How to Get Out of Debt With the Get Out of Debt Guy » real estate investor

We Have Not Been Getting a Lot of Sleep Recently While We Worry About Our Debt. – KL

Steve Rhode — Fri, 02 Apr 2010 14:31:54 +0000

“Dear Steve,

Steve, my husband and I are not getting a lot of sleep lately and we very much related to your story. Thank you.

Our situation is my husband is in the real estate business and his income has drastically been reduced. We bought and sold a lot of real estate investment properties and did well when things were going up but we over leveraged and now we have a primary home, one investment property (which we lost over $120,000 on and will probably be going to short sale) and another investment property which we would like to keep but the rent is only paying a portion of the expenses.

To try to keep current on these properties, and last year we had four properties but sold one. we drained ALL our investments, 401K’s, etc. etc. we realize now this was a big mistake. We always had excellent credit but have now hit a brick wall with expenses and reduced income.

We do have permanent retirement pensions in addition to the reduced real estate income but it just is not enough to keep everything running. We have very high credit card debt (over $130,000) because of keeping all the properties running in addition to college expenses in addition to caring for a 97 year old mother with little income.

At this point we have no equity in the one investment property which is probably going to short sale but the other investment property we have about $70,000.00 in equity and about $60,000 in equity in our primary home.

We are thinking about filing Chapter 13 but need to know all the pros and cons. We don’t want to give up our primary home or our one investment property and in Chapter 13 would we be allowed to keep an investment property if we could modify the terms of the mortgage to make it more affordable and take in one more tenant to increase the rent so we would either break even or supplement a little. To dismiss some of the credit card debt would they go after the equity in our homes?

Thank you so much for any information we are talking to some attorneys or do you know of a good attorney in New Jersey? Also, is there an alternative to bankcruptcy? Thank you so much for any information

KL”

The Answer:

Dear KL,

I’m glad you finally reached the tipping point and have sought help. While I want to answer your questions they seem best answered by a bankruptcy attorney licensed in your state regarding your specific situation. You can click here to find a local bankruptcy attorney if you’d like. If you meet with one and you don’t like them for some reason, find another one. Just like any professional, you want to work with someone you feel comfortable with and trust.

It is important when heading into this phase of your financial life that you understand the worst outcomes are going to come from your demands to hold on too tight to something. What I mean is that the process will work best if you listen to what the attorney has to say and follow their advice. If the attorney says that under your state exemptions the investment property can’t be protected and you need to give it back to the bank, do that.

You can already see what holding on too tight has done, drained your investments and 401(k)s. Now is not the time to bargain with a fixed rule system. Now is the time to let go and start over.

Any modification of the mortgage will be up to the bank holding the mortgage. You might want to talk to a HUD housing counselor to look at the modification options available.

As far as bankruptcy alternatives go, no. When someone reaches the drained asset, want to avoid bankruptcy stage they become a prime target to be a victim of one of the many debt relief scams out there that will ask you for loads of money but wind up short on real help.

The best approach right now is not to try to bargain against the system but to work within the bankruptcy system to get a fresh start to put this behind you and move on.

It really will be okay and take it from a guy that’s been there, a better tomorrow is in your future. The key to daily happiness at this point is to stop focusing all your energy on what you feel you have lost and instead make a conscious effort to find little items for you to be grateful for each day. While the situation feels bad, life could be so much worse. I think you’d find comfort in my book “The Path to Happiness and Wealth” that you can download for free. It talks about this very issue and provides some insight that may make this transition in your life easier.

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!

@GetOutOfDebtGuy

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.

The Banks Won’t Refinance the Investment Rental Properties I Bought Using Credit Cards. – Kyle

Steve Rhode — Tue, 02 Jun 2009 19:48:58 +0000

From How to Get Out of Debt

Kyle

“Dear Steve,

Quit my job to do real estate investing. Was doing well, but then banks changed lending laws and I couldn’t refinance the houses I had. I bought them using credit cards. I was able to sell one of them, but on top of living on my savings and no income, things depleted quickly. I bought another house thinking that if I could fix and sell it quickly I could make anough money to pay down almost all my debt.

Unfortunately my contractor bailed, I have been paying on it for a year (half is a loan half is on credit cards), and I can’t sell it because he placed a $30k lien on it. I have a contract that will hopefully hold up in court and take the lien off, but until then, I am running out of money.

After this month I can’t pay any bills. I have over $150k in personal credit card debt ($80k is related to the house). The loan is $80k and in my LLC name. The one year hard money loan is due July 1st. I have no idea when the court date is for this lien.

My life is falling apart. I have always been a hard worker and have always had money. This last project has torn me to pieces. I only have a part time job right now. Because of the economy I can’t get a decent position anywhere. What do I do??

Kyle”

The Answer:

Dear Kyle,

You’ve got a big problem. But the good news is that you’ve got a great opportunity to start over again and get out from under this pressure.

While I’m feeling better about the economy improving, it’s still down right now. I seriously don’t see real estate values launching back to space where they were before.

I really can’t see any sort of realistic option that is going to get you quick relief or help you to make ends meet here.

Some of the things that ran through my head included angel investors, shared equity partnership, etc. In this market with the situation on that house, I doubt anyone is going to want to jump in with any deal that will rescue you personally. They might try to steal the house for the lien amount but that still leaves with with all the credit card debt you still can’t service. Even if they gave you $10,000 to $20,000 that is still not enough to resolve your personal financial problem.

I would imagine that the credit card payment alone is about $3,000 a month and on top of that you’ll need to add in all your other expenses.

If I read your question right the LLC loan might be a balloon note and maturing in July. That’s really bad news if that’s the case. You certainly don’t have $80,000 to repay the note if it is.

I think the minute you finish reading my answer here you need to be on the phone to a couple of local bankruptcy lawyers and trying to schedule a free bankruptcy consultation appointment to go in and discuss the situation.

When you meet with the bankruptcy attorney you can discuss the situation with the LLC note and if you personally guaranteed it.

With the lien, real estate market, note and cash flow situation, I think the time has come to put this bad situation to rest and instead focus on moving forward with a new life.

Big Hug!

@GetOutOfDebtGuy

Is It Possible to Avoid Bankruptcy and Prevent Our Creditors From Attaching Judgment Liens On Our Properties? – David

Steve Rhode — Mon, 19 Jan 2009 19:26:25 +0000

From How to Get Out of Debt

“Dear Steve,

I’m a real estate investor and my wife is a Realtor.

We have used my wife’s credit to accumulate debt of $180K in unsecured personally guaranteed business LOC and credit cards in one corporation and $100K in of the same in a limited liability corporation. I filed personal bankruptcy 4 years ago and thus the reason we are using my wife’s credit.

We’ve not been able to produce adequate income with these companies to cover the debt since early last year and have now maxed out our limits with no means of repayment. We have some equity ($20K) in our personal residence (jointly owned), a rental home which my wife’s mother lives in has $40K equity, and another rental home owned by one of our corp. has $25K equity. Both of our autos are paid for but need replacing.

We are focusing on try find real estate deals to cover our living expenses of $3K per month. The payments for the accumulated business debt is $7.5K. With the real estate market in flux right now we are also looking at trying to find jobs, but so far it’s been difficult to find anything. I believe would qualify for Chapter 7 Bankruptcy but don’t want to liquidate the home my wife owns where her mother is living. We have just started to default on the business credit cards and lines of credit.

Is it possible to avoid bankruptcy and prevent our creditors from attaching judgment liens on our properties? We’re hoping to re-establish some income in the future to be able to pay a portion of our debts.

David”

The Answer:

Dear David,

Recently I wrote an article about a service called AssetGuard that might be what you are looking for.

While a service like AssetGuard might protect your property from being attached, it does not deal with the underlying issue that you are not able to meet your financial obligations. Nor will this approach prevent your need to go bankrupt, if that is what is needed.

However, it sounds like you are trying to address that issue by looking for a job. Good luck.

Steve

Damn You June Reyno. Let Your Home Go And Move On.

Steve Rhode — Mon, 10 Nov 2008 16:25:56 +0000

From How to Get Out of Debt

Not that long ago I wrote about a woman that chained herself to her front porch to prevent her home from being foreclosed on. I’m afraid the story has turned into the pleading mother begging for the return of her child, only to have murdered it herself.

June isn’t an innocent victim here of banks gone wild, although I would pay good money to see that video. She is a serial defaulter. Court documents show that she has purchased and lost seven homes in California for non-payment.

Joe Stemmer sold two Palm Springs properties to Reyno in 2006. The original note on the homes was for $44,000 each.

Stemmer says she made two payments at the agreed note amount of $256 a month. But then he claims the payments stopped and the excuses started.

Apparently Reyno borrowed and borrowed against her primary home to consolidate credit card debts and buy properties or try to make payments on other properties. Silly.

A real estate investor once told me that if you are going to play with the big boys you better not cry when you get bit. June, you got bit. You tried to create a real estate empire on the foundation of shifting sand and it is now crumbling around you. Yours is not a case of an innocent family being booted out of the only shelter they have. Unfortunately yours is a case of someone who highly leverged their shelter to dig a deeper hole and obligate themselves to things they could not really afford.

June, please, for the sake of all of the people that I fight and care for our here that are in terrible situations, please let your house go and move on so we can get real help for innocent homeowners in trouble. You’re not innocent.

How to Get Out of Debt With the Get Out of Debt Guy » real estate investor

We Have Not Been Getting a Lot of Sleep Recently While We Worry About Our Debt. – KL

The Answer:

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The Banks Won’t Refinance the Investment Rental Properties I Bought Using Credit Cards. – Kyle

The Answer:

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Is It Possible to Avoid Bankruptcy and Prevent Our Creditors From Attaching Judgment Liens On Our Properties? – David

The Answer:

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Damn You June Reyno. Let Your Home Go And Move On.

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