Bankruptcy vs Equity

ROOM4IMPROVEMENT · ‎01-21-2025

We experienced a MAJOR change in income in 2024 and have fallen behind in bills. Our scores have tanked horribly and we aren't sure what options are safe and available to us given we have equity in our home. We don't want to lose our home but we aren't sure how to tap into the equity to pay down our debt with damanged credit (or if that's that best solution). If you can share from experience how you may have had a similar situation and how you managed it all that would be great. For reference here's the snapshot...

His Income for 2024 has been unstable/unpredictable (take home varies monthly) $2200-2600 now. Down from $3500-4k monthly

My Income stable (take home monthly) $2200

Yet somehow (according to our W2s) we took in $103k gross in 2024. Still trying to figure that one out.

Assets

His Car $285per month (balance $4000)

My Car $0 per month (value $3000)

Mortgage $1000 per month (Equity $150k - balance $126k)

Debt

Student loans $40k

IRS debt $60k

Credit card and personal loan debt $80k

(2 credit cards have filed lawsuits and IRS debt is in collection)

Not sure how we'll be able to get through this and am constantly praying for relief without being homeless.

FicoMike0 · ‎01-21-2025

Since you don't provide any credit scores or data, no way to help with debt solutions.

there's something way off on your income. What does your w2 indicate your take home pay was? Are you due a large refund?

Certainly looks like you should talk to a bk atty.

Rogue46 · ‎01-21-2025

@ROOM4IMPROVEMENT wrote:
We experienced a MAJOR change in income in 2024 and have fallen behind in bills. Our scores have tanked horribly and we aren't sure what options are safe and available to us given we have equity in our home. We don't want to lose our home but we aren't sure how to tap into the equity to pay down our debt with damanged credit (or if that's that best solution). If you can share from experience how you may have had a similar situation and how you managed it all that would be great. For reference here's the snapshot...

His Income for 2024 has been unstable/unpredictable (take home varies monthly) $2200-2600 now. Down from $3500-4k monthly
My Income stable (take home monthly) $2200
Yet somehow (according to our W2s) we took in $103k gross in 2024. Still trying to figure that one out.

Assets
His Car $285per month (balance $4000)
My Car $0 per month (value $3000)
Mortgage $1000 per month (Equity $150k - balance $126k)

Debt
Student loans $40k
IRS debt $60k
Credit card and personal loan debt $80k
(2 credit cards have filed lawsuits and IRS debt is in collection)

Not sure how we'll be able to get through this and am constantly praying for relief without being homeless.

Unfortunately even if you have to file BK it wouldn't touch the IRS or or student loan debt so you would still be left with $100k on those. Selling the house would only net you around $20k after fees so I'm not sure that's a great idea either. That's a tough one, Stick around im sure others can provide ideas for you.

ROOM4IMPROVEMENT · ‎01-21-2025

Scores are in the low 500s. I'm not sure what could be off on the take home income it's exactly what was stated. Unfortunately it varies for him because his hours have been fluctuating like crazy. Sometimes he can't get 40hrs a week and other times he may get a few OT hours. What we saw in 2023 and 2024 was that income struggle was more substantial from August to March. According to W2s he made $59k and I $46k. We both have extra taxes coming out for Fed to help offset the IRS debt. Of course they take that return every year. We both pay extra in state taxes so that we don't owe state and usually see a refund of $3k give or take. Getting the state refund helped last year because the work was slow and we barely made ends meet.

compassion101 · ‎01-25-2025

I'm not sure what state you live in but it may make a difference. In most states 103K would be too much for two people to qualify for a Chapter 7. Do you have kids?

Your take home seems to be about 55 K. How was your gross 103K and take home 55K? Something just doesn't seem right about those numbers so I would check them out for accuracy.

If you were able to do a Chapter 7 you could discharge the credit card and personal loan debt, the IRS debt may get discharged if it's more than 3 years old.

Again depending upon your state, you don't seem to have a lot of equity in the house or cars and may be able to keep all three or at least the house and one of the cars.

Contact a lawyer for a free consultation.