Newbie needs advice

[SN2009]

Hi there,
First post ever and just wanting feedback.
We purchased our home in 2005 and according to the local realtor we are upside down $250K with the foreclosures and downward spiral of the home prices in our area.
I currently do not work and will be graduating from Nursing school in 6 months. When I graduate I will have 6 months grace period before repayment of the student loan. I have also about 45K in credit card debt, car loans of $1000 per month for 2 cars. We have about $30K from now until I graduate in April.
My question is : Should we use that money to put into a house (mortgage payments) that has been declining in value or if we shoud try to short sell and rent for the next few years? If we short sell, we still run the risk of foreclosing if the banks don't agree on the price and will not be able to buy again for many years.
If we stick it out and use all of the 30K, there is no guarantee I will find a job right after I graduate so we still run the risk of losing our house and no more savings cuz it was used to pay for mortgage.
Any input would help, Thanks!

[jIM_Ohio]

Tough call, here are the few things I know which apply to you:

1) Cash is better than home equity- keep current on all bills
2) Your income will rise in 6 months once you graduate
3) I would not make too many mid or long term plans until you see income after getting a job.

In the mean time, I might consider
a) paying off cc with some or all of 30k- depends on balances and interest rates
b) stop using the cards for purchases and cut back on expenses until graduation- no more phone, cable eating out and similar.
c) consider reducing car debt by selling or paying off, depending on loan terms and balance

[maat55]

I would keep 5k for small EF, payoff or sell cars and replace with beaters. Anything leftover would go to paying off CC's.

With the cars, I would sell them, paid off or not, and pay cash for cars 5k or less. As stated above, stop using the cards, cut out all nonessential spending.

The idea is to lower as much debt as possible while applying as much income to debt reduction as possible. I assume you have a good income and may be spending money recklessly. Sitting down and starting a strict budget may produce extra funds for debt reduction.

Treat your finances as a business. Especially, as a business going through a slump.

[jIM_Ohio]

The idea is to lower as much debt as possible while applying as much income to debt reduction as possible. I assume you have a good income and may be spending money recklessly. Sitting down and starting a strict budget may produce extra funds for debt reduction.

Maat- check again I think there is 30k in the bank and no job (INCOME) for next 6 months.

[maat55]

Maat- check again I think there is 30k in the bank and no job (INCOME) for next 6 months.

If they have no income, They should sell off one or more cars and cut expenses to the bone, and stretch out the 30k as long as possible. Someone needs to get a side job.

[MiikeB]

Part of me doesn't understand how you can have 30k in the bank but have 45k in credit card debt? Did you have the money in the bank when you ran up the debt? How did you decide to purchase two cars totaling payments of 1k a month with no income and cc debt? or how did you take on cc debt knowing you had 1k a month in car bills?

I am just curious how someone could get in such a weird situation, and until behaviors are addressed how you deal with this debt in the short term is irrelevant.

[amarowsky]

I would keep 5k for small EF, payoff or sell cars and replace with beaters. Anything leftover would go to paying off CC's.

I could not agree more. Do you have numbers for the %APR on all the card, the cars, the mortgage payment, and the Student loan? If you get all those numbers together we can hammer out a plan for your 30k to stretch as LONG as possible.

With your 30k, what kind of account is it in 401k, savings, checking, roth IRA, mattress? Thats a good chunk of money you could start making some passive income from.

Also no matter what, I say you sell those cars if they you are able to get a decent return on them (also depending on how much left you owe on them).

AND GET A JOB, Even if it's at some place only offering a lower compensation. Nothing is worse than no active income at all. The only way you can tip-toe around that is if having a job (even 20 hours a week) is that having the job will totally cause you to fail in your studying. One of my buddies is currently going to school with 15 credit hours and working nearly full time, I work totally fulltime but only take a few credit hours every quarter and a few more during semesters.

[disneysteve]

You keep writing "we" as in there are 2 of you. You are in school. What about the other person? Does he/she have an income?

As for the house, are you having difficulty making the payments? If not, don't consider a short sale. The current value of the home is only relevant if you are looking to sell. Otherwise, you agreed to buy the house for a set price and took a mortgage for a certain amount and you are obligated to hold up your end of that deal no matter what the current value of the home happens to be.

[maat55]

Without knowing what your income potential is and why there is no income at all, I still see longterm problems even when you have income. Questions.

What is your house payment?
What is your total income?
What is your income potential in 6 months?
If there is no income, why not?
Can one or both get some kind of jobs?

Student loans, Credit card debt, a big house payment and two big car payments is huge mountain to climb with no assurance of income and even with a good income, the debt will be around quite a while.

With what I see to go on, I would do everything I could to lower my living expenses, including leaving the home and selling the cars. Being in this same postion 6 months from now with no money and no job will be a disaster.