to be to you now, their tune will change drastically if you force the issue. We’ve been seeing settlements of 10-15% on HELOCs, and although I can’t guarantee you will see that result, I’m confident that you can get it settled with the resources available to you. Also, since the “Good Ship FICO” will also be sitting at the bottom of the ocean while the mortgage negotiation is under way, you may as well feel free to drill a few more holes in the hull while she is down there. :-) What I mean is that you could also include the unsecured credit card accounts in the same strategy and settle those as well. But there is no question that you have to be prepared to allow the credit score to slip. After you have restructured all the debts and have a workable budget again, then you can take steps to rebuild your credit again.

      • MB-in-MI

        Steve is right about having a fresh start.  If I am to eliminate some of the overhanging debt, this is the most appropriate time.  I have the largest debt burden right now, I have the hardship of divorce, and the economy has placed me among a huge group of Americans with similar issues so I don’t “stand out” from the crowd like I would have only 2 or 3 years ago.  I’m just one of many, so in relative terms if I take credit hits I don’t look so bad.  As you point out, this may be the time to take care of the credit cards too.  I have two major credit cards at $7,000 and $10,600 so maybe I should settle those rather than paying them off in full with my retirement IRAs and 401K.  I would like to minimize credit damage though - I don’t want to go bankrupt (especially at my income level it would be more restructuring) and want avoid foreclosure.  I think I can settle a lot of debt, take some damage to my credit rating, and be in a good position to bring my credit standing back up relatively quickly. 

        If I let the HELOC go bad with the objective of settling, do I still pay on the primary mortgage while I continue to work with GMAC on a refi plan? Note that the primary and secondary HELOC are both GMAC but different organizations within the company. 

        Also, GMAC stated that they will not consider a refi until my wife files a quitclaim deed to relinquish her interest in the home (she of course does not relinquish the debt on the home until I refi under my own name).  I offered the quitclaim deed contingent upon them offering a low rate refi but they are demanding the quitclaim first.  They will not even review the refi until a quitclaim deed is in hand.  Is there any danger in my wife providing the quitclaim deed?

        Thank you Mr. Phelan.

      • MB-in-MI

        One other question, with our vacation condo we did manage to settle the Citibank HELOC (and yes payments were current) and PNC has given us permission to short sell to resolve the primary mortgage.  Since PNC is working with us, is it appropriate to make my mortgage payment in full while the unit is for sale?  If we don’t sell it within a short period of time (Sept per my wife, March is my preference but that has not been hammered out in our divorce agreement yet) we’ll ultimately have to do a deed in lieu or foreclosure.

      • Charles Phelan

        Yes, I would continue to cooperate with the lender since they are working with you on the short sale. But if the unit does not sell quickly, it would definitely be appropriate to revisit the strategy on the first mortgage.

      • http://GetOutOfDebt.org Steve Rhode

        I just want to correct one misconception. A bankruptcy may be the quickest way back on track. If you qualify for a Chapter 7 the debt will be discharged in months, retirement savings will be protected and the credit rebuilt within a couple of years. In fact it is stupid easy to rebuild the credit. See this article.

      • Charles Phelan

        Good point, Steve. In Mark’s case though I’m sure he would be stuck with Ch. 13 just based on his gross annual income.

      • http://GetOutOfDebt.org Steve Rhode

        I just wanted to make sure he was not laboring under any misconceptions or assumptions like so many have.

      • Charles Phelan

        The thing to understand about credit damage is that it only takes one hole to sink the ship. Default on a second mortgage alone will cause your score to take a drastic plunge, but if you were to opt to settle additional accounts like the credit cards, the incremental damage to your credit score would not be a significant factor. Also, it really should be the arithmetic that leads to your decision rather than a focus on credit. If bankruptcy will clear out more of the debt faster for less money out of your pocket, then that is the mathematically correct answer. That is almost always the case when Chapter 7 is available. Chapter 13 is another story, and under that version of BK you are required to pay back a percentage of the debt (determined by the court based on your actual income and IRS-allowed expenses), usually over a 5-year period. The major advantage with a private settlement strategy is that it’s not a public record matter like bankruptcy, and it gives you much more control over the process. Further, armed with sufficient resources, you can complete the project in 12 months or less rather than 3-5 years.
         
        To your question, yes, you would take the first and second mortgages as though you were dealing with two completely different lenders, continuing to pursue the mod on the first while positioning for a settlement on the second. However, if you are current on the first while pursuing a modification, the odds are very much against an approval. It’s generally the case that you need to be 1-2 months behind to be taken seriously on a loan mod request. The quit claim demand is really just a stall tactic by GMAC, and I don’t think it’s wise to proceed with that just yet. If you have not done so already, you should review any potential impact a quit claim deed might have on your pending divorce case. Also, I frankly don’t see why it’s necessary, and if you were also 1-2 payments behind on the first mortgage, you might get a different response on that subject. :-)
         

      • Mark

        Charles, you are right about chapter 13. Bankruptcy is not the way for me, regardless of the emotional aspect of it. So to summarize my plan:1. I should continue paying on the condo as we wait for a short sale.2. Stop payments on my home HELOC and make another attempt to settle after about two months. 3. I will consult with another on the quitclaim deed for the home mortgage. If that doesn’t cause me further problems in the divorce I’ll attempt to finish up this current request with GMAC for the refi. If they refuse me again, I’ll stop payments and try in another 2 months.4. I will contact the two credit card companies and let them know my situation and attempt to settle with them as well. I was really hoping I could do all of this without being late on payments – that the financial numbers I provided the lenders coupled to the impending divorce would be enough to work things out. It worked with Citibank on the condo HELOC. Are some companies that much more flexible/inflexible than others? It seems that there would be some general business practice that most would follow under these circumstances. Maybe my wife is better at putting together the hardship information – she’s the one who worked the condo agreement. Maybe GMAC is just tougher to deal with.One concern I have with stopping payments is that I have a good job and make a nice income. I’m afraid they will come after me and legally make my life miserable (lawsuits, garnishment, etc.). Any comments on this?

      • Charles Phelan

        Mark, I recommend you hold off on #4 on your list. There is an entire set of tactics to absorb before you take on the credit card settlement process, and announcing your intention in advance will get you nowhere and possibly backfire by getting the account routed sooner rather than later to third-party collections. The reality is that the condo settlement (while in current standing) was unusual, and Citi probably based that decision on a pattern of similar actions for vacation units in that hard-hit area. It’s a totally different story when it comes to credit cards and usually with second mortgages as well. With credit cards, you usually have to be at least 90 days late and headed toward charge-off at 180 days to get the best settlement available. It’s largely a mechanical system, and you won’t get them to deviate from it on the basis of financial difficulty due to a divorce.

        The lawsuit fear is something that 100% of settlement clients face, and of course there is always risk when you are in default on a debt obligation. But the reality is that lawsuits before the charge-off deadline are the exception rather than the rule, and can normally be avoided provided you have adequate resources to settle with as the opportunities develop. The worst-case scenario for any given account is that you work out a repayment agreement with altered terms. Given some income to work with, there is no reason to sit still for lawsuits.

        Also, I don’t want to leave the impression that I am saying you should absolutely do settlement no matter what. If you can soldier on and not fall behind anywhere as you transition through this process, that would alleviate any stress associated with falling credit score or collection hassles. However, my concern here is that you will deplete what resources you do have trying to stay current, so unless you can aggressively restructure your budget quickly, this approach carries its own risk. It also would be prudent to at least sit down with a BK attorney and chat through the situation. This is always a smart move even if you are determined to avoid filing bankruptcy, because it gives you a clear view of “Plan B” and therefore gives you more confidence while continuing to negotiate privately. And of course, you’re welcome to come by ZipDebt.com to learn more about how we approach this whole process.

      • http://GetOutOfDebt.org Steve Rhode

        I hope Mark recognizes what totally awesome advice you just gave him. Spot on.

Get My FREE Get Out of Debt Guy Newsletter

It is the smart thing to do.

I promise to keep your email safe and secure.

Close

I want to keep you posted each weekday with just one email about the latest get out of debt news, scam alerts and information to beat back debt.

You can unsubscribe at any time with just one click.

After you subscribe, check your email to confirm your subscription. If the confirmation email does not appear in your inbox in a few minutes, check your spam folder for it. Sometimes it likes to annoyingly hide there.


  • It will keep you posted on the latest scams.
  • You will be alerted to the latest articles.
  • You will wind up smarter than everyone else dealing with debt.