I’ll never know the story and would never ask them for the details, but I hadn’t considered medical bills. Our daughter went to the emergency room 2 months ago, spent 1 night in the hospital, and the total of all the bills, if, indeed, I’ve received them all, will come close to 6K, after insurance. They never even gave her an Advil for pain, and we just received a $300+ bill from the ER doc who never even physically touched her and couldn’t have possibly spent more than 20-30 minutes in the room with us, total. He’s already received 80% of his charge, and now wants the other 20% from us — and he earns a salary!!!
Whew. Got that off my chest. Just really meant to say that I can easily understand how massive medical bills would completely devastate a family, especially an older couple living mostly on retirement income.
I lived off my savings and eventually the very modest investments I had and kept up the mortgage payment along with utilities and car payment and nothing else until the $$ ran out; and that was after selling off some personal belongings and eating a diet of most store brand mac & cheese and ramen noodles for months. I had had the house on the market for what I owed on it but couldn’t get an offer for that price. Technically I was only slightly underwater and that was mostly due to a home equity line of credit, we’re only talking between 2 to 3K.
The townhouse I bought was modest, slightly under market in 2004 and I put 20% down and had a 5.25% interest rate on a conventional 30 year mortgage. The big mistake I made was taking out the 2nd mortgage – LOC that I used to pay off some other debts as a result of my divorce in 03 and doing some home improvements, but it seemed like a good idea at the time.
My real estate agent was great and really knew her stuff and worked with the two lenders on the short sale I eventually had to do. The primary mortgage holder (S&L) was great to work with but the big bank I had the LOC with was horrible. They didn’t want to approve the short sale until I had made three more payments (the one I missed, the current and the next month’s). I kept telling them “what part of I have no money and no income right now, zero, ziltch, nada don’t you understand”? They told me I should borrow the $$ from a family member or friend and they wouldn’t talk to me or consider a short sale until I did.
My agent went after them big time and went to a much higher up in the bank as that plus some other things they told me were completely untrue and illegal. The bank also told me that even if they approved they would only pay 3% commission to the agent that was in direct contradiction to the Mortgage Forgiveness Debt Relief Act – this was in 2009.
My agent finally got everything through after convincing the 2nd lender that if the house went into foreclosure, they’d get a lot less and have to wait a lot longer to get it and threatening to report their illegal mortgage collection practices. We went to settlement 2 days before the foreclosure and a week before Christmas! I moved in with a relative and eventually found a job, saved, bought a used car, got an apartment and have struggled back to some semblance of normalcy and financial soundness.
As for being taxed on the debt forgiveness; that was covered under the Mortgage Forgiveness Debt Relief Act and that provision has been extended through 2012.
I really didn’t want to go that route but at the time I had no other choice. Aside from a tax debt to the IRS that I'm paying off on an installment plan because of the tax bill I incurred as an independent contractor that I didn’t pay because I was making my mortgage payment, I’m debt free and plan to stay that way. :)