Is selling our house to pay off card debt a good idea?


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Sally Herigstad is a certified public accountant and the author of “Help! I Can’t Pay My Bills: Surviving a Financial Crisis.” She writes “To Her Credit,” a weekly reader Q&A column about issues involving women and credit, for She also has written for MSN Money and, and has guested on Martha Stewart Radio and other programs.

Ask Sally a question, or see if your question has already been answered in the To Her Credit answer archive.

Dear To Her Credit,
My husband and I have bad credit scores due to the loss of job a
couple of years ago. We were forced to leverage ourselves to keep afloat. In
late 2016, we were not able to keep up on a lot of the payments and ultimately
let most of them go to collections.

My two-part question is this: We have about $110,000 in equity
in our home, and we now have a steady income. Should we sell our house and get
rid of our $25,000 worth of debt? And if we do that, what comes into play with
our credit score and purchasing another home? Are we looking at having to wait
it out awhile? – Rylee

Dear Rylee,
It’s good to hear you have a steady job now, and that you’re
looking for a way to pay down your $25,000 credit card debt.

Based on just the information you have provided, however,
selling your home is probably not your best solution. Unless you have other
reasons for selling your home, I strongly urge you to keep it.

Why it’s not cost-effective to sell your home

What are some other options?

So, if you don’t sell your home, how do you deal with this
debt? You won’t want to file for Chapter 7 bankruptcy over $25,000, especially
with a steady income. If you are completely overwhelmed, you might consider
Chapter 13 bankruptcy, in which you pay off part or all of your debt under a
court-approved plan. Better yet, you can find a way to resolve your debt
without the cost and trouble of going through the courts.

To get a jumpstart on paying off debts, you might consider
selling something and using the proceeds to get a jumpstart on your debt, or
using lump-sum proceeds as a bargaining tool for negotiating down your debts. If
you’re looking for something to sell, other than your house, the first place
I’d look is your driveway. If you have two or more cars, especially if you’re
making payments on any of them, living as a one-car family for a time may make
the difference. You can also use the amount you’re not spending on car payments
to continue to pay down your balances.

If you have questions or need more help, please visit a
credit counselor. You may be eligible to enter into a debt management plan
where the credit counseling agency helps you create a debt repayment strategy
that stops collection calls, reduces fees and helps you pay off the debt in a
manageable way. I recommend finding a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Financial Counseling Association of America.
They can look at your options with you and help you solve your debt crisis,
without giving up your home to do so.

See related: HELOC vs. cash-out refinance for card debt repayment

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