Marriage Crisis: Drowning in Debt: Amelia Tyagi, Inheritance

Survival Mode

Dr. Phil introduces Amelia Warren-Tyagi, personal finance expert and author of All Your Worth: The Ultimate Lifetime Money Plan. "Could they have made bigger mistakes?" he asks her.

"Wow. I can't think of any," Amelia says. "You guys need to prepare yourselves. I hate to tell you this, but I think the first move you may need to make is to call the bank and see if you can give that house back. You don't own that house anymore. You're $150,000 under water and right now, the smartest move is to walk away and find an apartment you can actually afford."

"Because they've refinanced this house to where they're upside down in it, right? There's no way that they're going to get that paid off," Dr. Phil says.

[AD]"And that's the worst kind of debt you can take on," Amelia says. "Look, all debt is bad debt. There's no such thing as good debt. But you put that debt on your house. You put your house on the Roulette wheel, gambling whether you can make every payment, every month."

"Let's make sure you understand what we're saying here," Dr. Phil explains. "When you have a house, you have a homestead exemption, and if you have financial trouble, they can't take your house … unless you refinance it. And if you've refinanced your home, you've taken a home equity loan, you've now collateralized these other loans with what was protected, and it's no longer protected. And that's what you mean when you say you're putting it on the Roulette wheel. It's no longer exempt. They can come and get your house."

Pam says divorce might be her only option to protect the money she will be receiving in an inheritance. "Chris thinks my parents are an endless moneybag, and I'm scared that when my parents die, that he will drain me of the inheritance money. I don't want Chris to have access to any of it, and I think the only way to achieve that is through a divorce," she says.

"You understand, we're into survival mode here. A lot of people in America are in this situation. This isn't about how you can sock something away for old age. What we're talking about here is how you survive. What did you think when Amelia says you probably need to walk away from that house?" Dr. Phil asks Pam.

"I think I've pretty much come to that conclusion before I got here," she says tearfully.

"Do you get that's where you are?" he asks Chris.

"I understand that's where we are. That's not what my goal was. That's not my goal at all, and I don't want to lose the house, because even though my name's on it, I don't consider it mine," he says.

Dr. Phil wants Chris to get out of denial. "This is like you've fallen off the back of the boat, you have an anvil tied around your neck, and you have to swim to shore. [Then] somebody comes and says, ‘Cut the anvil loose and you've at least got a chance of making shore.' Right now, this house is like an anvil around your neck."

He asks Amelia, "Are they candidates for bankruptcy, in your opinion?"

"For you folks, I would say walk away from that house and try to pay off your debt. I don't think we need to file for bankruptcy this minute, but I would still get on the phone with a good attorney just in case it comes to that," she says.

"Why not file for bankruptcy when they're $624,600 in debt?" he asks.

[AD]"I'll tell you why and there are two reasons," Amelia explains. "The first is bankruptcy isn't going to help with your student loans. You're looking at $75,000 between the two of you in student loans. Those are following you anyway. And now we've got $450,000 on that house. And if you're going to give the house back, hopefully you can work it out with the bank, and there's going to be some negotiation that they'll take a short sale on the house, and you can walk away."

"Yeah, the bank doesn't want the house, right? They want the money," Dr. Phil says.

"They want the money, but they also get the dry lemon principal," Amelia says. "There are people walking away from homes all across [America]. You may need to file for bankruptcy though to get them to take that house back."

Dr. Phil asks Amelia about Pam's inheritance. "If you get that inheritance before you get bankruptcy protection or before you get yourself out of debt, it's gone, true? Wouldn't that be sucked in as an asset to the estate for bankruptcy?"

"Yes, it would, Dr. Phil," Amelia says. "And any creditor can come and tap your bank account. You said you're getting sued. They're going to come after whatever is in your bank account and take it out."

[AD]"That's what scares me to death," Pam says. "Everything I had went into my house when I only owed $80,000. I put $75,000 in cash to have it built. That was all the money I had previously, so I'm willing to walk away from it, as much as it hurts, and I know I need to, and it's scary."

"But the good news is you two have a great income, right? We have something to work with here," Dr. Phil says.

"Yeah, but my income is limited," Pam says.

"Well, it may have to get unlimited. We may have to do some things to bring it about," Dr. Phil tells her.