Long story but I need help and hope whoever reads it can understand it.

48 year old and "was" doing well. Some savings, 401k etc.

2006 father in law dies of a heart attack leaving mother in law with no life insurance, little savings and a mortgage they just took out 6 years ago for more then anyone in their late 60's should ever take on.

MIL never worked and FIL made average income his entire life with no retirement savings at all other then a couple grand in the bank after they put down 20k for this house.

FIL dies and leaves MIL with a large house payment, no income other then his 1/2 of ss which is only 1k per month.

House payment is 850.00 for her.

We lived in our home for 12 years and were doing well. Hardly any cc debt, house payment was 1500, making 85k per year and saving money in 401k etc.

Spin forward to late 2006, mil comes to us and tells us she is losing her home because she cannot make the payment to help her sell the house and find something smaller.

She has no credit history as the FIL never added her on anything ever.

Talked to the bank and they said with only 1k ss and no history it would be hard to get anything unless she had plenty down at her age etc.

Us to the rescue, we buy the home from her, she can live in it, payment will be lower because we paid 15 k out of our pocket to get the total down so she could afford it and pay us.

Worked out ok until summer 2007, I was nearly crushed at work by a falling object that ruined my spine and neck forever. Company fired me because they said I did not follow safety procedures. I hire an attorney (400 per hour ) and we filed a lawsuit. Took money out of savings to pay him.
6 months later the company settled with offer of retirement if I qualify for SSI only. Attorney advise was to go for it.

We got the SSI and then the retirement.

Problem was no income for 6 months, our house payment was paid out of any savings had left and dipped into 401k to help with expenses and medical cost that was already at 300k and 20% out of pocket from me.

With half the income now and MIL struggling to pay her payment to us I find it hard for me because we are struggling in my own home.
We have cut expenses, food, travel, kids needed items to help her with her payment on the place we bought so her payment would go down and she could stay in the home she loves.

My savings is gone, 401k down to nothing and credit scores falling like a rock because of the stupid use of CC's and maxing them I now find ourself in a hole that will cost us our dream of moving to Florida some day once the kids are gone. ( 14 and 9 year old still at home )

Tried to refi our home and no go because of DTI because of 2nd home cost, used MIL as a renter last year to show income to do this and still IDT to high they said.

12k cc debt currently, our home value like everyone elses has fallen below current values to sell our home.

MIL has to, her home in close but we cannot list it because it will cause a family feud I think. Family ( wifes sisters and brothers ) have already went nuts thinking we are going to have it made when she passes and sell the home for huge profits. They think this is why we did this and it is not the case at all. In fact we could not sell it for amount owed today I do not think.

We took on this to help her and now she is not paying us only once in a while.

My wife and I are struggling, I am having to pass on two major important surgerys because they want the 20% down before surgery we do not have.

Kids are going without items we have always been able to get them because of this. We find ourselves cutting out even our cell phones, lower cable channels, cut down on lights and water ( kids are asking what is going on ). We are still struggling week to week.

Worse part is now, MIL has been diagnosed with cancer, getting treatments etc and no way would I ever sell the home with her in that condition.

Credit is going to get destroyed soon if I do not do anything. We have never struggled ever before and do not know what it is like to stretch food and etc at the end of the month.

We are handling it, but I am missing something here.

Do not know what to do or who to talk to about this.

I do not want terrible credit until I am 56 years old and then try to buy our dream home in Florida.

I do not want to sell MIL home with her in that condition. I cannot sell my home because the idiots behind me devalued our properties by foreclosing and leaving a empty home and of course the nationwide issue with values.

Just do not know what to do.

Any advise would be so much appreciated.

I am no financial genius and have never been in any pinch like this before and wondered if there is even a way we can work it out to save our home, our credit and give my wife and kids back the life they deserve.

Thank you.

You should consider selling your house and moving into the MIL house. She can stay or go, if there is room. Let the other siblings fight over who will take care of her.

Living all together in an lower cost situation is better for everone. It may not be fun, but it will give you and her time to find a better arrangement in the future.

If your house will not sell for what is owed, you may have to do a short-sale. Saying you cannot sell one of the homes isn't going to work unless you can create more income.

Siblings have already honored us with taken sole care of her. They think because we bought the house from her it is now out sole duty to take care of her.
They wont even come take her to the doctor as needed, they rely on us to do it all.
They think we will gain a huge chunk of equity when we sell her home and you and I know that is not going to happen in this market.
Sorry to be so lost, how does a short sale work? Does it ding your credit report?

When you bought her home, did you pay market value or the remaining mortgage amount?

If you bought at market value, she may or may not have recieved some equity.
If you bought it for what was owed, the other siblings may believe that you bought her equity.

In either case, you and your MIL are in need of lower cost living expenses. Going by your original post, you cannot afford your current home.

There are different levels at which leaving a home can affect your credit. Selling for what is owed, short selling and arranging to pay the difference, short selling with no recourse, deed-in-lieu of forclosure with/without recourse, forclosure.

Anytime you do not pay as agreed for anything, you will ding your credit. I think worring about your credit at this point is useless. You need to get you and MIL living arrangements workable for both of you.

A short-sale is selling the house for less than what you owe. You would need to talk to the mortgage company, explain your situation, and see if they will accept you finding a buyer for what you can seel the home for.

I can't know all the dynamics of your situation, I can only say what I would do with what information I see. If necessary, I would walk away from your current home and move to the less expensive home, to stop the bleeding. The longer you wait, the worse it will get.

What anyone thinks is irrelevent. You need to match your living expenses to your income. If you cannot maintain your current expenses, you have to retreat as painlessly as possible, giving up one home is a dramatic but extremely affective fix.

A short sale is no guarantee, you may have to walk away. I also suggest that you take this question to this site for more information.

Personal Finance Forums