Drowning in Debt - Anonymous Poster Seeking Help

[bjl584]

Looking for help maybe been in similar or situation. I lost my husband very suddenly last year I’m 50 years old. Lost income and o life insurance. We have a business that has slowed significantly. I am locked into a lease and he is known to go very hard after anybody that walks from the lease. I have a home that is worth 900,000 I owe 200000. I cannot sell because my elderly parents live with me and two of my college children going to school. I make $5550 a month. I have an Airbnb on my property that brings in 2500 that I clean myself to save money. My parents are chronically ill and I use most of my time caring for them. I have 100000 in cc debt and personal Loans. Minimum payments are more than I can afford at this point. I have not missed any payments but due to the balance is all being lowered on my cards. Suddenly, my credit score went from over 700 to 580. I am afraid if I attempt to file bankruptcy, I will be forced to sell my home. I live in a very expensive area and it would be very hard to find a four bedroom home or less than 1 million and I would lose the income from the Airbnb. D mostly comes from the feeling business my husband’s death and funeral expenses and children’s college I know I messed up. I don’t necessarily need to be told that I’m just looking for advice. Thank you so much.

[kork13]

Anonymous posts are tough because we can't ask questions ... But first I'll say that the circumstances here are tough & tragic, and my heart goes out for the family.

OP mentions previously having life insurance until DH passed -- I wonder if there were any proceeds from life insurance, or if it lapsed prior to his death? Life insurance desirably should be sufficient to cover funeral expenses, outstanding debts, and enough leftover for a spouse or dependents to be provided for, at least for a couple years.

Otherwise ... Bankruptcy may not be a helpful solution here, given the $700k home equity & dependent parents/children. I'll admit, the home equity presents an enticing option. It's not really "smart" to do so, but AN option could be to do a cash-out refi (or HELOC) on the home, then use some of that equity to pay off the credit cards. It would put those debts on your house, but likely reduce the interest rates & almost certainly lower the overall monthly debt payments. The downside of that is you're extending those unsecured debts into a long-term secured debt .... Not a great option ... But a viable one.

Is the business sellable, or closeable? If the business is still the source of your income, that may not be a highly desirable option. But if you have a job separate from the business (or you're willing/able to shift gears & go that route), letting a floundering business go can be an emotional but rational choice.

Have you looked at state/federal support for your ailing parents? There may be funding or services or otherwise available to reduce the costs associated with caring for them. Likewise, are you charging your college student kids room & board? If not, you need to. They're adults, and they need to contribute to the household's financial needs, even if only with a token amount of rent like $500/mo.

[james.hendrickson]

Why not sell the business?

[Fishindude77]

The above scenario requires drastic emergency action:

• Close or sell the business ASAP and negotiate your way out of the lease with as little damage as possible.
• Sell your home ASAP and use the equity to clean up debt and start your new life. Rent and relocate to somewhere you can afford on $5500 / month, may require drastic relocation.
• You can't handle caring for your parents anymore. They probably need to go into a Medicaid funded nursing home if they have no financial resources.
• College kids may need to change plans and sit out for a while, or work / borrow to pay their own way next year.
• Sell the Air B&B or move into it if it's economical housing.
• Pay off the credit cards from house sale proceeds.
• Start a new life accepting the lower income and your inability to care for and finance parents and adult children.

[ua_guy]

I kind of feel like this is clickbait/replybait. Not like the days when we'd get new members signing up during the recession. I'll bite anyway.

Seems like a cash-out refi or HELOC could easily settle the cc debt and personal loan issues while maintaining the living situation. Interest rates aren't great right now but if we treat staying afloat like a business, sometimes things need to ride until better times.

It would be a tough call on what to do with the elderly parents. Ultimately, they created their own situation and should be part of developing the solution.

[srblanco7]

My first thought was to sell the AirBnB. Not sure how much it’d address your outstanding debt and help out with keeping the business afloat (if that makes sense?) until you can sell or exit. Granted the AirBnB delivers some cash flow but it’s also a risk if you have time periods where it does not rent.

Fishindude hit on most other considerations.

My sympathies on the loss of your spouse.

[disneysteve]

You have $8,000/mo income from your job and the rental. You have your parents living with you. How much income do they have coming in from SS, pensions, and any other resources? How much are the two college kids earning? What is the grand total household income per month? The average SS check is $2,000/mo so let's assume dad gets that and mom gets half of that so that's another $3,000 giving you at least $11,000/month in household income plus whatever the kids are earning. With $132,000/yr income, I think you should be able to handle 100K in consumer debt and pay your mortgage.

What's the situation with the business? You say business has slowed but what does that mean? Are you still operating at a profit? Is the business worth saving? Can you do things to improve it? Hard to give any advice without knowing more about the business.

Without seeing a full breakdown of income and expenses, it's impossible to give any meaningful advice.

[riverwed070707]

Agree its hard to offer specific advice without being able to ask additional questions, but this feels like a classic case of "you can't pour from an empty cup". It is generally used in terms related to energy but the same can be true for finances. You have to get your own financial house in order before you can help others... don't let the obligation of your parents and children put you in a situation where you can't take care of yourself. If it were me, I'd sell the house, find an affordable 2 bedroom rental for you and your parents, pay off the consumer debt, maybe give the kids enough for a deposit on their own place and use what's left to invest for your future. While the ideal scenario might be a 4 br home, you can't afford that right now. Sacrifices need to be made.

[disneysteve]

Agree its hard to offer specific advice without being able to ask additional questions, but this feels like a classic case of "you can't pour from an empty cup".

Another aphorism that applies is "when you find yourself in a hole, the first thing to do is stop digging".

[myrdale]

What is the context?

Did someone email this to you or is this from another website?

I can't sell my $900,000 house and pocket $700,000, then buy a $300,000 house be debt free, fully funded for retirement and kids college paid off.... because. Give me a break.

She hasn't missed any payments but her credit score drops 700 to 580????

Why is she locked into the lease and not her dead husband. Liquidate and move on.

$8K per month and can't pay her bills??

Too much here sounds fishy to me.

[disneysteve]

She hasn't missed any payments but her credit score drops 700 to 580????

She said the credit lines on her cards have all been lowered so she's probably now maxed out on them which wrecked her credit utilization ratio and resulted in her credit score falling.

Otherwise, I agree with you. This is a person who is just making excuses rather than taking action to improve her situation.

[myrdale]

She said the credit lines on her cards have all been lowered so she's probably now maxed out on them which wrecked her credit utilization ratio and resulted in her credit score falling.

I understand that credit utilization is a component of the over all credit score, but I didn't realize it would have a direct impact so long as you were keeping up with the payments. I could understand how new creditors could see this as a red flag, so yeah I guess it makes sense. I'm just surprized.

[myrdale]

Debts:

$200k Mortgage
$100k Credit Cards
$ ? Personal Loans

The personal loan is a big unknown. Is this $15k for a car, or is it $200k Medical, $70k car, $100k student loans?

We definately need more information.

[disneysteve]

Debts:

$200k Mortgage
$100k Credit Cards
$ ? Personal Loans

The personal loan is a big unknown. Is this $15k for a car, or is it $200k Medical, $70k car, $100k student loans?

We definately need more information.

I took "100000 in cc debt and personal Loans" to be a total, not 100K in CC plus more in a personal loan, but that's just my interpretation.

These anonymous posts are always more thought experiments than actual help since the person involved can't answer questions and isn't here to see the answers anyway.

[pacerob]

You’ve been carrying an incredible amount on your own, and protecting your home while caring for your parents and kids makes complete sense. I’d also look at Sheridan Care https://www.sheridancare.com because I found their in-home care plans for seniors, dementia, Parkinson’s, stroke recovery, and respite care really helpful, and having trusted caregivers handle some daily care can free up time to focus on your business and finances without uprooting your family.