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I Am Way Upside Down in My House And I Have a Relative That Wants to Help Payoff My Credit Cards. – Paul

“Dear Steve,

My California house is upside down and I have lost my job and almost out of savings. I have $160K on my first mortgage and $320 on my second. The house is only worth about $350. The payment on the 1st is $1200 but the second is $2800 and killing me. I can make money but no point paying unless I can get the second reduced or eliminated. I also have $55k credit card debt.

I have a relative offer $50k to help me out but I don’t see any way. Can I keep my house?


Dear Paul,

Interesting situation. We need to treat this as two different situations.

Let’s look at the house first. You are so upside down on the house that I doubt a fair or reasonable loan modification plan would be offered by the second mortgage company. However, if you have not done so already, contact them and see what help is available.

The second situation is the credit card debt. Don’t take the money from your relative if you care about them. Here’s why. In your current situation, unless we solve the mortgage problem, taking the money for the credit card debt still leaves you with a huge anvil hanging over your head, the mortgage situation. If that isn’t resolved you could still potentially lose the house, your credit would be shot and paying off the credit card debt would have provided little benefit to resolving the overall situation.

I think you really need to go talk to a couple of local bankruptcy attorneys about a Chapter 13 bankruptcy. The Chapter 13 bankruptcy has been used in California, and elsewhere, to strip away wholly unsecured second mortgages when the house value falls like your has. (Source) In that case the Chapter 13 bankruptcy would also provide a resolution and remedy to the credit card debt.

So it seems that looking closely at bankruptcy is going to provide you with a solution that will encompass both situations. It will help to remedy the mortgage issue and provide a resolution for the credit card debt. And you can do this without taking any cash from your relative.

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Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

About the author

Steve Rhode

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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