My husband and I moved to a rural town to semi-retire at the ages of 45. We found that after 22 years of marraige, we were pregnant with our first child.
We were doing fine with both of us working but after the baby was born, I stopped working to stay home with her. It was tight but workable.
Then my husband got laid off and hasn’t found another job that pays as well. The first thing we wanted to do was sell the house and move somewhere where the job market was better but found out that our house lost 1/3 it’s value since we bought it and we owe more on it than we can sell it for. We have been taking cash advances on our credit cards to pay the mortgage and living expenses. I am having a very hard time finding a job where there is any money left over after paying for child-care so I’m still home with the baby.
Now we can’t pay our bills. This will be the first time in 20 yerars that we will be late on anything.
We have gotten advice to stop paying our credit cards and advice that says to hurry up and get behind in the mortgage so we can get a mortgage modification.
We don’t want to lose the house and are afraid of bankruptcy. What should we do?
Honestly, in this economy, I think the odds are more likely that this situation is not going to get better any time soon. The minute you started taking cash advances from the cards to get by that was a huge warning flag and klaxon going off.
Here is the problem. It is highly unlikely that you and/or your husband are going to find new employment that will allow you to pay off the exceptionally high interest rate cash advances and to get out of your house. You are trapped and drowning in more and more debt.
The cash advance trap is just that, a trap. Under current law a cash advance, the highest interest rate charged on your card, can’t be paid off until the entire card is paid off. If you read your terms and conditions you will find that your repayment dollars are applied to the lowest interest rate charges first. This is to keep you building up debt to the creditor at the maximum cash advance rate.
The advice you’ve been given is great for getting the creditors attention but I have two issues with that advice. First, it does not solve the underlying problem of a lack of employment in your area. Second, I’m hearing from more and more people that their lender is being unresponsive to modification requests. You could sit for months waiting for an unresponsive lender, only able to survive on what, more cash advances? That’s not a sustainable plan. It’s just digging you deeper into the debt hole.
I don’t see any improvements in the short or medium range to the economy. It’s a gamble but I think the safer thing to do for you, your baby, your income and your future may be to cut your losses now and move. If you decide to do that then pick a place, put in a rental application, and then let the house go back to the bank and file bankruptcy to discharge your debt and start over. You can click here for a free bankruptcy consultation. If that course of action seems reasonable to you then I would urge you to meet with a local bankruptcy attorney first, coordinate your plan, and then put it into action.