I understand, and if you had to sell and move you'd probably be out a whole lot more money that you just don't have right now. I think you're right that settling with W is the best thing to do. If I understand you correctly, that would clear the path to refinancing and that would give you some relief on your debt payments. It wouldn't be fair for your W to incur the costs of the "settlement payment" of the refi, so it sounds like 3k would be a fair offer to her. Her 5k number seems unreasonable unless there's more to the story, like you kept all the furniture or something. You might pitch the 2.5k to her, that leaves you a little room to negotiate. If it makes you feel any better we have a LOT more equity in our house, I'm going to have to shell out 100k to my W!
