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I’m Totally Broke and Drowning…Help! – Linda

I am 47 years old and single mother to two teenaged children. I have a decent job and make good money for the area where I live. I bought a home in 2008, put $30,000.00 down on it (nearly my entire life savings). My house payments, insurance and taxes are equal to 2 weeks of my pay. SO one entire check barely pays my house payment.

I have $16,500 in credit card debts. Long story short, I got behind on my mortgage. I was trying to pay alittle everybody i owed (stupidly) and now my house is in foreclosure. I have been turned down for loan modification programs. (my debt to income ratio is too high??)

My question, do I file chapter 13 bankruptcy and try to keep my house? Or do I try to get a consolidation loan and pay off the credit card bills and catch up my mortgage and then try to sell my home for something more affordable? AT this point my formerly excellent credit is way less than excellent but probably not trashed as it will be if I file Bankruptcy and/or foreclosure.

Should I let my house go and lose my equity? Its too much house for my income obviously.

I am sick, scared and hopeless. I dont have family to borrow from. I worked two jobs for months until my health began to suffer. I sold my new car and bought a 10 year old one with 90,000 miles on it. I have pawned my jewelry, and anything else of value. I make slightly too much to quailfy for food stamps or other assistance.

Linda




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Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.


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About the author

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.

60 Comments

  • I can’t give you specific advice, but you speak of reasons you’re in debt all being related to “problems” and falling behind on your mortgage, but then talk about pawning jewelry and trading your new car in for a used one. I think the problem is that you spend too much for what you make. You even mention living in a home that eats half of your monthly net income.

    No matter what Steve or anyone suggests here, even if you get out of this with your head held high, you’re going to be right back in this position if you do not get a grasp on your spending habits. I know you might think you don’t spend too much, but by your own story, you do. Start listing what you spend your money on, EVERYTHING, including those coffees every morning (I dunno if you stop for coffee, I used to stop every morning and afternoon for a soda at the conv. store, so using it for example) and start eliminating EVERYTHING from your spending list that is not an absolute necessity. This includes cable, expensive cell phone plans, etc. Life is great without cable, trust me. The things you can’t eliminate look at reducing, even to the point of not buying packaged junk food… that $5 here and there for crap like pop-tarts and the like is expensive. Sell everything you don’t absolutely use and need *right now*. Garage sales are nice, ebay is nice.. pawning sucks because you’re essentially selling it to them at a super bargain for them.

    As to your question, my vote is bankruptcy and keep the house. The fascination in the U.S. with credit scores is part of our problem, because credit scores are only necessary usually when you get credit, which you do not need (not a stab at you, I don’t think many of us need it at all). You already have a house, and you can use the next couple years that your credit is “dinged” to fix your finances, save money, and possibly sell the house and get into something that consumes about 1/4th your income or less.

    Good luck to you!

  • I can’t give you specific advice, but you speak of reasons you’re in debt all being related to “problems” and falling behind on your mortgage, but then talk about pawning jewelry and trading your new car in for a used one. I think the problem is that you spend too much for what you make. You even mention living in a home that eats half of your monthly net income.

    No matter what Steve or anyone suggests here, even if you get out of this with your head held high, you’re going to be right back in this position if you do not get a grasp on your spending habits. I know you might think you don’t spend too much, but by your own story, you do. Start listing what you spend your money on, EVERYTHING, including those coffees every morning (I dunno if you stop for coffee, I used to stop every morning and afternoon for a soda at the conv. store, so using it for example) and start eliminating EVERYTHING from your spending list that is not an absolute necessity. This includes cable, expensive cell phone plans, etc. Life is great without cable, trust me. The things you can’t eliminate look at reducing, even to the point of not buying packaged junk food… that $5 here and there for crap like pop-tarts and the like is expensive. Sell everything you don’t absolutely use and need *right now*. Garage sales are nice, ebay is nice.. pawning sucks because you’re essentially selling it to them at a super bargain for them.

    As to your question, my vote is bankruptcy and keep the house. The fascination in the U.S. with credit scores is part of our problem, because credit scores are only necessary usually when you get credit, which you do not need (not a stab at you, I don’t think many of us need it at all). You already have a house, and you can use the next couple years that your credit is “dinged” to fix your finances, save money, and possibly sell the house and get into something that consumes about 1/4th your income or less.

    Good luck to you!

  • Linda, that sounds like good news to me. “your modification is being prepared” is what you want to hear. You will want to make sure that you’re calling at least every other day now. Always ask them to look at the notes and see if any Fedex or UPS packages have been sent to you recently, if they say yes, get the tracking number and find out where it is. I’ve seen instances where UPS/Fedex leaves it on the neighbors back door or it gets lost.

    When you receive the modification documents read them very carefully before signing and returning. Sometimes they require a notarized signature, other times they don’t. Many times they will include a Fedex or UPS return label to send it back, make sure you use that. If you would like me to look anything over for you I would be happy, you have my number, feel free to call anytime.

    Keep us posted and if you get thrown any curveballs or don’t understand something please let us know right away so we can help.

    Andy

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