selling home to pay off debt

[jdepp]

I am drowning in debt and would like to know if this decision I am contemplating is worth it. My wife and I have a combined college debt of +-$100000. We have incurred over the last 15 years of marriage about $15000 in credit card & personal loan debt. We have had a combined income for 2-3 years for the time we were married but for the most part living off a single income and now with 2 kids. I am looking into a career change to increase my overall income and taking some part time classes with a weekend job as well. This should theoretically be a good starting point to start paying off the debt including cutting down expenses. We have had medical expenses with my wifes & daughters chronic illnesses, supporting my parents overseas and a list of rather bad luck incidents that have incurred the debt over the years. I feel that trying to pay down this debt will take years and my wife cannot continue working for more than 2-3 years of course depending on her health and when I can begin a new or additional career. I thought that selling our house (homeowner for 4 years now) will provide me a lump sum (if I get my asking price) to pay off the $15000 & gives me an opportunity to start with a clean slate. The idea is to then rent. However when looking at rental prices, it is ironic that my current mortgage, plus taxes, plus home insurance, plus mortgage insurance = a decent 2 bedroom apartment. The only additional expense I have is association fee which includes my water. Does it make sense to do this or am I better off keeping the house and doing the long haul method of paying it off. I have no inheritance or any wish of getting a large sum of money to do this. I have never forced my wife to work but this time I did and would feel miserable if she gets sicker due to all this stress I am placing on her. The alternative I have heard from some is to sell everything and leave the country and then still pay off everything slowly but at least the debt is not in your face.

[skittles]

It's hard to say without more information...

What is your income? What is your likely income if you successfully make a career switch? What would your wife be able to earn if she is able to work for 2 years? How much of the $100k+ student loans is federal vs private? What are the interest rates on all your loans? How old are your kids?

The rental market is skewed towards landlords as you are finding out. I would rather find a way to pay off the CC debt, and go on an income based payment plan for the students loans (if federal), and keep the house. If you have a fixed mortgage rate, that monthly amount won't change much other than property taxes, but rental prices can always be hiked by the landlord.

[jdepp]

It's hard to say without more information...

What is your income? What is your likely income if you successfully make a career switch? What would your wife be able to earn if she is able to work for 2 years? How much of the $100k+ student loans is federal vs private? What are the interest rates on all your loans? How old are your kids?

The rental market is skewed towards landlords as you are finding out. I would rather find a way to pay off the CC debt, and go on an income based payment plan for the students loans (if federal), and keep the house. If you have a fixed mortgage rate, that monthly amount won't change much other than property taxes, but rental prices can always be hiked by the landlord.

Income is gross $65000 per year
Wife can make $34000 per year
Of the $100000 all were federal loans but we have already asked twice for forebearance and the interest totals are just accumulating, especially mine since a part of my loan starting accruing from the time I took it. I will try income based as you suggest.
My kids are 10 and 7 and our mortgage amounts to $1200 including taxes, insurance etc. Association fee $300. We cut our cable package and changed insurance to a lower premium. We had to replace both cars we had last year as mine needed $4000 repairs and my wife's amounted to $5500. We got rid of both and started a lease on two vehicles both at $250per month.The mortgage is a fixed rate at 4% for 30 years.
My income if I were to change careers would start off at around $95000 and then eventually climb to $150000+ easily over the couple years thereafter; but we are talking about 3 years additional school and not even sure if I can manage working and studying at the same time again.

[skittles]

Could you list out all your debt, itemized along with respective interest rates and remaining term?

Are you continuing to use your credit cards and increase the amount that's on there?

Do you have any retirement savings (401k etc)?

[jdepp]

Could you list out all your debt, itemized along with respective interest rates and remaining term?

Are you continuing to use your credit cards and increase the amount that's on there?

Do you have any retirement savings (401k etc)?

I could add these but most are at 29% for the credit cards & 24% for 1 personal loans. These are all basically still maxed and I have only paid off 2/6 credit cards. I spoke to someone yesterday who made the suggestion that it seems to him I have two options: either get another job now and increase income by an additional 1500 a month and use that to pay off debt which will allow us breathing room to at least live without stress OR sell the house and go into hiding from debtors and do the same as #1, (increase income significantly) and start over. Although, #2 involves a radical change with kids having to change schools, downsize to apartment etc. He said don't get additional education as this involves more loans.

My wife is understandably frustrated given that all her sisters married exceedingly wealthy men and we are struggling. As you can imagine we argue each day and the stress level is about to pop. If I sell the house, with closing costs involved etc I need at least $20000-$30000 more than what I owe.

[skittles]

Considering that your cards are maxed out (and you're either not making payments or paying just the minimum), your credit scores have probably taken a huge hit. You will likely have difficulty qualifying for a rental house/apartment that you like, if the landlord is prudent and runs a credit check.

Which leads me to emphasize that you should NOT sell your house- you have an excellent rate locked in and you have to do everything to stay in it. Your friends suggestion of going into hiding is, frankly, absolutely asinine, and will certainly cause your family immensely more stress than you are under. I would not take any financial advice from this friend.

You need to do everything you can to:

a) avoid taking on ANY extra debt, and this includes student loans, for the time being. Cut up all your credit cards.
b) get a part time job or have your wife get a part time job, and everything you make from that after taxes should go to pay off the credit cards and personal loan ASAP- those are insane interest rates you are carrying. At an average of about 27%, you can pay that off in 12-15 months with an extra $1300-1600/mo income.
c) stay in your house- make the mortgage payments on schedule.

Are your kids old enough to work and make some money? Every penny counts at this stage. Get rid of cable and internet, use just your cell phones. If your wife is not working right now and unlikely to work for the near future, get rid of your 2nd car.

Do you have a budget? What are you spending your income on? At an annual income of $65k, after taxes you are probably looking at a monthly take home pay of about $4700 - $5000.

Housing: $1500
Cars: $500
Student loans: I'm guessing around $1000 but this should change with an IBR plan.

This leaves you with at least $1700 per month to pay for everything else. What is your budget? That's the first step in getting all this under control. Share a full budget with us here, starting with net monthly income and all expenses.

[jdepp]

Considering that your cards are maxed out (and you're either not making payments or paying just the minimum), your credit scores have probably taken a huge hit. You will likely have difficulty qualifying for a rental house/apartment that you like, if the landlord is prudent and runs a credit check.

Which leads me to emphasize that you should NOT sell your house- you have an excellent rate locked in and you have to do everything to stay in it. Your friends suggestion of going into hiding is, frankly, absolutely asinine, and will certainly cause your family immensely more stress than you are under. I would not take any financial advice from this friend.

You need to do everything you can to:

a) avoid taking on ANY extra debt, and this includes student loans, for the time being. Cut up all your credit cards.
b) get a part time job or have your wife get a part time job, and everything you make from that after taxes should go to pay off the credit cards and personal loan ASAP- those are insane interest rates you are carrying. At an average of about 27%, you can pay that off in 12-15 months with an extra $1300-1600/mo income.
c) stay in your house- make the mortgage payments on schedule.

Are your kids old enough to work and make some money? Every penny counts at this stage. Get rid of cable and internet, use just your cell phones. If your wife is not working right now and unlikely to work for the near future, get rid of your 2nd car.

Do you have a budget? What are you spending your income on? At an annual income of $65k, after taxes you are probably looking at a monthly take home pay of about $4700 - $5000.

Housing: $1500
Cars: $500
Student loans: I'm guessing around $1000 but this should change with an IBR plan.

This leaves you with at least $1700 per month to pay for everything else. What is your budget? That's the first step in getting all this under control. Share a full budget with us here, starting with net monthly income and all expenses.

thanks so much for your help here. I am bringing home $3100 every month. The problem is I am paying $700 a month for insurance. My employer claims this is the best they can offer & if I chose a lower premium the deductible would be sky high (currently $4000). My wife has cancer and my daughter type 1 diabetes so I have had to take a secondary insurance to cover the additional costs. Her cancer is in remission so thankfully she is ok but medication costs are high. I have been told my salary is abt 10k less than what engineers at big companies are making with 5 years experience. At the end of the day I need to find supplemental work evening and weekends to get out of this. I really do not want to sell the house as it does not make sense for me to do this but when the bills and debt calls start coming in, I start to change my mind.

I took two loans out on my 401k and now a hardship withdrawal. I know this is suicide but I really have no family or friends who can help. I do know we will eventually be ok but I need to get rid of this debt so I will be starting a janitor position some evenings as this is all I could get right now. Hopefully something else comes along. My kids are in elementary school. When she worked at her first job we started making progress but then she got ill and I told her to quit and thats when the bills racked up.
Appreciate your response.

[skittles]

It's clear that you are in a tough situation, I hope your wife stays in remission and continues to get healthier. You also have a positive attitude for the long term future, and you must do what you can to make sure your condition does not worsen before it can get better.

Are you overpaying on your taxes? Did you get a sizable refund this year? If so, make sure you adjust your withholding to get the maximum take home pay you can. Make a budget and cut out as many wants as possible. Please investigate the federal IBR plans as soon as possible and get yourselves enrolled in one.

What profession are you in and where do you live? If you believe you are being underpaid, have you tried looking for the same kind of job at a better company? These days, especially in the information technology sector, there are lots of companies willing to work remotely with qualified candidates.

Has your wife explored any part time work from home jobs? Does she had any technical skills when it comes to the internet? There is tremendous opportunity in the field if you just have some skills. It might even be something she can work towards if she has free time.

I'm happy to make suggestions, as I work in the industry, please give me a better sense of your professional training and qualifications, for you and your wife.