Question: Bob filed for bankruptcy a year ago and closed his business. He has a $35,000 home equity loan and owes $10,000 on a car. The home equity loan is a balloon loan and he's on Baby Step 2, making $61,000. Should he put the home equity loan on Baby Step 2 or Baby Step 6?

Dave Ramsey's advice: Normally, I say if the second mortgage is less than half your annual income, then you put it in the debt snowball. Since this is more than half, I'd put it in Baby Step 6. What I would recommend here is that you pay off the car and get after paying off the second mortgage. If you can get rid of that, you'll get your life back.

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Question: Sherry is getting a settlement from a car accident for about $35,000. Should they use it to pay down the mortgage or save it and try to sell the house and get something cheaper? Dave's answer is immediate when he hears about how much they make versus how big the house payment is.

Dave Ramsey's advice: This house is not ANYTHING you can afford, you need to get it sold. Your house payment is 70% of your take-home pay. There is no recasting in the world that's going to fix that. Your house payment should be no more than a quarter of your take-home pay on a 15-year fixed rate mortgage. That's very conservative, but that's what you need right now.

If I'm in your shoes, sell this house and rent for a while until you get everything cleaned up. Get stabilized, because right now you're just spinning!

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Question: Laura bought a house with her boyfriend a few years ago. She can't refinance it or do anything without him and she can't find him. Her house payment is $1,250 and her income is $48,000. Dave thinks she might have to get a private eye involved here, and get a quit-claim deed.

Dave Ramsey's advice: I would spend $500 and hire a private investigator to find him. You need to find him. You can't afford the house ... your house payment is 40% of your take-home pay. You can't afford a house payment of about $800, and you need to have a life other than just a house. Have an attorney prepare a quit-claim deed, where he quits claiming the house and deeds it over to you. Then find him and have him signed it. Then sell this house and get it out of your life.

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