Just had baby, bills are out of control & we forecast 3 mo. before needing credit cards to pay mortgage- help!?

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We are married and have three children… (just had our third child.) The pregnancy had many unforeseen problems which resulted in a mountain of doctors bills during and after the pregnancy. We have a substantial amount run up on credit cards (over 20k) and that promotion we have been holding out for my husband to get for the last two years is nowhere to be seen now. My mortgage is way more than we can afford right now. We purchased our home 4 years ago on a 5 to 1 arm. Got scared when rates started to go up and wanting to do what we thought was the right thing, we refinanced to a traditional 30 year loan two years ago which raised our monthly payments about $ 800. The rate we are locked in at is 6.5% and we had perfect credit back then! With everything that has happened and what we are forecasting, we can swing things another maybe 3 months before needing what little we have left open on credit cards to pay our mortgage. We have used our credit cards over the last two years to purchase groceries and what not when we didn’t have the cash. I just don’t know what to do. We live in las vegas- and our home has depreciated so much we are estimating to be upside down around $ 150-175k on top of losing the $ 70k we put down on the house. Please, where do we go for help. I don’t know where to start or who to trust! What do I do?

  1. Reply
    April 30, 2011 at 12:30 am

    I read your question and I actually walked away from the computer for a while because it is a problem of your own making and yet I didn’t want to berate you for all your mistakes in this situation. I hope you are smart enough to see them in hindsight and I want my advice to be redemptive so let me try.

    You clearly cannot afford the house and in truth never could. Sorry but your 70K invested is gone and not coming back before your newborn is in college. The house is going to be lost and you need to start planning for it. Let me explain the Nevada foreclosure procedures.

    In Nevada, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

    • Judicial Foreclosure

    The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

    The borrower has one year (12 months) after the foreclosure sale to redeem the property if the judicial foreclosure process is used.

    • Non-Judicial Foreclosure

    The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”.

    • Power of Sale Foreclosure Guidelines

    If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

    1.A copy of the notice of default and election to sell must be mailed certified, return receipt requested, to the borrower, at their last known address, on the date the notice is recorded in the county where the property is located. Any additional postings and advertisements must be done in the same manner as for an execution sale in Nevada.

    Beginning on the day after the notice of default and election was recorded with the county and mailed to the borrower, the borrower has anywhere from fifteen (15) to thirty five (35) days to cure the default by paying the delinquent amount on the loan. The actual amount of time given is dependent on the date of the original deed of trust.

    2.The owner of the property may stop the foreclosure proceedings by filing “Intent to Cure” with the Public Trustee’s office at least fifteen (15) days prior to the foreclosure sale and then paying the necessary amount to bring the loan current by noon the day before the foreclosure sale is scheduled.

    3.The foreclosure sale itself will be held at the place, the time and on the date stated in the notice of default and election and must be conducted in the same manner as for an execution sale of real property.

    Lenders have three (3) months after the sale to try and obtain a deficiency judgment. Borrowers have no rights of redemption.

    See if you have a power of sale clause. if not you will have 4 months to vacate the house. Use it wisely. Save the money you will need to rent a new home – in Vegas right how you can rent the same home you are in for about two thirds to a half what you are currently paying. That should improve cash flow.

    Next I highly suggest you read Dave Ramsey’s Total Money makeover – it is the only book on money management written for people in debt and struggling and it would be a priceless gem to you folks and most every library has it.

    What matters is getting a roof over your heads, food to eat and utilities – everything else comes second. I would try and avoid bankruptcy because it is such a heartbreaking experience but if you stay in that home you will be there in short order.

    Medical bills are negotiable and I would be honest with them. “We are lossing our home to foreclosure and while we’d like to pay these in full but we cannot and the choice I am offering today is that you reduce the outstanding balance markedly and get some money from us or you force us into bankruptcy and get nothing. I can offer you 20 cents on the dollar”

    While the loss of the hosue will set you and your credit back a couple years it is better to out form under the stress you undoubtably are under. If you learn better money management skill it will be only an expensive lesson but one well worth learning in the long term.

    May God sustain and bless you in this difficult time

  2. Reply
    April 30, 2011 at 12:32 am

    Sounds like you need a personal bail-out…here is how:

    You need to be selective with the bills you pay. Basically, stop paying all unsecured debts. All credit cards fall into this category. If you have available credit left, use it but do not do something stupid like go on a bahamas vacation or buy a flat screen TV.

    Hopefully you have a sub-prime mortgage, or your mortgage was resold on the secondary market. If that is the case, stop paying your mortgage and find a good bankruptcy lawyer in your area. You can stall the foreclosure process 6-12 months or more by disputing the foreclosure action (since the bank does not own your loan anymore, in most states it is illegal for them to foreclose) and live in your home for free. There is a new bill in the works that will allow bankruptcy court to adjust the mortgage balance to market value as well as lower your interest rate. If you can afford the lower payments, you can keep your home after filing chapter 7. If not you’ll have to move out.

    Right now you need to stop worrying about pointless things like your credit score and focus on your family. You still have income; once you stop paying “optional” expenses and only pay for utilities, groceries and such, you should be able to adjust.

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