Never Pay Credit Cards Before Mortgage

The last couple years have proven to be tough times to be a homeowner. Home values around the country have seen a decline, and many homeowners are now feeling the squeeze from signing up for adjustable rate mortgages.  Many homeowners are having a hard time coming up with mortgage payments, while meeting minimum payments for cars and credit cards (even low interest credit cards often have high minimum payment requirements of 2-3% of the outstanding balance).  Something has to give, and all-too-often it is the house that falls behind.

The Squeaky Wheel Gets the Oil

There are too many stories out there about homeowners who kept their credit cards current as they fell behind on their homes, ultimately leading to foreclosure.  Credit card collectors are notorious for their obnoxious, high-pressure techniques, and unfortunately they are also often the most successful.  I used to work in a call center, and I’ve seen these collection practices up close and personal.  Believe me, it wasn’t any more fun for me being on the other end of the line, but some people seem to enjoy abusing others over the telephone.  I was raised on the idea that you catch more flies with honey than with vinegar, but in the collections world this just isn’t true.  The best way to collect money on a credit card is to scare the cardholder into thinking they will be sued, or to pester them to the point that they finally pay just to get you out of their lives.

Shelter and Transportation Before Capital One or American Express

The problem with paying credit card companies when you are in a financial bind is that with only so much money to spread around, something else is going to suffer.  I’m not advocating you neglect to pay a just debt, however I am advocating that you sit down with the pile of money you have to work with and put life necessities at the top.

I’m a fan of the Dave Ramsey radio show. I don’t agree with 100% of what he advises, but he is right on when it comes to this subject.  When he fields calls from people who are being bullied by credit card collectors he advises them to list out their monthly expenses beginning with life-sustaining expenditures first:

  • Housing
  • Food
  • Lights
  • Transportation

Notice credit cards weren’t part of that lineup.  If you have money left over after paying those four basic categories, then by all means make your credit card minimum payments.  If you don’t have anything left over, do not stress out about what Bank of America might do to your FICO score, or worry that Discover Card is going to garnish your wages.

If you receive a call from a nasty credit card collector, explain in a calm manner that you have budgeted your bills for the month and unfortunately you are not able to make a payment this time.  When they start to scream and yell and call you names, simply put the phone down on the table and go about your business.  If you get emotional and yell back at them, they win.  Getting you upset is their objective, so don’t let them win!

When your financial situation improves make plans to catch up on outstanding bills, again putting credit cards last.  House and car payments come first, and with anything left over you can begin to catch up on outstanding credit card debt.  The bottom line is to play by your rules, not the credit card collector’s.  After all, you are the one that has to suffer the consequences of missing a house payment, or getting your car repossessed.

Comments

  1. Thanks so much for writing about this. My husband and I have spent the entire summer without a paycheck, scraping just to get the money together to pay for the house. After getting the calls from the collection agencies for months, we just feel like people trapped in cages – can’t answer the phone, the doorbell sends me into an anxiety attack, they call us at work and tell their “sad tale” to whomever picks up the phone.

    But what we finally realized is that they can’t squeeze blood from a stone. We’re working on our options (our situation’s a little unique, you can read about it on my blog if it suits you), learning to take deep breaths and moving along. For someone who’s always had a great FICO score, these can start to feel like dark days. And we really appreciate it when we read about someone else who is surviving it, or understands, or even just sympathizes.

  2. I never thought about it that way. Good post! I don’t carry credit card debt but I do have a car loan so perhaps I need to change my priorities of paydowns….

  3. Frugal Dad: If you get emotional and yell back at them, they win.

    SO true!! About 7 years ago we were in that situation. I was still pretty new to the US so I didn’t really know the laws at all.

    Great post!

  4. I think an important part of this post is “why?” should you pay off the mortgage first and leave the credit cards?

    I believe the big reason why is because in bankruptcy they cannot take your residence.

    So, if you pay credit card bills and don’t pay mortgage, you would get foreclosed on and you would lose your home. If you pay your mortgage and leave the credit card bills, the worst case (and only in worst situations) would be bankruptcy but you still have a home.

  5. Good post! Losing your home is probably the worse thing that can happen financially and causes much more of a life disruption than credit cards. If you don’t pay your credit cards, you won’t end up on the street or scrambling to look for shelter.

  6. Its funny…this should be a no-brainer, but it is amazing how many people don’t do this when they are under pressure from the creditors!

    Probably the biggest piece of advice beyond this would be to communicate with your creditors/lenders. They don’t go away! There are options…and your mortgage lender may even be willing to help out. When I worked for a mortgage lender we often allowed people to skip a payment and paid it directly to creditors. It was a way of protecting the mortgage investment!

  7. I would totally agree that paying the mortgage and car note is more important than the credit cards. However, if you have significant amounts of debt on credit cards, then you could face being sued by the credit company and having your wages garnished or your bank account trimmed.
    (http://www.bankrate.com/brm/news/bankruptcy/20050906a1.asp)

    The only way to prevent this would be to declare bankruptcy. With the laws that were passed a few years ago, this has become a much more difficult process — and rightly so. Bankruptcy should be an absolute last resort. Far too many people for too long have used it as a “reset button” on their bad decisions and massive debt. It leaves those of us who are good debtors to pay higher interest rates and face increased difficulty in obtaining credit (mainly for cars and houses). Unfortunately, far too many people in the US have gotten used to passing-the-buck and dispersing blame so anything that can prevent people from suffering through their mistakes is OK by me.

  8. “Unfortunately, far too many people in the US have gotten used to passing-the-buck and dispersing blame so anything that can prevent people from suffering through their mistakes is OK by me.”

    Whoops, I meant to say that anything that can prevent people from NOT suffering through their mistakes is OK by me. They should reap what they sow and not be able to fall back on bailouts and people “feeling sorry for them”.

    I tend to subscribe to the Larry Winget method of facing one’s debt and problems.

  9. Frugal Dad, what a timely post. My husband was layed off about a year and a half ago. All savings has now dried up and this is the situation we are in, lining up all our bills and paying the most important first and going down the list until we run out of money and telling the rest, “Sorry but you will have to wait”. It’s a horrible feeling, but it helps to know I am not the only one in this position. I think you are right on the money with your advice. And to others out there in this situation, TALK to your lenders. They are usually willing to help out if you let them know your situation and that you want to make good on your debt.

  10. Unfortunately with 12 years of business friendly government in power all the consumer laws have been re-written in favour of the companies. While I expect the proverbial pendulum to swing back I don’t think it will help those in trouble in the near future.

    I love all things American but I’m very glad I don’t live there.

  11. My husband is a commission only sales person. His pay is about 1/2 what it was a year ago. So we sat down the other night and decided we are going to take care of our 4 walls and our 4 wheels first. We were able to pay something towards the CC’s but not even the minimums.
    Is that what we should do? Pay a little on each? I’m not really sure.

  12. @Dana: Other readers may also have thoughts on your situation, but I would recommend that you contact each card and see which ones (if any) will allow you to skip a payment, or a rework the amount due (this is called “re-aging” the account in collections lingo). If none will work with you, I’d recommend making minimums on as many as possible, even if it means others get nothing. Better to have one or two in collections than several in a late payment status. Once you fall behind with those few you couldn’t pay, contact their collections people and work out arrangements. And never, under any circumstances, give them your bank account info over the phone–mail in payments to them on your terms.

    Hope your situation improves soon. It sounds like you and your husband are attacking this problem together, and that is the best way to go. Stay strong, and stay a team, no matter what!

  13. I’ve been laid off before and understand what a difficult and scary time it is. That is part of the reason I’ve tried to avoid debt whenever possible. One less thing to worry about during the bad times.

    Best of luck to Dana, J, & Emily. I have a feeling you will come out stronger. The hard times won’t last forever.

  14. So how do I decided which ones to pay & which ones not to pay? Pay the smallest like my debt snowball or pay the one that is yelling the loudest?
    The good news is that we have enough to pay rent, utilities and such just not the CC’s. I’m actually ok with it. We will get to them when we can.
    Thanks for your help!

  15. @Dana: I’d probably spread the money around in such a way that you kept as many accounts current as possible, regarldess of the amount owed. This way you are dealing with less accounts in collections, even though the one or two that are may be larger debts. Better to only have to deal with one or two collection departments than four or five!

  16. “could face being sued by the credit company and having your wages garnished or your bank account trimmed.”

    Going to court (not just sending letters) is a multi-thousand dollar minimum expense on the part of the plaintiff.

    If they obtain a judgement (which expires in a set number of years), they usually have to spend more money to enforce it.

    A consumer who can’t pay the minimum on their credit cards probably won’t have any bank account balances to seize (if they do, the collection firm better be d**n sure those funds didn’t come from sources exempt from collection such as SS benefits)

    And some U.S. states (e.g. Texas) flat out prohibit wage garnishment for consumer loans.

  17. It was the roof over my children’s heads, was always my reason.

    Thanks for the legal reasons – makes sense!

    Good timely post!

  18. “Going to court (not just sending letters) is a multi-thousand dollar minimum expense on the part of the plaintiff.”

    Collections attorneys are in the business of obtaining judgments against defendants for the lowest cost to the plaintiff as possible. Plus, once the plaintiff is vindicated in court after a judge formally determines that the debt is owed, the defendant is required to pay the court costs, service fees, and attorneys fees, so it essentially costs the plaintiff ZERO to file suit, except for a retainer to hire the collections attorney.

    This is why it is IMPERATIVE to know who you’re dealing with when you’re getting collection calls. If it is a run of the mill bill collector who is just pestering you to pay, then, by all means, blow them off. But once your account gets placed with a lawyer, take some notice. You wouldn’t want to spend all your time building equity in your house just for a judgment creditor to take a lien on it, making unsecured debt secured. Plus, you never know what your creditor’s policy is on writs of execution and garnishments.

    In other words, never say never.

  19. “so it essentially costs the plaintiff ZERO to file suit, except for a retainer to hire the collections attorney”

    In the U.S., a civil suit for damages is still a jury trial, NOT decided by a judge.

    Are you saying the collections attorney operates on contingency?

    Then they’ll still have to foot the bills, so it is in their interest to pressure their client to settle.

  20. Good advice. Start with the basic life-supporting needs and if you pay the minimum CC fees you are good.

    To your list I have to add also water as well. You better have running water in the house and you have to pay it in some countries.

  21. My husband thinks the CC company can come after your home if you are delinquent on the card. I’ve friends who say otherwise – anybody know?

  22. They can sue you and put a lien against your house. But they can’t take it outright. At least that’s the law in Texas.

  23. We have five credit cards with sizeable balance (2 are over $10k and 3 are over $5k) – we had to use them to pay some property and irs taxes, as well as live on them for about a year while when my husband was laid off. Then I got laid off after returning from maternity leave. Between me and my husband, we were both making about $150k so we never thought that we would ever be in a situation where we couldn’t at least make the minimum on our credit card payments, but after a month or two of late payments, are interest rates went from 3.99% to 22.99%, tripling our payments. We can no longer continuing paying these accounts. How long does it usually take for the cc companies to file suit against us and what recourse, if any, do we have (other than filing for bankruptcy)? Thank you in advance for any answers we receive.

  24. My concern is with the interest and late charges that keep accumulating on the credit cards. If intention is to eventually pay them off, and not declare bankruptcy, the amount owed would be double or triple by the time I get around to paying it off . Is there any way to halt interest and late charges on the amount owed? One of my cards zapped me with 29% interest by claiming default of terms-( I was 3 days late) raising interest alone to $500.00 a month! in addition to late charges. At that rate I will owe an additional $7000.00 a year just for interest and late charges. They refused to accept any type of proposed payment plan and continue to charge interest and late fee charges-what do I do?

  25. Lynne, the solution is to talk to the credit card people when they call about a late payment. Tell them you are in a ‘financial hardship’ and they will close your account – eliminate all late charges,over limit fees and reduce your interest down to 0-6%.They are usually very nice about it. The payments are usually cut in half and they actually start to get paid down because the interest is so low. Credit cards are unsecured so they can’t take your house or lien your accounts. The best they can do is aggravate you by constantly calling or try to sue you. If they try to sue and you don’t have any money the judge will order 10.00 a month or something low.
    Pay your mortgage, car, insurance,electric bill and skip the credit cards until you recover financially.

  26. what happens if you get a call from a lawywer were they are saying they are going to sue u for the amount you owe. cause they think you had no intention of paying it back. however we did make payments til it got to high to pay back. we used the credit card for food, gas and to help with some bills. anyone got a suggestion on this. she is on SS and that is all the income we have.

  27. I am only 29, but these last 13 months have been the HARDEST I have ever seen. We had our 2nd child august 07 and we decided that I would stay home. With having 2 kids in daycare, and a 50 mile round trip to work, it just wasn’t worth it. My husband was forced out of his job in june. He has a new job, paying not nearly as much. I am still at home looking for something part time at night. HAHA! We have talked to our mortgage company, and they told us we don’t make enough for them to help us. And that we should sell our house. I can’t believe that they would want to sell, considering the house isn’t worth what is owed on it. And our 2 credit cards are not budging. We are doing everything above, but there is never money left for cc’s. ls there something else we should try? Any advice would be wonderful.

  28. Shannon, DON’T SELL YOUR HOUSE! That is a bad idea! The person who told you that is not looking out for your interest! Then where will you live? Pay your mortgage. At least with your mortgage you’re gaining equity every month (no matter how little)and when the housing market straightens out you’ll be able to sell for a profit if you decide. Every mortgage payment you make puts some equity back in your pocket. If you only have 2 credit cards you’re not doing so badly. They will call constantly and threaten you with anything they can think of to get you to pay. If you talk to them and tell them these words ‘financial hardship’ and ‘financially dead’ they will close your accounts and reduce your payments. If you can’t pay anything just ignore the calls or change your phone number! Remember that it’s their job to try to get you to pay – they are ruthless! But – their threats are bull. The most they can do is sue you but it’s not cost effective for them to do that. And if you have no money the judge can’t order you to pay! You have not commited any crime by not having enough money. If you got a credit card to charge to the limit then not pay, that’s fraud. Otherwise it is not. Credit cards are unsecured so they lose.
    Before you decide to sell your house for no profit I’d think about walking away from the mortgage. What happens is that you stop paying and it would take about a year for them to kick you out. In that year save all the money you would have used for the mortgage and you could walk away with some cash. With a walk away you owe NOTHING! Even if you owed 300,000 and it’s only worth 200,000 you get out without owing anything. BUT you will have a foreclosure on your credit report which isn’t good.
    Don’t feel guilty about letting the cards go bad. They are the ones that screwed us by changing their terms, interest rates, and other charges and got us into this mess. Just like their terms changed your financial situation did too.
    I don’t know if everyone notices that the ‘powers that be’ are trying to get rid of the middle class and have just rich and poor.(much better situation for the rich) People are being scared into making the wrong financial move that puts them into the poor category. If I hear another commercial about the importance of you credit score I’ll scream! It’s a scam – if you don’t need a house, loan or car who cares about your credit score? 5 years ago did you ever hear about it- or think about it? They’re trying to scare us into paying out money we don’t have to ‘save our credit score’. Everyone is in the same boat so soon it won’t matter as much what your ‘score’ is.

  29. my husband and i have been in a financial hardship situation for going on 2 years and i can no longer pay any credit card payments, we have ten card equaling 12 thousand dollars. we have already filed bankruptcy 7 years ago and we do not want to there again. we were 3 months behind on our mortgage but are now almost caught up- we did a repayment workout plan- as a result we increase our house payment- only by 40.00 dollars – which is no big deal- considering we were about to be foreclosed on- i did a debt counselig plan but now i can not afford that payment. my husband and i have decided to pay our house and card and power bill- car ins also- everything else will have to be let go- i can not change the current situation and have decided to not worry about these cards- my home is more important- bottom line- frugal dad just made me reallize i am doing the right thing for right now.- thanks, kellah

  30. i was laid off my job in august after 28 years. i then found i had cancer and had surgrey. i am going through radiation. i have filed for disability but have been told it will take till april.i owe my cards over 80000 and they are all going to collectors. between my wife and i we can barely afford our mortgage and insurance. is there anyway to get out of paying the card debts. i am told by doctors i can not work again, as i also have parkinsons and chronic arthritis and rls. i will never get enough money to pay the debt on disability.

  31. I have mortgage, cars, boat, credit cards, and second vacation home. My income has dropped substantially and I need to decide what will NOT get paid. I’m thinking the correct domino fall down should be credit cards, then boat, then second home, then cars. Would this be correct?

  32. So far we have been able to stay on top of mortgage, other secured loans and credit cards. Our credit score has risen nicely. We purchased a townhome 3 years ago with no downpayment on a fixed rate mortgage. So of course we are upside down in value. I feel our cushion of money is rapidly dissipating and in a few short months will begin experiencing difficulties in meeting all our debts. We absolutely hate the townhome we are in and would love nothing better than to escape it. To sell means we would have to come with thousands of dollars out of pocket. I have been toying with the idea of paying down our unsecured debt which would take us several months while letting the house go. We would continue to pay on the other secured debt (boat and motorhome). I know how rideculous that sounds but would allowing the bank to foreclose on our hated home be one way of getting out from under this while still preserving at least some of our credit history? Or am I totally out of touch with reality here?

  33. Ramona, your plan is fine except that you will not be preserving your credit by getting foreclosed on. That is a huge blow to your credit score. You will have big trouble trying to get another mortgage. Why pay down unsecured debt? You can call and make deals with them(you have to be late on payments). They’ll drop your interest to 0-2%. Save the money and do a deal with your mortgage company. They can do a ‘short sale’ or some other plan that can preserve your credit. The only good thing is that credit scores will mean nothing soon because everyone is in financial trouble.

  34. My husband and I have about $50,000 in credit card debt, we have agreements with some creditors and some judgments. We are having a hard time paying the mtg plus all the debt. We are considering not paying the credit cards anymore. Does anyone know if my husbands wages can be garnished in the state of New York? Also how many creditors can garnish your pay at once?

  35. Dear FrugalDad,
    I am on unemployment insurance, even though I am able to pay my mortgage I am having a hard time paying my two credit cards which comes to about $10,000 combined. I have established a lower payment with them but I am hounded by their collection department. Am I safe in assuming that paying them something indefinitely will keep them at bay? And what is the worse case scenario in New York state? Who can place a lien on my co op and who can force me to liquidate their property. Since credit card debt is unsecured debt am I safe if I have to default if my unemployment insurance runs out.
    Many thank,
    Leonard

  36. I am responsible for some credit card debt of which I have fallen behind. I have been trying to pay something to each bank, but now realize I cannot keep up with the minimums. My question is: If I continue paying at least something each month to each bank – paying more when possible – will the cc company not be able to put me in collections?

  37. I think everyone is missing what has happened to all these credit card companies which are the banks that we bailed out. With out our help they would be out of business. I AM ONE OF THE TAXPAYERS THAT GAVE THEM BILLIONS OF DOLLARS TO STAY IN BUSINESS so how much of that money is ours try dividing it between each and tell them thats what they owe you plus interest.

  38. I’m a self employed artist and have had a very successful business for over 30 years. About a year and a half ago my business went belly up due to the type of companies I did work for (recreation and publishing) and the overall economy went south. My wife and I live in Northern Michigan. There are absolutely no jobs up here. Recently an ad ran in our local paper for one person to work at our local drive-up ice cream bar. Over 400 people applied. It’s a seasonal job.

    We barely have had enough money to pay our mortgage, food and utilities. We recently brought in a relative who is mentally and physically disabled and my wife tends to her needs. It helps make our house payment. I’m not eligible for unemployment. I have been able to bring in a little money by doing odd jobs for a few friends. I have not been paying on our credit cards for quite sometime and now it looks like we’re being brought into court. I tried explaining to the credit card people our situation months ago. They even offered a fairly large reduction on what we owed but we weren’t able to meet their monthly payment for that (it was quite a carrot they dangled in front of us). They said nothing else could be done. I just received a summons to appear in court. I have 21 days to contact the credit card attorney and maybe work something out. I’m hoping they will listen. What is so hard to accept and that I always paid my cards on time and paid large amounts each time I’m going to call the attorney’s this week but only after I talk to a few knowledgeable people. I really don’t want to file for bankruptcy if possible. I just thought I’d put my story out there. Thanks for listening and I believe if we all stick together we’ll make it through these stressful times

  39. This is the best blog I’ve been to on this subject. I have a unique situation that has me stressed. My wife has a credit card problem. She does not work but I have a good job. About seven or eight years ago she racked up $17,OOO in CC debt. Before I found this out there was probably already three thousand dollars of interest and fees. She tried to “fix it” herself, waited longer and made the problem worse. When I finally found out, I was very angry but cleared out all our accounts, made balance transfers onto “good” cards I was carrying at a lower rate and got it paid off quickly. A lesson learned but at least it was fixed. So I thought.

    Well inadvertantly I had just enabled her to continue to have a great credit score. She did it again but worse….much worse this time. I learned less than a week ago we are $70K in debt and the recent payments have just been missed so the interest has skyrocked. It is possible, barely, that I could clean out every bank account and investment we have to almost pay this thing off. However, my question is why do this?

    All the cards are in her name only. I don’t know if they can back check but I want to transfer the home deed into my name only before this comes to fruition. At that point she’ll have few assets. The cards, six of them, won’t settle now because she’s not so late yet. I would like to settle it because then we paid what we could and it also shows up on her record (which is what I want). I really really want her credit totally destroyed. Not because I’m angry and malicious but because I’m trying to preserve the family which includes our three children, one with a significant handicap. BTW, she is on board with this plan should we do it. I want the CC companies to feel some pain and remember she is a bad bad bad risk…stay away from her!!

    I think a stop payment on all the cards would either accomplish reaching a settlement or getting sued. She’d be w/o any assets to pay it back (she has no bank accounts, no cash, no job, nothing but a Roth IRA which is protected). I can live with creditors calling all the time; in fact, if this is the decision we choose I could see even having some fun with it. I’m much more concerned with the legal ramifications.

    I have two main concerns: 1) Can I become liable for payment without having signed for the cards and essentially destroying my own credit and 2) Just how high can credit card interest compound to on a card? When does it stop, $1,000,000? Plus court fees, etc. On a current $70K debt just how much could it snowball to? If it snowballs and then they legally come after me it will destroy us. But if they legally can’t touch me, then it becomes a viable option that sounds better to me than bankruptsy.

    Bottom line, I want to ensure my wife can never do this to the family again but at the same time use my good credit to keep the family from financial Armageddon. I know this is long-winded but it would be very helpful to know if it’s reasonable to move in this direction. I feel like I have little time to decide.

  40. At this time, I have several credit cards…I have very good credit, but now am in stage 4 and in remission and my husband has prostate cancer and is now in his chest…Chemo has stop working for him…But, Am now on Disability….Which will not cover my credit cards payments…I do get part of my husband pension to live on..I also have a son that has problems and can’t work..What do I tell the credit card companies? Or Do I file bankrupty?

  41. I was about to lose my home, as I was unable to afford the mortgage payments. Luckily, I got a loan modification just in time and avoided foreclosure. Now, I’m being sued by Capital One Bank for a credit card I’m unable to afford paying off. I offered to pay $50 per month, which is all that I can afford. They rejected my offer and are going ahead with the lawsuit. They just don’t care that I’m out of work and living on a very meager income at present. How can I do if I’m unable to pay off this debt or afford $200 per month, as they are insisting on? My main concern is keeping my mortgage current. I don’t want to fall behind again and I’m doing all that I can do to avoid this.

  42. I am a college student. I am in my final year and I graduate in December. I have had to pay for everything all on my own. There is no family to help me. I had a great job as a nanny, but could not keep it this year because of classes. I had to have the classes and they were only being offered at certain times. I have found another job but it doesn’t pay very much. I can no longer afford the interest on a school loan I took with Bank of America my sophmore year. It’s only $50 a month but I have no disposable income. It all goes to the other bills which have to be paid. I have no credit card bills, thank God.
    Today I got a summons from the Bank of America loan. I have no assets. I own nothing. Wage garnishment is not allowed in South Carolina (where I live).
    I am wondering if there is anything they can do to me? I know it has destroyed my credit. What is the absolute worst that can happen as a result of this going to court? I really need some advice but I can’t afford to talk to a lawyer.

  43. Sara, I’m no expert on finance. However, the initial visit with a lawyer is usually free (consultation/talk about the options and how to pay). It was helpful to me and I never did end up using the services. I’m not necessarily saying you should use their services but maybe set up three different consult appts (three different firms) as a starting point, keeping in mind they are trying to ultimately make a profit. JMA

  44. There is an exception to the rule that you should always pay your mortgage first. This also happens to be the situation I’m currently in. I am about $100k upside on a house due to the market, NOT taking a HELOC or 2nd, and I also have about $60k in credit card debt due to a failed business (that was breaking even for 6 years until the economy tanked). I don’t really care if I lose the house because I could rent a nicer house in a better neighborhood for about $1000/month less than I am paying on the mortgage (which is just a 30 year fixed at 5.625, not a bad loan, the house is just not worth what I paid unfortunately). I am employed (and will hopefuly remain that way) so I make too much to qualify for bankrupcy, but my lawyer did advise that I could just stop paying the house, and pay off the cards. The logic being that unlike the credit cards, who can sue me and garnigh my wages, the mortgage company can just forclose on the house and that’s then end of it. Also, given how long it would take for the forclosure to go through, I could likely live for free for probably a year or more, allowing me to pay off the cards much more quickly. Is anyone else in this situation or care to comment?

    • Steve – I’m in a very similiar situation in California. Would love to hear which path you decided to go down and how it has been working out.

      Best of luck to you.

      • I’ll be 3 months in default on the house in a week or so (didn’t pay June, July or August). I did, however, manage to get all my credit cards and business debt paid off by penny pinching and selling off my valuables, so now I am debt-free except for the house, I have a little money in savings, and have almost no monthly expenses. I get calls pretty often from the bank regarding the mortgage, but I tell them the same thing each time “I don’t know when I’ll make a payment, it just doesn’t make sense.” I’m just waiting now until they kick me out; it could be 6 months, could be a year, could be longer, I don’t know. Either way, I plan to rent an apt. for a few years and save up a nice nest egg once the eviction people come knocking. I’ve been in debt as long as I can remember, between credit cards, car loans and a small business; I’m done making the banks rich. They screwed up the entire system by giving loans to people who had no business owning a home, and then selling the loans to wall street a creating a recession. People like myself, who could afford a home, now have to suffer because the market was so inflated, plus we got to bail out the banks as taxpayers. Well, I tell you what Citibank, here’s your stupid house back, you screwed up, and now, I don’t owe you $100k anymore…

  45. Hi, I like others went through a very tough finacial year. He was without work for 7 months and we have been working on a get out of debt so we can retire plan and when he lost his job the payment were just too high, something had to give. So after alot of reading I stopped paying credit cards and caught up my mortagage, car and line of credit. Now we are back where we belong and want to relocate to Florida and buy a home. We have 60,000 to make down payment on the home of 150,000. Will anyone lend us money or do we have to fix paying off card and up or credit first. Never had a 30 day late payment and I’m 50 until this year?

  46. On the subject of deferring payment of credit cards when necessary: You’re not necessarily being immoral or anything by doing this. It’s just a business deal, where the lender is charging you a very high interest rate on that money in exchange for their assuming the risk of not being repaid as agreed. You’ve already paid through the nose for them to assume that risk. If they want to throw that risk back on the borrower now, then they can also refund those high risk-based interest rates they charged the borrower. That’s fair dealings, is it not?

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