Robert, you are certainly in a difficult financial position, but don’t feel like a lone ranger. We’ve certainly counseled many who are in similar situations. You have a couple of issues here, so let’s start with the house.
It’s not clear why you want to sell this home. Do you have to sell? Obviously, it’s not a good time to do that. If you must sell it for some reason, then know that a short sale is a seven-year decision in terms of your credit as it will take that long for it to fall off your report. And if financial institutions continue to examine line items and not just glance at your score, it’ll take years before they trust you again as a good credit risk. A better choice may be to tackle some of the repairs yourself and hang on until your real estate market improves. If you ultimately decide a short sale is the right path for you, the Mortgage Forgiveness Act of 2007 will work in your favor. Ordinarily, “forgiven” debt as in the case of foreclosure or a short sale is added to your taxable income. But now through 2012, forgiven mortgage debt is just that – forgiven. You’ll need to check with Tennessee to determine if state taxes would be owed.
Right now your finances are controlling you. Because we believe a budget is the cornerstone of financial success, our advice is to put one together. Start with a spending record and write down all the known stuff such as your mortgage, car payment(s), utilities, etc. And then track daily the rest of your expenses, including groceries, dining out, convenience store stops, gifts, etc. Know compare your income to outflow.
If you end up with a positive number, figure out how to carve your expenses to the bare bones with the goal of paying off the $50,000 in credit card debt as quickly as possible. I’m sure the folks who helped with your debt management plan have already discussed that with you.
It’s critical to live within your means now and in the future. We understand that things can get crazy in a hurry, but we must remain vigilant when it comes to our money.