Wanted: Opinions/Advice on "our story"

[JenR]

Short and sweet right? Here goes....

Live in CA. Married, 2 kids. Income 90k. Own a home, estimated value is $250k.
1st mrtg = $275k (4 years into a 15-year, payment $3000)
2nd mrtg = $38k (3 years into a 15-year, payment $450)
CC = $40k (current payments, $800 - will go to $2000 in Sept)
2 cars, 1 with a loan = $15k (owned vehicle value = 10k, payment = $415 on the other, with 3 years to go)

Current on all bills. Problem is husband and I both work for the state and have seen our pay decrease by 10% (in Feb), just recently an additional 5% (totaling 15%) and rumors of another 5% reduction (totaling 20%) in the very near future. That plus Chase increasing their minimum payments. Come September we won't be able to pay all the bills.

Want to keep the house and cars. But seems silly to file bankruptcy over $40k in CC debt. We've tried getting unsecured loans, no go. We can't do any sort of refi because there's no equity in the house.

We only get paid once a month and live by a very strict (and tight) budget. Most months we add $400-500 in living expenses (gas, groceries) to CC's because the cash is gone. I've done the means test and we'd qualify for Ch7... and indications were that Ch13 is not possible (negative money, or not enough leftover.. something like that).

Thoughts, opinions, suggestions, comments? Any/all advice is welcomed!

Thanks! ~Jen

[JRScott]

You need to let the house go in the bankruptcy.

Even with a bankruptcy filing your mortgage payments are eating up 46% of your gross income a month. That's to much and not sustainable. It should be between 25-33% of your income.

Your car payment is only 5.54% of your income which is very reasonable.

[OhioFiler]

You need to let the house go in the bankruptcy.

Even with a bankruptcy filing your mortgage payments are eating up 46% of your gross income a month. That's to much and not sustainable. It should be between 25-33% of your income.

Your car payment is only 5.54% of your income which is very reasonable.

Wouldn't they be eligible for an Obama mortgage mod perhaps? Being under water $63K in California doesn't sound too bad.

[JRScott]

Wouldn't they be eligible for an Obama mortgage mod perhaps? Being under water $63K in California doesn't sound too bad.

From my understanding you have to have equity in the home to qualify....

[AngelinaCatHub]

JR, I sure agree with you. Actually, they should not have been able to get that mortgage as in the 'old days' you could only spend up to 25% on housing to get the loan at all.

I think the OP could do well to C7 and start with a "new start" and purchase a little place "contract for Deed" and have it paid if they are now seeing a future decline.

DW has had her UC renewed 4 times now and a $22 "stimulus" added per week. I don't approve in all this unearned income, but we have no choice. She has been getting this now for two years. Every time her balance goes to zero, all of a sudden the online system gives her another 3K credit. I don't understand all I'm seeing, but I won't refuse it either while the confidence of the filthy paper will still purchase something of need. 'Hub

P.S. My personal theory is, we are much worse off than we realize, and if the "masses" stop getting UC, there would be a rebellion and the 'Bammy administration needs more time to yoke us down. They are "quieting" us with money income. (My opinion)

[JenR]

JR, I wouldn't mind letting the house go. I agree with you... the payment is too high. But I can't seem to sell my DH on the idea. He wants the house to be paid off by the time he retires, so that either he has a place to live mortgage free or can see it and move out of state. And I know ALL the reasons why that is foolish, but his mind is set (and decided long ago as a result of the way he was raised - or a lack thereof).

'Hub... when we got the mortgage, the home was valued at $450k (originally purchased it for $250k in 2001) and our income was around $130k.

We have a few appointments with different attorneys over the next couple of weeks. Any other thoughts or advice?

I appreciate the comments so far. I will continue to work on my DH about letting the house go, as I most certainly agree that it would give up a "fresh start".

[JRScott]

Well I hope your significant other comes around.

Let's look at the figures a moment:

90k yearly
that's 7500 a month before taxes

3450 to mortgage (Represents 46% of your gross income)
415 to car payment (5.5% of your gross income)
2000 to pay credit cards (26.67% of your gross income)
~465 to State Income Tax a month (9.3% on a taxable income of 60k)
~750 to Federal Income Tax a month (assuming again 60k taxable at the 15% rate for a married couple filing jointly)
~465 to Social Security Payroll Tax (6.2% rate on the full 90k)
~109 to Medicare a month (1.45% rate on the full 90k)

So at this point you are -154 dollars a month, that's before you buy food, clothing, gas for the car, electricity, water, heating oil, car tags, driver's license, property taxes (unless included in the mortgage), car insurance, home insurance, health insurance, sewer, tv, phone, etc. I"m almost certain getting rid of just the 2000 credit cards will not be enough to meet your basic needs, the car is very reasonable compared to your income the only thing you can do is downsize the mortgage by getting rid of this.

I understand him wanting to have a home when he retires but how far off is that? I mean if he's planning to retire at 62 he might want to start rethinking that. Anyone under the age of 50 now needs to start planning to work until at least they are 70 and possible 75 for under 40.

Maybe you can take this and show it to him, perhaps it will help you convince him especially if you continue to list all expenses and show it will not work, then look around in papers etc and find something that you can rent that would fit the budget better.

[JenR]

JR - I will be printing this out and showing my DH. And the list of paycheck deductions doesn't even include the 6% of our salaries that we have to contribute to our (state) retirement plans (there's no "opt-out" for it). As far as retiring, that's about 14-15 years off....

[JRScott]

I hope it works