New here...need help please!

[gosteelers]

I guess I need some advice, or at least I don't want to feel so alone right now. I'm hoping this message board can help, in at least one of those ways.

Here's my story...

Up until this week, my spouse and I made about $108,000 per year, with a $1700/mo mortgage, $750/mo auto leases and (yikes!) $67,000 in credit card debt. For the past two months we've totally stopped increasing our debt, did a budget and were starting to really get on track. We are in the middle of applying for a 125% LTV home equity loan to consolidate the credit card debt and an existing home equity loan at 13.5% interest. We were also considering maybe credit counseling/debt management plan, or just trying to negotiate with creditors directly.

Then...

Yesterday my spouse got laid off. Now we are down to about $38k in income once the four months severance runs out (my spouse earned $70k). We have some time to plan, but I'm not sure my spouse can get a similar high-paying job.

I'm confident my spouse can get a job that will let us pay the house, the cars and the utilities/food. The *credit card debt* is going to be a big burden, though. That is our real problem.

I'm guessing our options are:

- Home equity loan at 13.5% (sounds bad now, in the event we soon end up in BK. Not losing possessions/house is our #1 priority. I've read you really can't "borrow your way out of debt.") So it would be bad to turn unsecured debt into secured debt right now, even if the monthly payment was lower?
- Debt Management Program - Haven't looked into this and have read good and bad. Probably would not help much with the immediate cash flow, but may be better than a 125% LTV home equity loan?
- Chapter 13 - Scares me so much. So many questions.

I know we've screwed up a really good situation and just when we started to turn things around, this bomb was dropped on us. Please don't chide me for the debt we've accumulated, we've learned a hard lesson and have enough guilty and anxiety right now!

The thing that is killing us is the $67,000 in credit card (and the associated minimum payments) -- otherwise we would be in decent shape and nowhere near a bankruptcy.

Any ideas? Take out the high-interest home-equity loan? Should we call a credit counseling firm? Go straight to an attorney? Wait until we see what job my spouse gets?

I feel sick...

[StaciMM]

Looking on the bright side-you have some time to plan. Right now, you don't know where you'll be in 4 months. BK may ultimately be an option, but ch. 7 is not one for you right now. W/ the new laws, your monthly income is determined by averaging your past 6 months worth of income. With an average over $100,000/year, you're bound to be over your state's median income.

For now, concentrate on cutting back where you can. Don't use the credit cards-at all. If you do end up filing BK, it would be good for you to be in the habit of not relying on credit. In 4 months time, when the severance runs out, you'll have a better idea of what your income situation is at that point. You may ultimately be a candidate for ch. 7 or ch. 13 (where you repay a % to your creditors over 5 years).

[StaciMM]

Edited to add-if your spouse ultimately does NOT get a job that allows you to pay the credit cards, you could stop paying them once the severance runs out. You would probably still need to wait 3-6 months to file, though, or the old job/severance pay would counted in your income.

If your spouse gets another job soon, I imagine you'll have that income + the severance pay for the 4 months. You may be able to use that extra money toward paying off some of your credit card debt. Before the severance runs out, reassess your budget. (With fewer credit card payments.) That might allow you to avoid BK.

[bezoar]

I personally would put the brakes on the home equity loan and start making some appointments w/ atty's - just to get their take on the matter. Putting your house at greater risk when your future is up in the air at the moment is probably not the most wise thing to do.

You'll want to try to talk with several. Some are still scratching their heads regarding the new laws while others are swamped with clients from the pre-10/17 filings. The good news is that you don't sound like you need to file immediately (no lawsuits, foreclosure, etc) so you have some time to evaluate your options - and for hubby to start looking for a new job.

[StaciMM]

Agreed-taking the home equity loan right when you don't know where you'll be in 4-6 months could be a BAD move.

My honest opinion is to research & explore all your options, but don't make a permanent change when so much is in limbo.

[Lightning]

I agree. Do not take out a home equity loan now. Keep up the payments on the credit cards so the interest rates will be less likely to go up. One late payment could put you in a really deep hole.

Right now your spouse's full-time is finding a job. Get up every day at the same time as if you're going to work. Work on the resume, start networking, post a resume on the online career sites, search classifieds, etc. You didn't mention your spouse's career field, but be prepared to accept a pay cut as many jobs just don't pay what they used to.

I'm guessing you probably don't have much in savings given the high credit card debt. If that's the case, start cutting your expenses as much as possible. Get rid of cable/satellite TV, cell phones, broadband internet access, cut back or eliminate expenses on hobbies such as golf. Drive as little as possible to save on gas. Don't buy any new clothes except maybe a new, yet inexpensive, interview outfit for your spouse.

[BassBoy]

Well said folks

gosteelers,

Everyone who has replied is absolutely right! A few years ago, my spouse and I refinanced at 100% LTV in order to bury the CC debt and it has come back to haunt us. If you are unsure of what your finances may be in 4 to 6 months, like we were (unsure) when we re-fied, then do not make any decisions that could come back to haunt you. Be patient and be very diligent.

I hope this works out for you and hubby.