Homeowners Eliminate Debts Without Declaring Bankruptcy
Our consumerist society often gulls people into spending beyond their means. In my business, I meet these folks every day. As recently as a few years ago, many would simply refinance their homes; pay off their credit card debt, and begin the vicious cycle all over again.
But that is much harder to do now. The maximum you can refinance your home has dropped from 90% to 85% and now stands at only 80%. At the same time, real estate values are not climbing as rapidly as they were a year or two ago, though they are generally healthy.
The bottom line is the simple mortgage refinance is not getting the job done anymore. Many people have an unsecured debt load far higher than the amount of equity they can comfortably take out of their homes.
For some, there is still a solution. It’s not nearly as pretty, but it does give them a fighting chance at a reprieve, without having to sell their home.
More and more, I find my unique skill sets as both a mortgage agent AND a credit counselor allow me to develop solutions that kill two birds with one stone. First I arrange a private second mortgage on the home, up to a loan to value ratio of 85%.
We keep that money in an escrow account at the real estate lawyer’s, and then I enter into discussions with a trustee to reach an amicable settlement on their debts. My preferred solution is called a lump sum consumer proposal.
Most people think of a consumer proposal only as a monthly repayment plan over as much as five years. But in fact, your creditors are often quite motivated to accept an immediate lump sum offer. They do not have the uncertainty of whether or not you will complete the payments, AND they don’t have to wait years for their money.
It’s not as simple as it sounds, but it is definitely doable and worth exploring. There are so many considerations. Like how much income you make; how much equity there is in your home; and what other assets you have, as compared to your total debts. But it maybe possible to come to an agreement for just a fraction of your debts.
If this sounds like your situation, give me a call or send me an email. It’s for sure worth pursuing,
Ross Taylor is a full-time credit specialist and mortgage agent who blogs frequently at ASKROSS
If you have any questions about anything financial, send him an email at email@example.com, he answers everyone