Downsizing a $700,000 Home to Solve a $5,000 Monthly Deficit

A household running a $5,000 monthly deficit cannot sustain a $5,500 monthly mortgage payment. The deficit is the result of an embezzlement loss of $1.6 million from an investment fund managed by Tracy. This loss wiped out 70% to 80% of the household income, leaving a take-home pay of $12,000 to $17,000 a month. Current monthly obligations include $4,300 in credit card payments, $1,700 for college costs, and $3,000 to $5,000 in business expenses. The family's debt stack totals $270,000, consisting of $152,000 in credit card debt at 12% to 30% interest, $30,000 owed to family, and $88,000 in back taxes to the IRS. The home is worth $700,000 with $550,000 owed. Selling the house allows the family to eliminate the $5,500 mortgage payment. The resulting $150,000 in equity can be used to eliminate the $88,000 IRS debt.