Foreclosure advice?

In the mean time, please call a lawyer and/or non-profit credit counselor.

Brett_Murphy wrote: I've heard stories that if you somehow get your payments reduced or forgiven it counts as income with the Federal Government. So, if your bank forgives, say $50k of debt on the house, that counts as $50k of income come tax time. Is that true?

IIRC that came up on the Dave Ramsey show a week or two ago and it seems that it's not taxable income if the debt is forgiven on your primary residence or something along those lines.

Datsun1500 wrote: They will not modify the loan unless you are behind. They will not talk to you about it unless you are behind. They will not take you off of autopay, you will need to switch bank accounts.

Take it off of auto pay first!

Your BEST option- improve your income a bit, and hang on for a while. Work on stabilizing your family first, then make a decision on the house in a year or so. Don't sell yourself short on this one. Both you and your wife can improve the income thing (a bit) without adding stress to the situation.

Second best option- talk to a non-profit debt consolidation company. This is NOT mutually exclusive from option #1, and they may be able to offer you some good advice that compliments it. Plus, they will know the specifics of your local market and be able to instruct you on some details that none of us on the int3rnetz can offer.

It is possible that bankruptcy is a better option than foreclosure. It should free you of the obligation without the deficiency, or a reduced amount. The non-profit will be able to help you sort this out.

Foreclosure might be the next option, but it is a VERY distant option. The negative impact could be huge (especially with the whole deficiency judgement thing). The worst part of this is it will DEFINITELY NOT reduce the stress. It will INCREASE it, and I don't think your family is ready for this. You could still owe all the debt you do currently, not have ANY asset to show for it, bad credit, and be being hassled by collection agents, lawyers, etc. That won't make your life any better.

Don't stop making payments quite yet. Maybe soon, but not quite yet. Look at the income side, and find a non-profit counselor.

You've done a lot of things right. Don't quit.

First things first. Non-profit does not mean they work for the good of the consumer. It simply means they pay out all the profits each year.

If by "non-profit debt consolidation company" you mean he needs to go to a company like Consumer Credit Counseling Service then you need to do a little more research on what they are. They are simply a "before you go bad" collection agency and you will have loads of negative credit showing on the report. In most cases they are actually worse on your credit than a bankruptcy.

They will put the really hard sell on you to sign up!!!! If you sign up and then back out soon after it will still be on your credit report and alerts all present and future creditors that you are in trouble.

Many counselors try to break your "dependency upon credit" and they do this by ruining your credit so that you can't use credit.

Bankruptcy is an event and time limits for future credit are based upon that time. CCCS goes on for so long it looks like a life style choice and can do damage in other ways.

Once upon a time I talked to the CEO of Montgomery Wards (yeah, it was that long ago). I wasn't satisfied with responses I was getting with underlings and worked my way all the way up the ladder. He is the one that told me the insider stuff about CCCS. He told me that creditors will do everything CCCS does and all without a negative impact upon your credit. He says CCCS tries to force a settlement on them and so many times creditors will report you as paid/settled for less than full amount, or show lates for every payment after you begin the process.

CCCS doesn't do all this for free. You have to pay them. Imagine that, you are paying them to ruin your credit- what a world!

I have had decades of experience with people who have taken that route and have never found a person who came out on top.

Also as SVrex said any of these options increase stress not reduce it. It's not as simple as walking away from a payment you don't want.

Good input. I'll admit I am not very knowledgable on the non-profit groups that are out there, but I do know there are good and bad ones. Sounds like you found a bad one. Previous posts have referenced good ones.

SVreX wrote: Good input. I'll admit I am not very knowledgable on the non-profit groups that are out there, but I do know there are good and bad ones. Sounds like you found a bad one. Previous posts have referenced good ones.

Commercial non-profits are all like the one I mentioned. I have never found an altruistic, I'm here to help all mankind type, but I'm sure there's at least one out there somewhere. The point is BEWARE!!

People think the non-profit moniker means no money or I'm doing this for the consumer's good but really all it tells is the way their money is distributed.

Just remember they are businesses like every place else you frequent and they have a product to sell. Check to see if the product they are pushing is one you need to buy. Don't let your guard down simply because they pay themselves differently.

Find out where their money comes from. Is it from you, the collection fees, or is it from some entity like the govt. who is offering the service as a public service.

KATYB wrote: i know some mortgages allow you to short sale and be forgiven the remaining balance....

Fairly sure that the IRS claims that remaining balance is "income" and will be taxed at the end of the year. Get some pro advice on this one because you have a fairly large differenece.

It might be hard to do for a while, but I'd be delivering some pizza nights and weekends for a few months.

carguy123 wrote: First things first. Non-profit does not mean they work for the good of the consumer. It simply means they pay out all the profits each year. If by "non-profit debt consolidation company" you mean he needs to go to a company like Consumer Credit Counseling Service then you need to do a little more research on what they are. They are simply a "before you go bad" collection agency and you will have loads of negative credit showing on the report. In most cases they are actually worse on your credit than a bankruptcy. They will put the really hard sell on you to sign up!!!! If you sign up and then back out soon after it will still be on your credit report and alerts all present and future creditors that you are in trouble. Many counselors try to break your "dependency upon credit" and they do this by ruining your credit so that you can't use credit. Bankruptcy is an event and time limits for future credit are based upon that time. CCCS goes on for so long it looks like a life style choice and can do damage in other ways. Once upon a time I talked to the CEO of Montgomery Wards (yeah, it was that long ago). I wasn't satisfied with responses I was getting with underlings and worked my way all the way up the ladder. He is the one that told me the insider stuff about CCCS. He told me that creditors will do everything CCCS does and all without a negative impact upon your credit. He says CCCS tries to force a settlement on them and so many times creditors will report you as paid/settled for less than full amount, or show lates for every payment after you begin the process. CCCS doesn't do all this for free. You have to pay them. Imagine that, you are paying them to ruin your credit- what a world! I have had decades of experience with people who have taken that route and have never found a person who came out on top. Also as SVrex said any of these options increase stress not reduce it. It's not as simple as walking away from a payment you don't want.

FWIW, I know someone who did work with CCCS to develop a debt management plan, which included suspension of some of the interest accrual, and he could not have been more pleased with the results. Yes - it hurt his credit some. The negotiated reduced rate resulted in a charge off. On the other hand, it got him out of a spiral and he was able to pay off the negotiated terms. It must not have hurt his credit too bad, as he was able to buy a house 4-5 years later.

i'm on the "another job" boat... I made more then that delivering pizza part time... even after figuring out operation costs of the car... yes the schedule sucked... but you can easily work a regular job

the negative is it doesn't have any real potential in moving up the chain/income ladder...

DILYSI he could have done it on his own with even less credit dinagage and you say he bought a house 4-5 years later? That's quite a long time.

Also WHEN did he buy said house? Back when Clinton had his "Everybody deserves a house even if we have to destroy the integrity of the mortgage industry" program? That definitely ain't today!

carguy123 wrote: DILYSI he could have done it on his own with even less credit dinagage and you say he bought a house 4-5 years later? That's quite a long time.

What CCCS did was negotiate a freeze to the accumulating interest. Prior to their involvement, he had gotten to a point where he couldn't even afford to pay the accumulating interest each month. Thus, the balance was increasing even though he wasn't using the cards and was paying a few hundred bucks each month. That's the spiral I referred to. Can't really escape from that scenario without either more money or less accumulation of interest, and he couldn't afford the more money part.

He had attempted to get them to freeze the interest / lower the interest rate to a point where he could at least begin whittling away on the principle, but when it was just him talking to the customer service bots, he got nowhere. CCCS did. Using the debt management plan they put in place, along with the frozen rates, he was able to get out from under the debt in a couple of years. And yes - 4-5 years is a long time in some regards, but it's a pretty short time to go from drowning in perpetual debt to being able to put 20% down on a home. It's also less time than a bankruptcy would have affected him, which at that point was the other option.

I'm not saying it's a silver bullet, and I'm not saying they are altruistic, etc. But they seem to be able to put the squeeze on situations where the individual consumer cannot.

carguy123 wrote: Also WHEN did he buy said house? Back when Clinton had his "Everybody deserves a house even if we have to destroy the integrity of the mortgage industry" program? That definitely ain't today!

Bought probably 8-9 years ago. So, before the insanity hit full swing, but probably when they were a lot more generous than they are today as well.

Five years ago I was stuck - my wife had lost her job and we were covering the mortgage on our home and the rental property which I couldn't find tenants for. Like idiots, we had taken to paying bills on credit cards hoping that the money crunch would pass quickly (it didn't). CCCS gave me some good, eye-opening advice on how to deal with my creditors, though I ultimately decided not to take them up on their credit consolidation offer. My visit was free.