Ask The Get Out of Debt Experts Real Estate

I’m Currently in a Wachovia Pick-A-Payment Mortgage With Payments Increasing. – Teri

“Dear Andy,

Mega credit card debit – totalling $60K- High interest rates on those cards up to 29%. Currently in a pickapayment mortage-Wachovia with payments ballooning. Husband and I both have great steady government jobs, but finding it extremely hard to support our 5 person family and keep up with the bills, let alone making a dent in our massive debt.

We are ready to just walk away, but both know that’s not the right thing to do. We are both responsible citizens and want to pay our debts in full, but get discouraged when we see others walk away. I’d like to have a credit fairly decent because we’re going to need a used car in the next couple of years and want some options if any to resolve this issue.

Can we work with the mortgage company to consolidate our loan and our massive cc debt? 200K upside down on mortgage.

Should we work with a debt management/settlement company? Which ones are recommended.

Should we ask for “short sale”?

Should we wait on settlement $ from class action lawsuit. Which is probably just a scam?

Teri”

Teri,

That’s a lot to digest, and I’m sure you feel buried. Financially you are buried, but with a plan and some cuts you should be able to come out of this in one piece.

The very first thing I would suggest you do is speak with a local bankruptcy attorney. (Click here to find a local bankruptcy attorney.) I can totally understand that you feel a moral obligation to pay your debts in full, that’s a good thing, but your responsibility to your family and their future has to take priority. I’m not saying “go file bankruptcy”, but I am saying that you should go speak with a BK attorney first, before you begin looking at any of the other options you mentioned. I suggest this because all of the other options require that you invest time, money, or both, and it would be a shame for you to waste either and end up filing bankruptcy anyway. If you qualify for a Chapter 7 BK and it makes sense to you, the mortgage and cc debt would be dealt with in a legal manner, and you wouldn’t need to even bother with any of the other stuff.

If you find out that you don’t qualify for BK, or that it still just doesn’t sit well with you, the other options you mentioned may be worth taking a closer look.

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It’s going to be difficult no matter what you do to keep the home. With most of the neg-am “pick-a-payment” loans there are very few options for modification, and when they do modify them, the monthly payments will typically go up by a good amount. With the loan about to reset, unfortunately, the mortgage payments will be going up no matter which way you go. Add to that the fact that you’re $200k under water, it’s probably time to let the house go. After all, can you afford much higher payments to float this place until the market comes around and you can finally break even?

If you go short sale contact a local real estate broker that has a good working knowledge of them. Hiring professional help with a short sale shouldn’t cost you a dime, as the lender typically picks up all real estate commissions. Beware of any offers to help that require any kind of payment up front, nothing good can come from that.

Once you shed the mortgage payment you can then asses your budget and truly gauge where you stand with the credit card debt. If you find the cc debt is still a major strain on the new budget you may want to speak with a non-profit credit counseling group to start. (Click here for credit counseling information.) They may be able to offer you a program that can get your interest rates down and establish a plan that will get you out of debt over the next 3-5 years.

At the same time you may want to look into debt settlement, but keep in mind that no matter what debt settlement option you go with, you will need to fall behind on your on your monthly payments. That means you will go into collections just like anybody else that falls behind. No matter what the debt settlement company says, you will damage your credit rating, receive collection attempts and face possible lawsuits from the creditors. Being in a debt settlement program does not protect you from any of that collection activity. Debt settlement is nothing more than a strategy to get you out of debt as fast as possible for as little as possible. I believe that if you need any longer than 24 months to complete the program, than you should strongly consider one of the other options instead. To me any more than that is just too long for someone to stay in collections.

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If you’re looking for reputable debt relief providers, there is no better place to look than the AACC. They are a group made up of credit counseling and debt settlement providers that have all pledged to put the consumer first and all they uphold the highest transparancy standards. I know many of the members and feel very comfortable sending people to any of them.

I wouldn’t worry about how you will get that used car just yet. Right now you have bigger fish to fry, and it sounds like all roads will lead to some kind of damage to your credit rating. As you get these bigger issues dealt with, your budget and credit will start to improve and who knows you may even be able to save the cash for that used car by the time you need it.

Waiting on settlement funds from a class action lawsuit is probably not your best bet. Address the problems now and if or when the settlement funds come in, save it.

Good luck Teri, and I hope I was able to point you in the right direction. I’m subscribed to this post so if you ever have any questions in the future just post them in the comment section below, I’ll do my best to respond promptly.

Andy

Andy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.

If you have a mortgage, short sale, real estate, or loan modification question you’d like to ask just use the online form. I’m happy to help you totally for free.

About the author

Andy Faria

Broker/Owner of Northeast Properties – real estate brokerage
President/Owner of Northeast Settlement Group – performance based debt relief

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