Fixing financial crisis
My husband lost his job 20 weeks ago and is unable to find work that meets his standards. I am still working, but housepayments are going to hurt after unemployment runs out. Does one sell the house and downsize -- or ask relatives for money or an early inheritance to payoff the house (which has a balance of $97,000)?
A:
That's a tough situation. The first clue is in your question: "Unable to find work that meets his standards." I think we're already IN a recession, and jobs are going to get harder to find. The simple fact is that he's going to have to take ANY work -- even work in another field, to bring in some money! And he should recognize that fact NOW, while there may be jobs to find, and before many others in his situation realize that the jobs they need won't meet their self-image.
You can show this to him, and I hope you do. This is a very hard thing for anyone to understand, and I know that. But having money coming in to help with expenses -- even if it means doing something he would never have considered -- will be a lot better than having him sit around the house, for his own ego and for your finances. Tell him ALL he must earn every month -- even if it means getting a job as a waiter in a restaurant (far from home) -- is enough after-tax to pay the mortgage!!! Believe me, others will be in the same spot.
It will be hard to sell the house now because there are so many on the market. You can list it, but if you have a low, fixed-rate mortgage you're probably better off sticking with it. If you have an adjustable rate mortgage, go to your bank immediately. It may be hard to refinance without his salary, though. And if you do have an adjustable where the monthly payment is going to increase -- then, and only then, is it OK to go to either of your parents. Remember, it may look like they have an "inheritance" to leave you, but odds are they're trying to make their money last as long as they do. Most people didn't plan to live as long as they are, and with the rising cost of medical expenses and taxes, they're probably straining as well. On the other hand, if you have really wealthy parents, then of course do ask before you get behind and ruin your credit.
You didn't mention kids, college, etc. There must be a lot of things straining your budget with him out of work. The sooner you face those issues, and the sooner he realizes that the job disappeared, not his ability to work, the sooner you'll be on the road to dealing with those issues.
Q:
A couple of years ago we had acquired a large amount of credit card debt. We refinanced our home with a two-year ARM based on an interest-only payment. The amount borrowed was $256,000, with a $1567.78 monthly payment. This does not include taxes and insurance. We also took a second mortgage of $62,000 to help pay of some of our credit-card debt, which it did, but only a small amount. When we saw the bubble begin to burst we searched for a credit debt company to assist us in paying off the remainder of our credit bills. The company, DebtXS seemed to be a great way to go and we signed a contract with them. DebtXS has soaked almost $7000 from us in payments and done nothing but help us to ruin our already damaged credit. Because of their advice, (to stop paying all credit card bills and negotiate a lower pay-off), we now have two judgments against us and find it impossible to consolidate any more. We refinanced our 2nd mortgage to $93,000, with an additional monthly payment of $1125.39, approximately nine months ago, to pay several credit cards off by negotiating lower rates ourselves, without the aid of DebtXS. We are tapped loan wise and money wise. Even though we make a decent amount of money, ($120,000 per year), we are barely able to pay our normal living expenses, which are not extravagant by any means.
Please inform your readers to STAY AWAY from debt-elimination companies like DebtXS. The $7000 I have paid them would have paid off a major debt! I would also like to ask you for a suggestion on what to do next. We have no idea. No savings. No credit, and our home, due to the market, has not increased in value in the last 1 1/2 years! My wife is a retail store ops manager and I am a full time carpenter and part-time police officer with two children in college and one in high school. We realize we worked our way into this mess with overspending, but we now need to work our way out of this mess. Any help, even a direction, would be helpful as we are now "credit lepers."
A:
For years I have posted one -- and only one -- source for consumer credit help on the front page of my Web site. It is Consumer Credit Counseling Services, which has affiliated agencies around the country. You'll get automatically connected to the nearest local agency by calling 800-388-2227. I am going to post your letter in its entirety -- without your names -- so that others can learn from your experience! I'm not sure what can be done now -- but your CCCS counselor is trained to work with you -- and your creditors -- and will provide the best advice. At this stage, bankruptcy might be the only possibilty -- but only by going over your situation thoroughly can you and your counsleor decide on that option.
Terry Savage is a registered investment advisor and the author of the newly published The Savage Number: How Much Money Do You Need To Retire? (256 pages, Wiley, $24.95).
