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Should I Sell My House to Pay off Debt If I Owe Over $19,000?



Question: My neighbors probably think I have money because I have the biggest house on the block. But in reality, I owe $19,000 on my credit cards and I’m barely making ends meet!

After my divorce, I got the house. I can easily pay the mortgage, but my problem is living expenses. I have a job as an office manager, but it barely pays my bills and other expenses. My health insurance isn’t very good, so I have several prescriptions that cost me $220 a month. (I was in an accident several years ago, and now it’s led to a chronic illness.)

Do you have any advice? Please don’t tell me to sell my house, because the mortgage payments are actually less than what rent would cost me. (We bought the house in 1999, when property values weren’t so high in this area.) 

I’m 77 years old and am worried about my future. 

Anita in Massachusetts

Howard Dvorkin answers…

Video Transcript

How can someone get out of debt and still keep their house? A reader has many beautiful things but also an ugly amount of debt.

When people ask me for financial advice I usually recommend many things: Credit counseling, a debt settlement program, and yes sometimes even bankruptcy. But I also spend a lot of time warning people what not to do when people are drowning in debt. It’s like they’re literally drowning.

They’ll reach for anything they think will help them stay afloat. Unfortunately, very bad people out there know this. They dangle too-good-to-be-true schemes that can actually get you in deeper debt. In Anita’s case, the worst thing she can do is take out a loan against her house and use it to pay off her unsecured credit cards.

That’s because if she fails to pay back to the home loan she could lose her house, but if she fails to pay back the credit cards she won’t be homeless. Instead, a debt management program, or even a settlement program will probably work best for her.

It takes a little longer but slow and steady not only wins the race but it wins your financial freedom for the future.

You’re facing three of the four major causes of debt, Anita. Those are:

  1. divorce
  2. natural disaster
  3. illness
  4. accidents

So first of all, I want you to take a moment and be proud of yourself. You’ve persevered, and now you’re seeking professional help. Those are two admirable traits.

Now let’s dive into your situation.

Prescription drugs

This wasn’t the first item on your list, but it’s the easiest to check off. You can likely save half on your prescriptions by using a free service called GoodRx. It’s a free app that helps you get the best prices on drugs, even those your insurance may cover but which are still too expensive. If that sounds too good to be true — and GoodRx insists the savings can reach 90 percent — it’s not.

The company was founded by some of Facebook’s original employees and is a deceptively simple business model: Crowdsource many prescription drug users, then negotiate with the drug companies for volume discounts. Read’s report on GoodRx.

Credit card debt

The next easiest money problem to resolve is actually your biggest: that $19,000 in credit card debt. I can’t say for sure, but you might be a candidate for a debt management program. These programs can cut your total credit card payments by up to 30 to 50 percent while avoiding fees.

Again, it might sound too good to be true, but DMPs (as they’re called) have been around for decades. A nonprofit credit counseling agency works with you to find a consolidated monthly payment that works for your budget. Then they negotiate with your creditors to reduce or eliminate interest charges. That way, you can get out of debt faster because you focus on paying off the balances you owe, rather than interest charges. In most cases, qualified participants get out of debt in about 36-60 payments, even though they usually pay less each month.

I can’t tell you for certain if a DMP is right for you, because that requires a more detailed debt analysis. Thankfully, you can get one for free from a certified counselor at a nonprofit credit counseling agency. How do you find one? can hook you up with one that’s A-plus rated by the Better Business Bureau.

Talk to a certified credit counselor now for a free debt and budget evaluation to find the best solution to get out of debt for your needs.

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What not to do: Borrow against your home

I believe these two steps might be enough, but I want to warn you against doing too much. If you ask less-reputable people for help, you might be told, “Take out a loan against your house and pay off all your debts!”

That’s a terrible idea.

As has reported…

The problem with that is that you effectively convert unsecured debt into secured debt. Credit cards are usually unsecured. As much as debt collectors may threaten, they can’t take your property without a court order. On the other hand, if you fall behind on your home equity loan payments, the lender will start a foreclosure action. If you don’t catch up, you can lose your home.

If you were a little older, then there might be a way to borrow against your home that doesn’t increase your foreclosure risk. It’s called reverse mortgage. It has lower risk because there are no monthly payments, so the risk of default is low. However, you must be over age 62 to qualify, so you have a few years before this would become a viable option.

Should you sell your home to pay off debt?

The option you’re considering is to sell your home completely, but you’re understandably concerned. First, you know your cost of living will increase if you sell and start to rent. Since you’re barely making ends meet now, any increase in housing costs will put you in a situation where you’re more than you have each month. That would be a recipe for a long, painful descent into credit card debt.

So, my advice is to focus on bringing your budget into balance now. Explore GoodRx to lower your prescription costs. Then see what a consumer credit counselor has to say about your credit card debt. If you can just get rid of those balances, then you’d eliminate those bills, which should do a lot to fix your budget.

If credit counseling can’t help you find a way to pay off everything you owe with easier monthly payments, then one last solution would be to consider debt settlement. This will get you out of debt for less than you owe by paying off a percentage of each balance. Your credit generally takes a hit for each debt settled. However, you already own a home and if you don’t need to buy a car for a few years, you should be able to rebuild your credit once you’ve gotten rid of your debt.

Have a debt question? Can’t find what you need to know? We can! Submit any debt or finance question you have, and we’ll tap a pro who will respond as quickly as possible.

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