Big Debt Problems- need advice to save marriage!

OpenEyes · #1 (**permalink**) 10-29-2009, 09:38 AM

Hi there, My husband and I made a string of poor decisions early in our marriage 5 years ago. Long story short, we bought a house in 2005 that was a huge money pit. We bought it for $800,000 and had a large mortgage on it, plus borrowed $200,000 from the in-laws to purchase. It was very foolish. To make things worse, it needed another $100-200k of work. This required us to dig deep into credit card debt for all the home improvements. Long story short, we owe about $1mm total mortgage, CCs and IL debts. We are trying to negotiate our mortgage. We can not do a short sale, b/c of debt to parents who took a HELOC out to help us buy it.

Our net worth is negetive apx $350k. Needless to say, at 29 and 32, this is a HUGE massive stress on our marriage. DH even wanted out recently, but we have been working on realizing our debt does not mean that we need to divorce. I am not sure he is convinced, but we have been discussing ways out of this mess.

We had the house on the market and cant sell it for enough. So, we are now thinking of renting it out and us going to rent a cheap apartment for a few years. Since our income is going to rise by far (but not enough to keep get us out of the house), we feel renting a cheap place, and chipping away at our debt, and letting someone else pay our mortgage, is the way to go. We did rent the house out for over 1 year initially, before the economy collapsed and decided to move in right before the bottom fell out.

So, we also ruined our credit b/c we had to have mortgage lates on our credit to get the credit cards and mortgage lowered.

sigh.... this is a very hard lesson or string of lessons learned. Oddly enough, DH was a financial planner in a prior life, before we got married (only for a year or two) but we are in over our heads. We feel helpless and have just so much on our shoulders at such a young age. I feel DH carries most of the burden and keeps this info from me b/c im sure it depresses him ....

Any help is greatly appreciated. Does it sound like were on the right track w/ the Plan of action? ITs NOT easy for me to leave such a nice house for a small apartment, but DH assures me that it will make us "FREE" and that is priceless. Thanks for any info.

renderedtoast · #2 (**permalink**) 11-01-2009, 02:18 AM

Why move out? Live in the house, and pay your mortgage. You should also look into Dave Ramsey's Baby Steps. I think they will help you out.

sapphirecapital · #3 (**permalink**) 11-01-2009, 08:40 PM

If you can pay the mortgage and living expenses that would make sense to stay and weather the market, however if you can rent it out for the mortgage and side expenses (tax etc) than you could probably start over, if your in-laws do not demand immediate payment you could catch up on the credit cards, but renting it out will mean rent payments; question: can you transform part of the house to an income suite? did you use all the tax discounts or is there room?

Freedom is priceless but only if you are happy, if you are miserable outside the house your marriage will not last, which would be a shame because a divorce will kill you both financially, try to work it out, help each other, its better to stick this out together, its pressure yes but together its easier (I guess I'm a romantic)

brian · #4 (**permalink**) 11-10-2009, 07:07 AM

Remember, a property's value is dependent on much much you actually sell it for - not a hypothetical higher or lower figure. So until you sell your house, you have not made a loss.

Conversely, remember real estate always has been a long term play - if you can handle living in the property for another 10+ years, the natural expectation is that its actual sale value will be significantly higher than at present.

Remember, you only lose value on assets when you sell them low - if you hold them and they rise back, it was only ever a paper loss.

OpenEyes · #5 (**permalink**) 11-14-2009, 10:29 AM

Thanks for the answers... sorry getting back so late! Still in this mess, not getting ANY better.

Assuming we can rent the house out, we would go for it as long as our monthly mortgage pmt is covered, and get a super cheap rental for a few years, to start chipping away at our CC debt (over 40k).

Also, we can not afford our mortgage payment, which is why we cant afford the house. Not sure if i made that clear. We are borrowing money from the inlaws to afford the mortgage presently, that is the dilemma. We could work more and make more and possibly afford the monthly payment.

Suggestions? This is massive for us to deal with.... its crushing us and DH is blaming ME for most of it. So unfair. I would love to come up w/ a great solution.

Kenny Golde · #6 (**permalink**) 01-22-2010, 09:28 PM

There are a lot of options, obviously, when it comes to paying off the debt, and everyone will have a different route to suggest.

My suggestion comes from a different angle. Recognize that "You are not your finances." Money comes and money goes in life, even rich people stress over money, just with more zeroes on the end. The trick is to accept that who you are as a person, your value as a person, your connection as a married couple, these things are not reflected upon by the size of your income, your savings or your debt. Those are just numbers.

Let go of any blame, any shame, even regret. Face the present for what it is, but don't make it mean anything more than what it is. Finances.

Find a common goal to work on together in getting out of debt, and use that goal to strengthen your marriage, rather than using the debt as a reason to end it.

I wrote a book called "The Do-It-Yourself Bailout" to teach people about how to settle credit cards debt without using an agency. Google it for more info if interested.

Good luck.

C9Consulting · #7 (**permalink**) 01-26-2010, 07:36 PM

I like the idea of renting your house out and living somewhere cheaper. That could possibly vanquish all of your mortgage payments every month while you're stockpiling money to pay it off as soon as possible. Especially if you can rent a cheap place and are renting out your house for a little under the monthly mortgage...which would effectively be lowering your expenses as far as housing is concerned.

And checking out Dave Ramsey, like the person above said, could really help you in your situation. I know a lot about what he teaches and it works every time.

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