Dear Dr. Don,
I need some help, please. I was part of a company layoff three months ago and now we are behind in our credit card, car and mortgage payments. I have an opportunity to be employed in another state.

We are upside-down in our current house by more than $120,000 with a $375,000 note. I’d like to relocate, take my lumps and pay my bills. We will, however, need to walk away from the mortgage. Could you please advise a direction?


Tim Turnaround


Dear Tim,
Ouch. Being upside down by $120,000 on a $375,000 mortgage loan is painful. No easy answers here, especially with your need to get out from under the mortgage to move on with your life.

I like the idea of a short sale, where you negotiate with the lender to accept (as payment in full) a price less than the outstanding balance on the loan. The Bankrate feature, ”
Everyone
could win on a home ‘short sale’
” explains a short sale in greater detail. That’s a big hit for the bank to agree to, but if that’s where market prices are, they’re not going to be any better off in a foreclosure than they are in a short sale.

If you expect the new job to get you back on track with your credit card debt and car loans, you shouldn’t need the protection from creditors offered by a bankruptcy filing.

I’m a little concerned about how the damage to your credit score hurts your ability to start over in the new job in another state. But your credit certainly isn’t going to get any better if you stay where you are and can’t find a new position. A bad credit score can hurt your employment chances, auto insurance rates and ability to get access to credit.

Those late payments will stay on your credit report for seven years. A successful short sale may have minimal impact on the report, but the late payments aren’t going away anytime soon.

Your message reads as if you’ve made the decision not to stay in the home. A short sale can minimize the impact on your credit report from that decision, helping to ease the transition in moving on to new opportunities.

To ask a question of Dr. Don, go to the ”
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