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One Family's Fight

Monday, 4 Aug 2008 | 8:41 PM ET
Personal Finance 101
Developing a money action plan, with CNBC's Carmen Wong Ulrich.

Brandy, a 34-year-old single mom from San Francisco, is a true casualty of the economic downturn. But before the housing crisis even began making headlines, Brandy faced a catastrophe of her own – the death of her two-year-old son, Cole, after a hard battle with leukemia.

When Cole was diagnosed with the disease shortly after birth, Brandy and her husband had no choice but to ignore the escalating medical costs related to their son’s costly cancer treatments. After he died, the grieving parents were left with millions in medical debt and only one option – bankruptcy.

Using a strict debt diet, Brandy was able to pay off her credit cards and save additional money for a down payment on a house. Although the bankruptcy was on her record she managed to find a lender who would finance the mortgage. Finally on the road to happiness, Brandy and her husband would have two more children, but then she faced another blow as she and her husband separated.

Today, with two young children, Brandy is finding it hard to pay the bills. Her job as a legal secretary does not cover a mortgage that is beyond her financial reach. She is about to lose her home.

One bright spot on Brandy’s financial record is the $20,000 she has saved. But with her monthly expenses far outnumbering her monthly take-home income, she needs a plan. Here’s what Carmen has come up with for this single mom:

Carmen’s Money Action Plan

-Short sale current home and get a more manageable rent

-Cut utilities and transportation costs (try CasualCarpoolfor free rides to and from work in the Bay Area)

-Sell the recently purchased Volvo and keep the old Honda with the lower monthly payments

-Pay back the 401(k) loan with $14,000 from savings

-Pay off all credit card debt with $2,000 from savings

Carmen also noted the phone number for the Homeownership Preservation Foundation: 888-995-HOPE, which could be of help to Brandy in her fight to keep her home.

We’ll check back on Brandy as she uses this plan to get her head back above water.