I am a 44 yrs old mother of two young teens (13 &15). I earn 80k. I have been married for 19 yrs. My husband just lost his 100k job in a very bad situation in which he is now facing criminal charges (he claims innocence). I have made the very difficult decision to leave him.
We own a home in VA which we purchased 5 yrs ago. We have a Heloc that we used for renovations. We purchased the house for 425k and now owe 420k. We owe 320k on the 1st mortgage and 100k on the second. The value of our house is now 370k. I have about 3 mos of living expenses in reserve. I do not wish to stay in this home. Selling the house would pay off our 1st mortgage but not the Heloc. We also own a vacation home in PA that we recently bought from his father. We do have some equity in this home but sales are very slow in this mountain resort. I am considering moving to this house as the payment is much lower and I will be closer to my family. I could probably transfer my job but will be earning about 25% less.
Is it possible for a “short sale” on the Heloc? Should I consider foreclosure or bankruptcy?
This is the type of situation in which we need to consider your larger life and not just the immediate debt. It sounds as if the marriage is broken and you are leaving and moving to an entirely new area in an effort to start anew.
At a time of starting over it makes sense to not only breaks the bonds of marriage but break the joint debt at the same time. Even if the marriage ends in divorce, joint debt continues past the divorce, no matter what the divorcee decree says. When it comes to debt, it is stronger than marriage and a decree where your ex agrees to pay X debt is only an agreement between the two of you and does not eliminate your liability for that debt with the creditor.
I typically recommend bankruptcy since it is the only legal way to separate yourself from the responsibilities of any joint debt from an ex-partner.
What complicates the issue in your situation is not that you probably would not be able to keep the second home in a bankruptcy, but that it is owned jointly with your future ex-husband. You would need to workout some suitable meeting of the minds with him that would allow you to live there and preferably with the title switched to your name alone.
It is not possible to do a short sale on a HELOC but you could do a short sale on the Virginia house if both the first mortgage and HELOC lenders agreed. The danger is if they later come after you for any amount they agree to forgive to make the sale.
My best advice is for you to meet with both a divorce attorney and a local bankruptcy attorney and come up with a game plan that works for you. You can click here to find a local bankruptcy attorney.
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