Brian
“Dear Steve,
I am currently out of work. My wife is employed and we are upside down on a mortgage that is in my name alone. Her income is not enough to pay the bills without dipping into our savings. This could possibly run our savings down to nothing and then we lose the house.
• We have enough cash to refinance but that would make for a very tight budget and any hiccup could put us in financial trouble and possibly still lose the house and any money we used to buy down the mortgage.
• We have enough to buy a nice place with cash and short sale the house we are currently residing in, that would make us debt free but we are concerned that the financial institution will come after what assets we have left or the short sale will destroy our excellent credit ratting.
• My wife mentioned a possible divorce living me with the current house and her with the money to buy her self a house with cash. That would make her debt free and her income combined with her savings would leave her somewhat financial secure. I would have no choice but to short sale the current house and take the credit hit.
I would like to hear your comments on the scenarios I have put forth. Or perhaps hear any ideas you may have. I look forward to your response.
Brian”
Dear Brian,
It seems like we have a situation here where the two of you are living financially separate but tied together under marriage and under the law which binds you together.
Now I can understand why you are looking for a happy ending to this situation but as a couple, isn’t the money in savings held both of you? That then becomes an asset you both share.
If the end result of your plans is lawsuits or bankruptcy to toss you under the bus here, the transfer of assets prior to that could create a real problem for the two of you.
Probably the best solution is to short sale the house, use money from savings to satisfy the difference and move on with your lives.
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What appears to be obvious is that without some sort of intervention, this situation is going to decompose into a right awful mess.
Of the options you presented the first is not reasonable, the second is probable, and the third seems unreasonable since you indicated the savings is in your joint names.
With the possible end result of your other options leaving you the target of creditors. I think it would be prudent for the two of you to go in and talk to a bankruptcy attorney, not with the intention of filing, but to better understand how the transfer of which assets prior to your credit demise can be potentially illegal and problematic.
I’m curious who is driving this rescue plan. Is it you because you feel guilty about losing your job or is it your wife blaming you for this situation and trying to save herself individually?
I don’t believe that divorce is the answer to this situation because there can’t be a happy ending. I believe Steve’s solution is the best solution. When you got married, you vowed to stay together through the good times and the bad. If you love each other, it won’t matter in the long run what your credit rating is. What will matter is that you came through this period of adversity loving each other and being there for each other.
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