I need some help...

[Anonymous]

Hi there everyone -

This is my first post after reading through this forum for a while.

I don't know what to do right now - me and my wife are in debt, badly.  We own a home and we are current on the mortgage.  We have racked up nearly 50,000 in debt because of a substantial drop in income and we did not adjust our lifestyle.  My wifes score is OK - last we looked it was around 650, but mine is dropping fast - last I checked it was about 520.  We are current on all cards and most of the interest rates are at or below 5.9% - but we have one that is causing us concern.  I have a BOA CC with a balance of $18,000 that is approaching 120 days past due.  We do not have the money to pay it.  I have been in contact with BOA almost every week letting them know my situation.  What happens if we do not pay this?  My #1 priority is our home - is there any chance they can take our home?  We also have a 2nd mortgage and we are current on that.  We have not used a CC in over 12 months - so are balances are dropping and we are digging ourselves out of the hole - but this one card is killing us. 

Any help you have I would appreciate.

Jim

[fused]

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ioweiowe wrote:

Hi there everyone -

This is my first post after reading through this forum for a while.

I don't know what to do right now - me and my wife are in debt, badly.  We own a home and we are current on the mortgage.  We have racked up nearly 50,000 in debt because of a substantial drop in income and we did not adjust our lifestyle.  My wifes score is OK - last we looked it was around 650, but mine is dropping fast - last I checked it was about 520.  We are current on all cards and most of the interest rates are at or below 5.9% - but we have one that is causing us concern.  I have a BOA CC with a balance of $18,000 that is approaching 120 days past due.  We do not have the money to pay it.  I have been in contact with BOA almost every week letting them know my situation.  What happens if we do not pay this?  My #1 priority is our home - is there any chance they can take our home?  We also have a 2nd mortgage and we are current on that.  We have not used a CC in over 12 months - so are balances are dropping and we are digging ourselves out of the hole - but this one card is killing us. 

Any help you have I would appreciate.

Jim

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A few questions. Is this card joint... it doesn't sound like it? Are both of you on the mortgages? How much equity do you have in each?

[Anonymous]

The CC is just in my name - the mortgage is in both our names.  We have about $100k in equity in the home, but remember we also have a 2nd mortgage out at $65k.

Jim

[Anonymous]

Okay, inyour original post, you made the statement that your debt has racked up due to unwillingness to adjust your lifestyle.  You still have about 35k in equity on your home, have you thought about putting it on the market and selling it.  Moving into an partment until your financial situation turns around?

I know that would be a hard choice to mae and no guarantees with the current housing situation but would the atempt be worth it until you can get straightened out financially.  With 18k in debt, BOFA will proabably not play nice in the end.  Ithink if you let them know you are putting your home on the market to try and make good on this debt, they may be a little bit more understanding.  You can alwaysmax out the equity on your home but that is never the smart thingto do and it would just result in delaying the inevitable if the tables haven't turned for you financially.

Bankruptcy is an option, but even when a debtor wants to reaffirm a housing loan, the lender does not have to agree wth it.  I would never reccommend bankruptcy unkess it would be a last resort.  However, there are non-proit credit counseling agencies out there that can work with your creditors on your behalf to lower payments.

Whatever you do, think long and hard because whatever you do can effect the remainder of your financial life.

[Anonymous]

I should add that we have about $35k in our 401k - should we possibly withdraw this to pay the BOA card - I know there is a penalty, but might this be an option?

Jim

[Anonymous]

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ioweiowe wrote:

I should add that we have about $35k in our 401k - should we possibly withdraw this to pay the BOA card - I know there is a penalty, but might this be an option?

Jim

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While I never recommend withdrawing retirement funds to pay back debt, if your only other option is bankruptcy, legal action of worse, this is not a bad idea.  Before paying contact the creditors and let them know what you are willing to do to repay the debt and ask if they would remove the delinquent information from my credit files in return.  Some are more than willing to do this or reage the account.  Especially seeing that you are willing to repay by any means necessary.

[Anonymous]

What about a home equity loan to pay the 18K?

[Anonymous]

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hdj wrote:
What about a home equity loan to pay the 18K?

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From whatthe OP write, that would only be borrowing from Peter to pay Paul. If the financial situation hasn't turned arnd it may wind up putting them in a tighter bind if they ever needed to get out of the house.  In today's market, there is no guarantee that if they ever wantd to sell the house to remedy this that they would get full value on the house so its best to leave some equity. I for one, don't believe in tying up home ownership with unsecured debt.

[Anonymous]

FYI to OP and everyone else.... it takes about 10% of the sale price to sell a home (real estate commissions, transfer taxes, recordations taxes and other fees) and that does not inclue any closing cost help that the buyer may ask for

Anyone that bought between 2003-2006 and didn't put a lot of money down would probably be 'negative' (i.e. need to bring money to the table) in order to sell.  As a Realtor is it hard to tell someone that they have to bring $10K in cash in order to sell. - they don't like you a whole lot. 

Selling a home should be a last resort in this situation.  I applaud the OP for keeping the mortgage current under the circumstances.  I think most of us have made 'lifestyle' mistakes - I know I have - in regards to our spending.  ZThe OP has figured out that the mistake has been made - is willing to own up to it - and now wants a way to limit the damage.  A hard lesson learned and will probably never repeat the mistake.

BofA is an unsecured CC debt - no, they can't 'take' your home (only the tax man and the mortgage holders can do that).  I would attempt to work out a plan with BofA - ask for an interst rate reduction to start - all they can say is no.

May I asked why the drop in income - and can your income levels return up in time or is it a permanent situation?

[Anonymous]

Another suggestion would be to only withdraw 9K from your 401K to pay down half the balance on the credit card and get you current. Of course, this would only work if you could afford the minimum payments after putting 9K down, but if you *can* afford it, then you would have some good payment history to follow the negative. Then of course you can always GW down the road...

Is there any way your or your spouse could take on a second job? Even part-time?

Good luck, I hope things work out for you.