“Dear Steve,
My question is regarding avoiding foreclosure but the nature of my circumstance is rather unusual.
Let me start by explaining that I just recently learned that my life partner of 20 years was over a year behind on our mortgage payments when, about 2 months ago I answered the door to a foreclosure notice from the bank.
There are 2 properties involved: our main home and a guest home next door that he bought for cash back in 2003. I also learned that he had secured a 2nd mortgage in 2008 to finance a business venture (which failed) and in doing so he combined the guest house into the package.
Prior to this, sometime around 2007 he put the guest home into the name of a trust and listed me as a trustee (he was acting manager I believe and not a trustee) I think he also made it a homestead.
Fast forward to present time when we received the foreclosure notice .. he’d been getting quite ill, much more so than anyone knew including myself and it was apparently affecting his thinking.
Not feeling well enough to deal with everything, we went to a local atty. and gave them a 2K retainer to deal with the courts in answering the foreclosure and to work with the bank for a re-fi. This was just last month. Days after our first consultation I had to rush him to the hospital where he was diagnosed with stage IV lung & bone cancer and last week he passed away.
I’m doing my best to unravel the paper trial of what he did but it’s quite confusing. I know so little of these things and he always handled the finances. In his will he left both homes and everything in them to me, which may have been an advantage when the will was drawn but today, it means a 600K debt on 2 homes that are severely under water and that is way beyond my means.
Even so, I want desperately to save them. We’ve been here for 20 yrs, had custom remodeled the main home in 2000 not to mention all the memories. I’ve been able to rent out the guest home and, if I can somehow get reduced financing, rental income from the guest house could very possibly pay the mortgage(s). The problem as I see it, is that my personal debt:income ratio looks bleak.
The income we had from his business was taken over by his daughter, who was named executor of the will, so that is lost. I don’t feel I can risk throwing more money at an atty for fear that nothing would come of it. I had to put the attys we hired on hold to stop the financial bleeding.
So here I am, 62 years of age, still grieving the loss of my loved one and scared to death of facing an eviction. I have no experience in these matters which is making me feel overwhelmed.
I realize this is a complicated situation but I’d like to know if I have any chance of saving our home, perhaps through one of the MHA programs or something else? I’m sure there is more info you may need and I’m happy to answer any questions that might help you in making suggestions. Thanks so much for your time. –
Barb”
Dear Barb,
First off let me say how sorry I am for the loss of your life partner so suddenly. Dealing with the loss of a loved one is tough enough but to pile the other mess on top, I’m sure the stress must be huge.
As an outsider in this situation I can offer you some practical advice based on experience.
The math doesn’t lie. Unless you have the income to support both of the homes, your regular expenses, and still save money each month, then saving the homes may be beyond our grasp.
However, not all is lost. Again, it depends on your income, but it might be possible to save your primary home. This depends on what state you live in. But the logical way to do this would be by filing a chapter 13 bankruptcy. You can click here to find a local bankruptcy attorney and discuss the issue with them.
There is no way to diminish make the pain of the loss of your partner and the possible pain of the loss of one or both homes. Those situations are what they are what they are. But what you can do is do your best to get actively involved in finding a solution for the situation and acting proactively. As long as you are acting proactively you will always be reacting and never driving the bus, if you know what I mean.
I’d like for you to read How to Get Out of Debt. The Honest and Unvarnished Truth. It will give you a broader perspective and help clarify some of the uncertainty you are dealing with.
The goal at this point is to find the bridge from your old financial life to your new financial life. We need to fit your new life within your current income and keep our eye on the fact you are creeping up on years when you may not be able to earn money.
One real possibility is for you to realize that you are currently living through a huge life transition. It might be appropriate to just wrap up all your old debt at this point in a chapter 7 bankruptcy and start a new financial life that will be less stress and leave room in your life to focus on finding a peaceful path forward towards better days.
Your homework: go meet with a bankruptcy attorney right now and then report back.
Please post your responses and follow-up messages to me on this in the comments section below.
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Dear Steve,
Thank you so much for your quick and thorough reply. I’m following through on your recommendations. I have not yet seen a bankruptcy atty since it is a holiday and offices are closed. But before I proceed with your suggestion, I wanted to ask a few questions.
First, I didn’t mention that although my partner’s credit was pretty bad given his debt load, my own personal credit isn’t nearly as bad. I have a car loan that is 2/3 paid off and auto insurance (I’m looking into trading down from a 2007 Lincoln Navigator to a comparable, lower priced vehicle) I don’t really have a lot of personal debt. I have 2 credit cards, both in excellent standing, with one of them holding just a $50 balance. Other “personal bills” are things I can either downgrade or do without, like subscriptions, domains, etc. Of course I have to begin assuming household bills like utilities, phone service, etc. So, without the mortgage, I’m living within my own means. It seems I would not be responsible for my partner’s personal debts. My question is this: Would you still recommend filing a personal bankruptcy and risking several years of bad credit in my name?
Also, I didn’t see a reply to my question regarding MHA or any other government mortgage assistance plans as being a possible solution to saving my homes. Is this because you feel that these programs don’t apply to my situation or that I don’t qualify for any of them? Prior to writing to you, I had printed out the MHA application from the website and was going to try that route. I’m very interested in your advice on these programs.
Just one more question ..you stated that “the math doesn’t lie”. This is quite true in one regard, if I have to produce documents like 2 yrs tax returns, pay stubs, etc. I can’t make it add up. But if I can somehow get a lender to recognize potential income, like rental income in particular and income from other freelance sources that I am more than capable of earning, the math would certainly look a lot better. You are correct in pointing out that I’m no longer in the prime of my income earning life but my goal is to work smarter, not harder, and I feel strongly that I still have a few years left to accomplish that.
Thank you again for your time. Based on your reply I will seek out legal assistance immediately after the holiday.
Kind Regards,
Barb
Rebuilding credit after bankruptcy is actually very easy to do.
The real question here is if a past life is possible on present income. You can always try for a modification but you have two strikes against you. The first is there seems to be no support you can afford the payments and the second is that it is a rental property.
You can always talk to a HUD Housing Counselor for free and evaluate the programs and if they are applicable in your situation.
It doesn’t really matter what your credit was, unless you take some action your circumstances are going to sink you.
Bankruptcy is still a worthy consideration if you can’t get out from under the homes and they begin to drag you down.