I’m Trying to Sell My Home in a Short Sale and Then Take Care of My Debt. – Mike

“Dear Steve,

I have over $80K CC debt; over $60k student loan, currently applying for a short sale to get out of the house. I am in the Financial/Securities market and BANKRUPTCY is not an option. I am paying over $2k monthly in CC payments and going nowhere!!! My income is down due to poor ecenomic confidence/difficulties making new sales….I just missed my first mortgage payment, but applying for a short sale..house currently up for sale…considering stopping CC payments to build up a settlement/reserve account to eventually pay these things off.

Should I settle my credit card and student loan debt on my own?


Dear Mike,

Before you make some assumptions about bankruptcy you need to know a couple of things.

  1. It is possible that you will wind up with a big bill from the short sale unless the lender agrees to waive any shortfall due. See this article for details.
  2. By allowing your credit cards to default and winding up in collections, and then possibly being sued and wage garnishments, that’s not attractive for your job either.

As part of a financial disclosure statement for a securities position the question I saw asked was:

Have you made a compromise with creditors, filed a bankruptcy petition or been the subject of an involuntary bankruptcy petition?

It seems to me that it puts debt settlement and bankruptcy into the same bucket and debt settlement may make you look like more of a security risk with all the defaults and unattended debt. And if a creditor decides to sue you before you can settle a debt, well a judgment is viewed negatively like a bankruptcy.

Before assuming what the impact of bankruptcy would be I would check confidentially with your HR department. FINRA does not have a problem with it.

If bankruptcy was an option for you then you could short sale the house, lump the remaining shortfall into a bankruptcy, discharge your credit card debt and kill the short sale deficiency and then focus on repaying your student loans.

Please update me on your progress by Damon Day - Pro Debt Coach

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