should we mortgage our house?

[drowningintn]

My husband and I are in our late sixties. We own our house free and clear and it has been appraised at $114,000. We owe $177,000 in non secured credit card debt due to illness, business failure and layoffs. We have carried this debt for the past 30 years...it grows every year. We have a car payment of $334. The only income we get now is my husband's social security check - $2300. We can't continue making payments on the cc's unless we cash out our 401's and IRA's (about $145,000). We recently have been approached by a lender who wants us to take out a loan on our house. The max we could borrow is about $80,000. He says it would help us pay off the high interest cards and reduce our payments. We would then owe them about $600 for the mortgage plus still owe the cc's we didn't pay off. Wouldn't this be just prolonging the inevetiable? Who would bennifit in this situation?

[AngelinaCatHub]

Please indulge me in my strong opinion: You would be NUTZ to do this. Your home is exempt and you want to pay peter by robbing not Paul but JC himself.

For dischargeable debt you would risk your HOME? I BEG you not to listen and who will profit? Your mortgage holder will be living in your house if you fail. Think about this I beg you. ‘Hub

[StartingOver08]

Hub, are you sure the home is exempt? The OP is in TN and I could not find the actual exemption for homestead. The OP would have to move to a state that allowed either Federal Exemptions ($125k, which TN does not allow) or to a state with unlimited exemptions like Fl and then that opens another can of worms.

All I found for TN is: http://www.legalconsumer.com/bankrup...nooga%2C+TN-GA

TN Exemptions


This may be an opportunity for a reverse mortgage for the OP.
Certainly the OP needs to do something - I just don't know if BK is the answer in this case.

In any event, if the OP decides to consider a reverse mortgage - they would need to negotiate the payoff the debt anyway.

[AngelinaCatHub]

Hub, are you sure the home is exempt? The OP is in TN and I could not find the actual exemption for homestead. All I found was: http://www.legalconsumer.com/bankrup...nooga%2C+TN-GA

TN Exemptions


This may be an opportunity for a reverse mortgage for the OP.
Certainly the OP needs to do something - I just don't know if BK is the answer in this case.

[StartingOver08]

...

I agree with you here.

I hate to see unsecured debt get paid off with the proceeds from a refinance of a fully paid home. All that has happened is the unsecured debt gets secured and that is the worst thing for retirement.

[catleg]

I think you need to do a Bernie Madoff, sell the home to your kids, wait 2 years and then file chapter 7.

[eddiep]

If the cc were defaulted on and they got a judgment, would they be able to get a garnishment on social security income? Or if they placed a lien on the property could they force a sale to pay off the judgment? I guess I am wondering if they are "judgement proof"

[drowningintn]

The SS check is free from garnishment. Because of our ages, we have a TN home exemption of $20,000. We were thinking that if we had the home mortgage, then the equity would be less than the exemption and wouldn't be worth the trouble for them to auction it off and we would be able to keep the house. The house is actually a "money pit" anyways and costs a lot to keep up. We would have to use the retirements funds to pay the mortgage anyways, so it probably is a dumb idea. I'm ready to surrender and start over.

[StartingOver08]

Talk to an asset protection attorney about your situation.

The SS check is free from garnishment. Because of our ages, we have a TN home exemption of $20,000. We were thinking that if we had the home mortgage, then the equity would be less than the exemption and wouldn't be worth the trouble for them to auction it off and we would be able to keep the house. The house is actually a "money pit" anyways and costs a lot to keep up. We would have to use the retirements funds to pay the mortgage anyways, so it probably is a dumb idea. I'm ready to surrender and start over.

This is partly why I mentioned a reverse mortgage - they actually pay you either a lump sum or monthly and there are other benefits.

Of course, if it is a true money pit - sell it. Before you do this, talk to an excellent asset protection attorney. You may have to interview several to find one that is the right one.

[keepmine]

I second Startingover's suggestion.
In general, the idea is to sell the house and put the proceeds into something that may be exempt from creditor seizure like, insurance annuities and then, let it all go.
Wait a few years and then file bk.
You can tell if you have a good asset protection attorney. His first words ought to be, "we don't do asset protection.We do estate planning, retirement planning and, tax planning." However, asset protection is a valuable byproduct of the process.