“Dear Steve,
My wife and I bought a house in 2006 in Michigan. Shortly thereafter, the company I worked for began to fail, and I was forced to get a new job. For my new job, I took over a 70% pay cut.
We used my 401k savings to make ends meet initially, sold our vehicles and replaced them with older cars, and reduced expenses everwhere we could, but still could not make ends meet. In addition, my new job was in a different state, so we (wife, daughter, son) decided to move.
We were unable to sell our house for what we paid for it. We have a first and a second mortgage on the property. We attempted to do a short sale, but it was rejected by the bank. Our mortgages are joint. We also have about $27,000 in credit card debt, which is only in my name. Even though my income has improved, we are still living month to month, and cannot afford a repayment program right now, so I am now considering bancruptcy.
If I alone file bankruptcy, can the second mortgage come after my wife for the remaining balance, or should we file jointly? My wife would prefer to not file bankruptcy. What do you suggest?
Jason”
Dear Jason,
I understand your wife would prefer not to file bankruptcy but I’m sure she would have preferred not to have the economy tank or homes in Michigan to lose value. Sometimes life just deals us the cards and we’ve got to play them.
Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
Your story is another example of why I hate to see people touch their 401(k) accounts to help make ends meet. If you had gone bankrupt earlier you would have been able to protect those funds and keep them. Ouch.
Thankfully you have found a way to begin again even on such a significant reduction in income. Congratulations on starting over.
At this point the best course of action is for you to click here to find a local bankruptcy attorney and make an appointment to go in and discuss your situation. If you allow the house in Michigan to go back to the bank before your bankruptcy then you can eliminate any lingering liability you’ll have from that. If you went bankrupt alone the bank will just go after your wife, but if you go bankrupt jointly then it’s over.
We can rebuild your credit after bankruptcy. My primary concern right now is we need to get you into a position where you can begin to rebuild that 401(k) account again.
