Home Sale Relief

Jim has words of wisdom today in Don’t use home equity to pay off unsecured debt.

 The primary reason I don’t advocate the transfer of the debt from an unsecured credit card to home equity is because of the downside. If something catastrophic occurs and you are no longer able to service the debt, having it be tied to your house is much worse than having it be tied to an unsecured credit card. If you can’t make payments on your credit card, there’s very little they can immediately take away from you as a matter of process. If you can’t make payments on a home equity loan, they can seize your house and sell it. That’s because your home equity loan is backed by your home as collateral, that’s the reason why the interest rates are so much better (they take on less risk for loaning you the money).

I never advocate people borrow on a home equity line except for something that is house related. Building onto your house, putting on a new roof, redoing a bathroom. Otherwise I don’t think a person should borrow on their home equity line.

A lot of homeowners are panicky right now because they have credit card debts that in some cases are just stunning. I am talking about $250,000 in credit card debts, or $70,000. Even a $5,000 debt for someone who is barely scraping by can be a killer. So what to do if you are in this position?

You can consider bankruptcy but in some cases you may be forced into a chapter 13 and you will have to repay the money back at least partly. Every month you will be making court ordered payments and it you are living under a judicial microscope for 3, 4 or 5 years.

Another approach is the no-bankruptcy workout. You contest what you can. And the rest you work out with your credit card companies by making offers in compromise. You figure out what you can pay per month for all your unsecured bills, and you make offers to all your old creditors based upon this total amount.

This has worked for thousands of people and continues to work. I write about it in the Mortgage Relief Formula. I offer you a 25 page free instant report on keeping your home stop foreclosure, how to avoid bankruptcy or when to think about filing it, slashing debts and working out lower mortgage payments without refinancing.

Also learn how to buy houses no money down no risk no credit — your next house can be bought with no money and no credit, even if you have had a foreclosure or have a low FICO score.