What is worse for my future/credit ?

[dakcp2001]

Honestly, I would stop paying the credit cards and try to keep the house current. Once you miss a payment on the house or cc's those 0% rates are gone and in order to do a short sale you will need to miss payments.

I would put the house on the market, stop paying the cc and try to save as much money as I could, either for a "new to you but still old" car or to get out of the house. Your 4 walls are the most important thing, pay them (food, water, shelter & transportation), the rest of the people can take a place in line until more money is coming in.

I don't agree with that. Do not stop paying your cards or you will get a default rate. Make minimum if you have to.

 

[Sparkleshine]

Be very careful if you cash out your 401K - you will end up paying close to 40% of it on taxes. You will do much better getting a 401K loan than cashing it out.

 

[Jeff_G]

Could you pay the mortgage if you didn’t pay the credit cards? If so you are better off stopping those payments and paying the mortgage, then when you find work pay the credit cards back. Your credit is going to be trashed either way, so try to keep a roof over your head. You are not bankrupt until you lose the house and they sue you for the difference, or a credit card sues you and begins garnishment. Food, utilities, shelter, transportation to work are the top priorities now, then everything else.

 

[Bob NC]

Thanks for the kind words!

Here is our timeline:

• Started working on our mortgage modification in February 2008.

• Stopped paying the mortgage in October 2009.

• Listed the home for sale in December 2009.

• Lender approved the short sale in April 2010.

• Submitted multiple offers in June 2010.

• Short sale closed the last day of August 2010.

We got VERY lucky and are thankful every single day.

Martin

Contemporary Resort 9/17-9/24/2011
Short sale closed the last day of August 2010.

Disneyland Hotel 9/26-10/1/2009
Stopped paying the mortgage in October 2009


Wilderness Lodge 8/21-29/2008
Started working on our mortgage modification in February 2008


Yes, very interesting timeline.

 

[mombrontrent]

Contemporary Resort 9/17-9/24/2011
Short sale closed the last day of August 2010.

Disneyland Hotel 9/26-10/1/2009
Stopped paying the mortgage in October 2009


Wilderness Lodge 8/21-29/2008
Started working on our mortgage modification in February 2008


Yes, very interesting timeline.

Yes very intresting Maybe we can give Martin the benifit of the doubt and say maybe a relitive took them on vacation or paid for their trip as a gift(a very generous gift). However I do think it's very irresponisble to go on expensive trips when you can't even pay your mortgage. That just goes to show why SOME people are in the situations they are in, their priorites are messed up. I would never consider taking a trip anywhere if I were in any kind of finacial trouble.

 

[disneychrista]

Every one came back with the exact same recommendation: "increase your income." Excuse me? If I could do that I would not be talking to you bozos.

Everyone can increase their income, it is called a second job. I am looking at losing nearly $500 a month of income in the next few months. I will have to get a second job to replace that income. It sucks but growing up my dad did it most my life. If you want to live at a higher standard of living then your main job can provide, then you have to increase your income with a second job.

 

[Planogirl]

Second jobs can be hard to find but they are out there. You might have to do some yucky things but it's not permanent.

I don't agree that counseling doesn't work. It might not work in SOME cases but in others it can be invaluable.

Good luck with whatever you decide.

 

[ancestry]

Some 401(k)s will allow you to take a loan against the money for up to 50% of the value. You do pay it back with interest but you are paying the interest to yourself not to a 3rd party. Taking it as a loan doesn't have any tax implications but the payments are usually take out of your paycheck directly. If you lose or quit your job before the loan is paid back (to yourself) then you will have to pay taxes on the amount you didn't pay back.

DH and I took a 401(k) loan to pay off some high interest credit cards a while ago. It was the best financial decision we ever made and out 401(k) is still growing because we are paying back the loan with interest to ourselves.

 

[ccgirl]

Some 401(k)s will allow you to take a loan against the money for up to 50% of the value. You do pay it back with interest but you are paying the interest to yourself not to a 3rd party. Taking it as a loan doesn't have any tax implications but the payments are usually take out of your paycheck directly. If you lose or quit your job before the loan is paid back (to yourself) then you will have to pay taxes on the amount you didn't pay back.

DH and I took a 401(k) loan to pay off some high interest credit cards a while ago. It was the best financial decision we ever made and out 401(k) is still growing because we are paying back the loan with interest to ourselves.

Interesting. I had never heard of that. Is there a limit? Do all 401 K's allow this?

 

[mdsoccermom]

Yes very intresting Maybe we can give Martin the benifit of the doubt and say maybe a relitive took them on vacation or paid for their trip as a gift(a very generous gift). However I do think it's very irresponisble to go on expensive trips when you can't even pay your mortgage. That just goes to show why SOME people are in the situations they are in, their priorites are messed up. I would never consider taking a trip anywhere if I were in any kind of finacial trouble.

Especially when they are then saying they can't increase their income.

 

[ancestry]

Interesting. I had never heard of that. Is there a limit? Do all 401 K's allow this?

It depends on the rules of your specific 401(k) plan. Ours (actually hubby's) through Fidelity and hubby's employer allows this. The limit was 50% of your current 401(k) balance.

 

[bellarella]

Were I in that situation I would:

1. Try to get a loan on my 401k
2. Cash out the 401k

I would not go bankrupt, get foreclosed on, or have a short sale to save 10% in penalties on my 401k. Once I cashed it out, I would readjust my budget (and lower my expenses) to increase my savings rate to minimize the impact this will have.

 

[SandrA9810]

Sorry you are going through this... we already have.

We cashed out a big chunk of my 401k to try and hold onto our home and we still lost it. I would not recommend stealing from your retirement funds in an attempt to hang onto your home.

If you borrow against your 401k, they can come after you big time if you don't keep up with the payments. And then start taking even more from your paycheck. You can't loose any more income to another "debt". And you'd probably be a lot worse if you cashed it out rather than borrowed against it.

We worked for 2-1/2 years in an attempt to get a mortgage modification that never materialized. All the federal programs supposedly designed to help homeowners are simply lip sevice. Research them and you'll find congress has given lenders financial incentives to short sell or foreclose, they lose money if they modify mortgages.

Consumer crediit counseling services are useless. We tried several. Every one came back with the exact same recommendation: "increase your income." Excuse me? If I could do that I would not be talking to you bozos.

Same thing happened with me. Took me a couple hours to gather all the information and enter it in to their system. In the end, they could save me $3 a month, and would take just as long as what I was doing already... ohh and the grand advice of seek more income.

We were lucky to have been approved for a short sale. A short sale will stop you from getting a new mortgage for about 3 years, a foreclosure for 7 and a bankruptcy even longer. It was the best choice for us.

Our lender sent us 1099's reporting their loss as our income but it's just paper - the federal government has excluded up to $2 million in forgiven debt between 2007 & 2012. Most states have followed suit. There was zero tax impact for us.

I'm 52 and starting over. We're now 7 months into our new lives and the day-to-day financial stress is gone.

Good luck,

Martin

 

[heatherleigh]

Do the short sale, if possible. Also, you mentioned you have kept up with your payments (on time). I would seize the opportunity to purchase a vehicle while your credit is still good. You can get a decent interest rate, and won't be stressed about driving something unreliable or that you have to sink additional $ into.

Do not touch your 401k! I've always heard that is the worst possible thing anyone can do. Act as if that money doesn't exist.

 

[mhconley]

Everyone can increase their income, it is called a second job.

Some people cannot take a second job - I am salaried, work 72+ hours per week and am prohibited from taking a second job by contract.

Yes very intresting Maybe we can give Martin the benifit of the doubt and say maybe a relitive took them on vacation or paid for their trip as a gift(a very generous gift). However I do think it's very irresponisble to go on expensive trips when you can't even pay your mortgage. That just goes to show why SOME people are in the situations they are in, their priorites are messed up. I would never consider taking a trip anywhere if I were in any kind of finacial trouble.

Remember there are widely varying income levels on these boards. For us a week these trips are not a splurge. Our mortgage dwarfed what we spend for a week at WDW.

We are in the situation we are in because my wife became disabled and could no longer work, we began caring for her disabled mother, financially and physically, and our dream home was only worth 30% of what we paid for it. It sold at less than 27% of our initial purchase price in the short sale.

I would have loved to have found a way to hang onto our home but we could not. Heck, I would have settled for just outright selling it.

I'll say it again - do not jeopardize your retirement to save a home - it is simply a thing and things are just not worth it.

Martin

 

[pixiewings71]

My sister and her DH did a short sale, she lost her job and they had no choice. They did not owe the shortage, the bank agreed to the lesser amount of money in exchange for selling the house.
I lost my job last June, then DBF had a pay cut, we were unable to pay everything so we let the house payments go delinquent. Our mortgage company was amazing!!! They set us up on a trial plan and had us apply for a modification, within the 3 month trial period they had approved us and our new payments start next month! We did have to let the mortgage go delinquent but we can now keep it and not stress over that aspect of things.
Good luck to you, I hope you're able to find a good commuter car for him at a decent price!

 

[bellarella]

I'll say it again - do not jeopardize your retirement to save a home - it is simply a thing and things are just not worth it.

I disagree. The OP has the money in a 401k to be able to sell her home without ruining her credit.

If I had the money, I would not walk away from a debt obligation.

I do not see retirement savings as generally available funds, but faced with a short sale/foreclosure/bankruptcy, I would definitely tap into it *if* it would prevent any of these occurrences.

Short sales can take a very long time. There is no guarantee that the bank will accept the price buyers are willing to pay. In the meantime, the OP may start defaulting on her mortgage (which will further lower her credit score), and may go deeper into credit card debt. Further, I believe she said that she had an equity line on the house. Debt forgiveness on these can be complicated for tax purposes (depending on the amount taken out and the use, the forgiveness could be a taxable event).

Withdrawing from a 401k results in ordinary income tax (at the marginal rate) + 10% penalty. It's not the end of the world, and if it would keep me from trashing my credit (and walking from an obligation), I certainly would do it.

 

[jedijill]

Please consult a bankruptcy attorney (just talking to one doesn't mean you need to file...they will look at your situation and give you advice) or a professional credit counselor.

DO NOT TOUCH YOUR 401K before talking to an attorney. Worst case, you file BK....retirement savings are exempt and if you pull your money out and still lose your house you just threw away your retirement.

Think of your finances as a business decision and not an emotional one. Yes, people feel moral/emotional obligations but at the end of the day you have to make a financial decision that is best for you and your family. To do that, please consult a professional (or two!) to get the best advice you can so you can make an informed decision.

This advice comes from someone who moved 3 states away to avoid getting laid off 2 months before the bottom fell out of the economy and is still unable to sell their house. I paid my mortgage and rent for a solid year before I finally found a renter to help partially pay the mortgage. I also took a close to 10% pay cut last year.

Jill in CO

 

[Swan4Me]

Remember there are widely varying income levels on these boards. For us a week these trips are not a splurge. Our mortgage dwarfed what we spend for a week at WDW.

.

Martin

So your monthly mortgage dwarfed a $5000 +/- WDW trip?

Golly-how can a mortgage be that high?


I also vote for not touching the 401k-I know someone who did that and did not prepare for the additional taxes and got in further money jam.

 

[surfergirl602]

that trip you took for $5K would pay my mortgage for almost half a year! I have a 5 bedroom 3 bathroom house with a double garage (BIG for this area) so I'm not comparing apples to oranges here... we have a nice house... But I can't believe anyone's morgage would be MORE than that a month!