Our Debt is From IVF Treatments But We Are Also Underwater On Our Mortgage. – Rob

“Dear Steve,

Key Points. Combined 150K salary with wife. 47K in CC debt (9 different accounts – all APR at 11% and below. 8k loan (0% interest for new windows for house). 80/20 mortgage with first loan I/O ARM (reset Feb 2012, at 6.75%, balance is 284K. Second mortgage at 8.58%, balance is 69,842. 38k in combined 401K. House is worth about 330k based on estimate from realtor. Wife has 100% matching 401k that we max out each month – total contribution is 1150 per month. We have 2 car leases, each at 190 per month. We have 3k in savings

We are lost. We’ve paid down about 5k on credit but i’m not sure if we should be saving instead of attacking credit cards. We’ve tried to refinance our home under new mortgage plans but our lenders won’t because we are underwater. My credit score is 570. I don’t know what we should be doing. We have good income and fairly stable jobs – should we be paying off credit cards first? 2nd mortgage first? Saving all of our cash? File for BK?

We filed for BK over 12 years ago and I can’t belive we’re back in this mess all over again? Most of our debt came from IVF medical procedures to have a child which we were successful and have a beautify 5 year old boy. Any advice is appreciated.


Dear Rob,

A very interesting situation. First, congratulations on your son. I’m so happy that it worked out well for you. IVF is an expensive process.

My primary concern is the loan reset. It would be a shame to make all sorts of progress now only to be sunk by an interest only loan that will reset in three short years. Time flies fast when you have a reset or a balloon note due.

I’m not sure why your credit score is in the toilet. The best way to check would be to order a copy of your consolidated credit report with the credit score option and see what the very people that calculate your score have to say. This consolidated credit report is the very same one that I use and love. I think it is the best.

As I ponder your situation it occurs to me that not every moment of every situation is the time for forceful action. And this might be that time for you.

Here is what I’m thinking. Bankruptcy is always a possibility but it would be more effective for you if bankruptcy judges are given the power to modify mortgages so yours could be adjusted to value. That proposal is kicking around congress right now. You have not given me any sort of indication that you really want to be out of the house now so why go?

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You are making the most of your IRA contributions and this is a great time to be doing that and investing. If an employer wants to match 100% then take it. Never turn down free money. There is so much doubt that Social Security will be around latter that we all need to save for our own retirement.

For right now I would suggest that you pay minimum payments on the cards and save any freed up cash by putting it in a boring old savings account. This is just to build up your emergency fund since your IRA should be left alone and not borrowed from.

It would be a good idea to write to both of your home loan holders and ask them for assistance to adjust your mortgage. We know they will say they can’t but you’ll need that documentation in hand if you decide to go bankrupt to deal with the home situation.

That mortgage you’ve got and the fact that you are so upside down on it is a ticking time bomb. We’ve got to address that or you’ll never be able to dig your way out.

I’d wait to see if bankruptcy judges get the power to adjust mortgages before drastically altering course. In the meantime you could always do a little pre-planning and schedule an appointment with a bankruptcy attorney now for a free bankruptcy consultation so you can create a game plan to execute latter.

Does that make sense?


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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.
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