Are you considering selling your home to pay off debt? If so, there are some things you’ll want to consider before making any firm decisions. Under some circumstances, it’s a good move to sell your home to pay off debt, but with other circumstances, it doesn’t make sense. This article will help you figure out whether or not this is the right move for you.
Debt can be overwhelming
Whether you’ve got tax debt, student loan debt, credit card debt, or other loan debt, it can be overwhelming. In fact, debt can negatively impact your life by causing stress, anxiety, and depression.
According to data sourced by MoneyGeek.com, two-thirds of adults say money is a significant source of stress. Over time, as debt accumulates, so do these negative feelings that impact your mental health.
People with a large amount of debt can end up with more than just mental stress – it can affect the physical body, too. If you’re experiencing this, it’s understandable that you’d be looking at selling your house to get out of debt. Stress is a terrible thing to live with.
Don’t worry about what other people think
Many people worry about what others will think about them if they sell their home to pay off debt. For instance, this couple realized they were deep in debt and were considering selling their home but didn’t want people to think poorly of them. In the end, they sold their home, and it worked out. They had enough equity to pay off their debts and they worked on getting their finances together afterward.
Is selling your house to pay off debt the right move?
Although it’s possible to sell your home quickly, there are important factors to consider. Before putting your home on the market, consider the following pros and cons, along with your circumstances to make the right choice.
1. How much equity do you have?
The number one factor to consider is how much equity you have in your home. If you don’t have enough equity to pay off all of your debts, it might not be the right move. However, there are some caveats.
Say you have debts that can’t be forgiven in a bankruptcy, like student loan debt. This debt won’t go away unless or until you pay it off. If you can’t pay this debt off anytime soon without ignoring your other financial obligations – or if it will take you years to pay off – that’s a plus for selling your home to pay it off. Student loan debt is one of the worst types of debt anyone can carry, and if selling your home can free you from this debt alone, it’s worth considering.
On the other hand, if you don’t have enough equity to pay off a significant portion of your student loan debt, it’s probably not worth selling your home unless you have a plan for paying off the rest of that debt.
2. Are you filing for bankruptcy?
When you’re in debt, you have the option of filing for bankruptcy. However, like every option, this isn’t necessarily the right move, and you’ll need to weigh the pros and cons with your individual circumstances. Selling your home before or after filing for bankruptcy can also get you in trouble.
The first point to consider is that in some cases, you can keep your home in a bankruptcy where your debt is rearranged and managed by someone else.
However, if you have too much debt to pay off over a reasonable amount of time, you’ll probably be considering chapter 11 bankruptcy to have debt discharged. This is where selling your home can get tricky.
If you sell your home before filing for bankruptcy and you don’t use the money to pay your debts, there will be consequences. However, during the bankruptcy proceedings you can file a motion with the court to sell an asset (your home) as part of your reorganization plan.
3. Can you consolidate your debt?
If you can consolidate your debt and pay it off in a reasonable amount of time, you may not need to sell your home. It all depends on the services you’re considering because sometimes debt consolidation involves a loan that can take a while to pay off, but not always. However, if debt consolidation will pay off your debt reasonably, you probably don’t need to sell your home.
4. Can you sustain a manageable level of debt after?
There’s no point in selling your home to pay off debt if you can’t maintain that level of freedom afterward. If you’re going to pay debt this way, make sure you have a plan for managing your finances afterward.
If you’re concerned about getting into debt again, consult with a financial expert to learn how to budget your money better. They’ll help you create a budget that will allow you to save money, live frugally, and stay out of debt. Or, if you need to take on some debt, you’ll learn how to pay it off responsibly.
It makes sense to sell your home to get out of debt when you have a plan to pay back that debt and stay out of unnecessary debt moving forward. Just make sure you have this plan in place before you sell your home, so you don’t make any wrong moves.
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If you’ve decided to sell your home to pay off your debts, contact us and we’ll give you a cash offer in 24 hours or less. We make selling your home easy. We’ll buy your home as-is, so you don’t have to worry about making expensive repairs just to get it sold. You won’t have to bother with listing or showings, and we’ll pay all the closing costs.
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