Financial nightmare UPDATE!!!!!!

[luvintink7]

I have been reading this board for a couple of months on the recommendation of a friend. I have been hesitant to ask for help because my problem is embarassing for me. I read about so many folks here that are out of debt and my problem is the polar opposite. A couple of years ago my DH became very ill with a bowel obstuction. He is self empoyed. He was unable to work for 11 months. Needless to say this has caused us to spiral into a financial disaster. Please do not tell me what we should have done as the past is in the past and I need help today. We have ended up in $65,000 in credit card debt. I feel like I am drowning. He is back to work and finally in good health. We are both working 2 jobs and just able to make the minimum payments on the cards. We do not live outside our means. You can't believe how hard it is to catch up when you have been so far behind. The CC companies have raised all out interest rates. We are paying between 29.99% and 33.9% in interest. We just can't make a dent in this debt. We feel we have two options. One is refinance our home and consolidate the debt to lower the interest and make it more managable. This will free up $747 a month to go toward the principle on the mortgage. This is a scary move because our mortgage will be 95% of the value of our home. My second choice is bankruptcy, which I know nothing about. I tried a credit counseling service and they will not let us keep one credit card. My DH absolutely cannot run his business without a credit card. Our debt was maily from cash advances to survive while he was ill. we do not have a "problem" with spending money. I have the refinnace papers here to be signed and I am terrified. I really need some opinions.

 

[Chicago526]

I don't know if you'd be able to refinance to have only 5% equity, banks are tightening up and while you can still get HEL's, they want people to have more equity incase housing prices continue to fall.

I hate to say it, but your best move may be to sell the house, use the proceeds to pay off your debt, rent a place and then save for a down payment on a new home. If you use most of the money you were using to pay off cc's to save for a down payment, it wouldn't even take you that long.

This isn't a flame AT ALL, but this is a prime example why all working adults need to have short and long term disability insurance. it will pay the bills while you can't work and avoid situations like this. Again, not a flame, just an FYI for others reading the thread.

 

[Tnkrbelle565]

I'm assuming that you have talked to your CC Companies and tried to get your interest rates lowered?

 

[Toby'sFriend]

are you refinancing to a fixed rate or adjustable rate?

After you refinance, what % of your income will your housing payment be?

 

[merryweather's twin]

I would refinance. It will let you make your min payments and give you breathing room. The home loan inst. rate will be much lower and you can pay extra! Your credit will be better with the cards payed off ...I would put the other cards up (water block in freezer or get rid of them)except the one he needs so you do not use them. I would not be worried about 95% of the home .... Most people are right there with you when they purchase their home new. Make any extra payment on the prin. and in a year or 2 make it a 15 year note.
I would also suggest that you cut the extra job hours some after you are doing better. Life is too short and if he has been ill you should be spending time with him enjoying life.... Not worring and working so much. Good luck.

 

[clarabelle]

Do you have a car you could sell for something cheaper?
Anything else you can sell? (a lot of people here selling old gold)

 

[Toby'sFriend]

would not be worried about 95% of the home .... Most people are right there with you when they purchase their home new.

Yes, and many people who financed 95% of their homes and then saw their home values drop by 20% in 6 months, now find themselves stuck in a home that they can't afford the payments on and can't sell because they own more than it is worth.

ALWAYS ALWAYS ALWAYS think very long and hard about converting unsecured debt (credit cards) to secured debt (a home loan).

It might be a good move, it might be a terrible move. But it is not something that you just do without very careful consideration.

 

[luvintink7]

We do not qualify for a home equity line. We do qualify for a refi at 5.8%. Not using the cards will not be a problem for us except his business. He has to travel and really needs a credit card for a variety of reasons with his company. I am glad we kept our company afloat while he was ill because it is a huge source of our income. We did what we had to do to survive. I just don't want to make any stupid moves from here on out.

 

[Cheshire Figment]

I'm assuming that you have talked to your CC Companies and tried to get your interest rates lowered?

If you have not done this, you should.

When you call the credit card companies ask to speak to a supervisor. Get names and direct phone numbers if possible. If a supervisor will not lower your rates, ask to speak with their manager.

Tell them your situation and mention that you are considering filing for bankruptcy. Let them know this will be necessary if you cannot get the rates lowered to a "normal, non-penalty" rate. This will scare them as if you file bankruptcy they will be out all of the money.

 

[SandraVB79]

OK, tell me I am naive, but...

Your DH needs a CC for his business. I would think this is a professional CC linked to the business.
If you (DH and you personally) do the CC consolidation thing (or whatever it is called), you can't keep any CC. I would guess these are personal CCs, right?
So, there is no way your DH can have a business one and you both have no personal ones?

Over here, business and private has to be completely divided.


Other than that, good luck on getting out of debt!

 

[luvintink7]

He drives a 92 and I drive an 02. We do not have fancy cars. Selling a car or gold is not going to bring in $65,000. We thought of selling the house but in this market it could take a year. I can't pay 30% interest for another year...it is throwing away money.

 

[luvintink7]

If you have not done this, you should.

When you call the credit card companies ask to speak to a supervisor. Get names and direct phone numbers if possible. If a supervisor will not lower your rates, ask to speak with their manager.

Tell them your situation and mention that you are considering filing for bankruptcy. Let them know this will be necessary if you cannot get the rates lowered to a "normal, non-penalty" rate. This will scare them as if you file bankruptcy they will be out all of the money.

HA they are a joke! I begged them. They do not care and I did try the bankruptcy thing. They did not care.

 

[luvintink7]

OK, tell me I am naive, but...Your DH needs a CC for his business.* I would think this is a professional CC linked to the business.If you (DH and you personally) do the CC consolidation thing (or whatever it is called), you can't keep any CC.* I would guess these are personal CCs, right?So, there is no way your DH can have a business one and you both have no personal ones? Over here, business and private has to be completely divided.Other than that, good luck on getting out of debt!

DH is a sole proprieter.* He is a contractor.

 

[Teresa Pitman]

Can your husband incorporate the business, so that it becomes a separate entity, and then the business could have its own credit card? Because I honestly think, from what you've said, that bankruptcy might be the best route for you.

If that's not possible, do you have family members who might be willing to add your husband onto a credit card they have?

Teresa

 

[hinodis]

My dh owns a business as well and it can be a very scary thing sometimes. I am sorry to hear about your situation. If you are confident in your DH's business, then the refi may be the best choice for you right now. How is the housing market in your area? If you are planning to stay there for a long time then it will not matter if your financing high. It will go down fast if your paying extra money into the principal. Good Luck

 

[Irin997]

I have been reading this board for a couple of months on the recommendation of a friend. I have been hesitant to ask for help because my problem is embarassing for me. I read about so many folks here that are out of debt and my problem is the polar opposite. A couple of years ago my DH became very ill with a bowel obstuction. He is self empoyed. He was unable to work for 11 months. Needless to say this has caused us to spiral into a financial disaster. Please do not tell me what we should have done as the past is in the past and I need help today. We have ended up in $65,000 in credit card debt. I feel like I am drowning. He is back to work and finally in good health. We are both working 2 jobs and just able to make the minimum payments on the cards. We do not live outside our means. You can't believe how hard it is to catch up when you have been so far behind. The CC companies have raised all out interest rates. We are paying between 29.99% and 33.9% in interest. We just can't make a dent in this debt. We feel we have two options. One is refinance our home and consolidate the debt to lower the interest and make it more managable. This will free up $747 a month to go toward the principle on the mortgage. This is a scary move because our mortgage will be 95% of the value of our home. My second choice is bankruptcy, which I know nothing about. I tried a credit counseling service and they will not let us keep one credit card. My DH absolutely cannot run his business without a credit card. Our debt was maily from cash advances to survive while he was ill. we do not have a "problem" with spending money. I have the refinnace papers here to be signed and I am terrified. I really need some opinions.

How much longer are you planning on staying in the house? If you don't plan on moving for 5 - 10 years, then don't worry about the 95% LTV. You will gain equity the longer your stay in your home. If you plan on trying to move ASAP than clearly a 95% LTV is a bad idea.

As long as you can afford the monthly mortgage payment (which I'm assuming the credit card will be wrapped up in..??) then go for it. And like you said, put the $747 a month towards the payment to pay down that $65,000 of debt! Good luck in whatever you decide.

 

[luvsJack]

You said he travels and what not with his business and needs a card. Is it to actually make charges on or for reservations, car rentals and things like that? We use a VISA check card for those things. Is that a possiblity?

We are in the process of paying off our cc through credit counseling; it is a great relief and they do get your interest way down. I couldn't get the cc companies to talk to me either, but InCharge did.

 

[LSchrow]

first, & most important, take a deep breath (really deep, all the way down ).

if you look at the mountain of debt as insurmountable, you'll have trouble conquering it. think of how long it took for the debt to accrue, how this was a "life episode" that you are now repairing (plus the fact that many, many people have gone through similar circumstances, & came through poorer, but with excellent lessons learned on financial survival ).
the refi is a good idea (if it can be done as you said, & you intend to stay in the house). do as figment said: CC's want their money, & if you file for bankruptcy, they will lose a lot of it.
also, look at the debt in simple terms by breaking it down & putting it on paper (keep a financial "journal" to organize your bills & debt). as each debt is satisfied, mark it, give yourself a "pat on the back", & start attacking the next one.

a financial crisis can be temporary, & it sounds like you are on the right track to making sure it is
glad to hear your DH is better ~ now comes the (comparatively) easy part. good luck

 

[luvintink7]

You said he travels and what not with his business and needs a card. Is it to actually make charges on or for reservations, car rentals and things like that? We use a VISA check card for those things. Is that a possiblity?

We are in the process of paying off our cc through credit counseling; it is a great relief and they do get your interest way down. I couldn't get the cc companies to talk to me either, but InCharge did.

Can you tell me more about InCharge??

 

[Chicago526]

He drives a 92 and I drive an 02. We do not have fancy cars. Selling a car or gold is not going to bring in $65,000. We thought of selling the house but in this market it could take a year. I can't pay 30% interest for another year...it is throwing away money.

First, are you sure you'll actually be approved for the 95% refi? Are you sure your house will apraise high enough, are you sure your credit scores are high enough? Are you sure your increased CC debt won't disqualify you?

Second, are you sure it will take a year to sell the house? Some markets aren't as slow as others, especially if your house is priced right and is in good condition in a desirable neighborhood. You can always have a real estate agent take a look at it and give you an opinon.

IF you can truely qualify for the refi and IF you are as certain as anyone can be that you'll be able to handle the new payment (how long will it take for your husbands business to generate income after such a long absence? has his field changed while he was sick, has buisness in the area slowed down?) and IF you are positive that you won't run up the cards again, then a refi could be your best option. But be very careful, if business isn't as good as it's been in the past, if your husband or you (God forbid) get sick again, or any other disaster befalls you, you're going to lose the house anyway, only it will be a lot less controlled than putting it up on the market yourself.

If you don't qualify for the refi, then I do think you next best option is to sell the house (price it right and it WILL sell) pay off you debt, and rent while you save like crazy people to buy another house.

BTW, have you checked with Consumer Credit Counsiling Service (CCCS). I thought that they let you keep one CC open for emergencies and such, but maybe that's changed. Pull up the website for United Way and follow their link to them, they're the best credit counselors out there and the only one that gets consistantly good reviews, a lot of credit counselors are glorified crooks. If you can work with them and they let you keep a CC open, then I'd go this route!