Looking for some honest input before we make a big decision.
Background:
When we bought our house, I was making ~$150K and the payment (now close to $5K/month) made sense
My income dropped to ~$80K for most of this year (Jan–Sept). The house payment ate almost everything, and we ran up debt just covering normal living expenses
Started a new job in September at $130K, so income is better, but the house is still sinking us
We now have about $80K in unsecured debt: mostly credit cards, plus some medical financing (CareCredit, etc.)
The house: We’re done with it. It’s been listed for about 10 months with no sale, so we’re looking at two paths:
Option 1: Short sale. Stop paying the mortgage during the 4–6 month process, use that money to pay down debt, then go on a structured repayment plan of roughly $800/month for about 6 years. On top of that, we expect to owe the IRS $10–15K on the forgiven mortgage balance, which we’d also have to come up with.
Option 2: Bankruptcy. Wipe everything and start fresh. The clean slate is tempting, but we’re honestly not comfortable with it.
Questions:
Which option makes more sense in our situation?
If you’ve done a short sale or BK, how did it affect your credit, renting, or future home buying?
Is there any way to reduce or avoid the tax hit on a short sale?
Is there anything else we’re missing?
Appreciate any advice, especially from people who’ve been through either one.
Would we even qualify for the BK?
submitted by /u/njdevil201
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