Before you begin to think I’m too paranoid, I just want you to ask yourself: if all these counseling services are non-profit, how do they make a living? The dirty truth is that banks are behind them. Now you know, caveat emptor.

Here’s Ruth’s question:

Over the past 10 years, my husband and I (mainly me) have run up credit card debt of about $100,000.00. We have 10 grandchildren, and my son has been in and out of prison. We have been taking care of them, buying all their clothes, paying for rent, day care and bills. It has come to the point I have to pay bills with credit cards because I don’t have enough cash. I juggle and rob Paul to pay Peter. I’m turning into a nervous wreck.

I finally told my husband how much debt we have, and he wants us to file for bankruptcy. We spoke to a bankruptcy lawyer. He told us to buy new two new autos because he said we need collateral debt. He also said to make payments on cards that have been charged on in the last two months and just stop paying on the others.

I’m not sure what to do. Praying hasn’t helped. I thought of some kind of debt cancellation, but my husband and the lawyer think not. Any ideas? —Ruth

In summary, to date I am upside down $135k. I am gainfully employed, and have no other debt other than my primary residence mortgage (which I am in the black on) and the rental mortgage.

I originally bought the home as a primary residence but made it a rental a few years back. It has been continuously rented to college kids attending a nearby university for $1,650/month. After all is said and done, I kick in about $100 per month (after deducting the tax advantage I get each year).

About one year from now, I will have to start making full P&I payments amounting to $2,200 per my most recent statement. This will up my ante to about $500 per month.

So knowing that I will most likely never get any money out of the house, I have a couple of scenarios that maybe some one can help me with.

Scenario 1: Keep the house for at least another 5-7 years until the market improves. Under this plan, I will have kicked in an additional $24-36k (difference between rental income and full P&I payments). My rational mind tells me that the home will have to increase in value that much in order for me to be in the exact same situation I’m in today.

Scenario 2: Try to sell the home now. Say it sells for $260k. After I pay off the real estate agent, I net about $245k. That leaves a deficit of $68k, cash I simply don’t have, plus the fact I already plowed $100k into the house.

Scenario 3: Is there a scenario 3? Any chance of a loan modification under Obama’s new bailout programs? Should I make it my primary residence again (risk here it puts up for grabs my current healthy residence in the event of a bankruptcy)? A friend told me she hired a lawyer who found an error in her purchase agreement which knocked off $65k from her balance. Should I hire a lawyer to review my contract? What if I walked, is it likely a judgment will be made against me? Is there any other alternatives I should look into?
I figure I have a year to come up with a plan and found this site to be most helpful to others, hopefully it’ll do some magic for me as well.

Thanks for your interest.

From a series of guided questions and answers from Help for Homeowners at The White House blog.

From a series of guided questions and answers from Help for Homeowners at The White House blog.