(MONEY Magazine) – FROM TIME TO TIME, DAVID AND PATSY THEOBALD OF Savannah still visit the vacant three-bedroom ranch house that they once called home. David, 45, a $53,000-a- year controller for the local Hershey Chocolate plant, stops by occasionally on weekends to tinker with the 1977 Nissan 280Z that he has been restoring in the garage for the past year and a half. Patsy, 42, who is a part-time teacher and the mother of two, shows up once a month or so to vacuum the dust that gathers on the floors and rugs. But the Theobalds have not dared to live in the two-year-old, $91,000 house since July 1, 1991. That was when Chatham County Police evacuated them -- and 43 neighboring families -- because of the threat of a methane gas explosion from a decaying scrap-wood dump that was discovered under the four-year-old development. No blast ever occurred, and the county eventually decided that only 35 of the Weatherwood subdivision's 44 homes were in danger. The county bought most of those $90,000 to $140,000 homes last year for $3.8 million -- an average of nearly $120,000. But that left the Theobalds, and eight other Weatherwood families whose homes were officially proclaimed ''safe,'' to face the grim prospect of moving back into a deserted neighborhood where property values had plunged by as much as 50%. Not surprisingly, most of them refused to return. In March the Theobalds and seven of the others filed a $20 million lawsuit against the state, the county and Weatherwood's developers, charging negligence and property devaluation. It's hard to say how much the Theobalds' house might be worth today because no buyers have made offers on Weatherwood homes since the evacuation. But two Savannah real estate experts queried by MONEY estimated it might fetch from $45,000 to $60,000 -- or at least $21,500 less than the couple's $81,500 mortgage. It is not just the loss of money that the Theobalds fear, though. As a defiant David bluntly explains: ''When I stand on my back porch, every house I see is condemned. Moving back would be like living in a minefield.'' The Theobalds thus join the growing ranks of Americans who have lost some or all of their home equity to environmental contamination. Nobody knows how many people are in this fix, but the number is almost certainly rising as toxic dumps proliferate. Some 40 million Americans live within four miles of one of the 1,235 sites that have made the U.S. Environmental Protection Agency's Superfund National Priority List -- sort of the most-wanted list of hazardous waste -- and about 50 to 100 new sites turn up each year. (For help in determining whether your house could be threatened, see page 130.) EPA officials think the toxic tally will eventually reach 2,000 sites, but others & expect it to go much higher; Joel Hirschorn, a former senior associate at the Congressional Office of Technology Assessment, says it could top out at about 10,000 -- many of which will impact the homes nearby. Consider just three recent examples: -- A 100,000-gallon underground oil leak from a tank farm in suburban Fairfax City outside Washington, D.C. is endangering some 38 homes in a nearby community. -- Twenty-eight homes in suburban Philadelphia have been found to contain masonry that is tainted by radioactivity from an old factory that processed radium used for treating cancer patients in the 1920s.

-- An entire 73-home neighborhood in Westminster, Calif., south of Los Angeles, was placed on the Superfund list last year because it is built over an old dump that is oozing thick, black oil-refinery waste containing arsenic, benzene and lead. You don't have to live atop a Superfund site to have problems. The waste material that hurt the Theobald family was rotting wood -- too prosaic to make any Superfund catalogue. And your house doesn't actually have to be damaged, just threatened, to cost you money; whether or not the Theobald dwelling was ever in any real danger of exploding, for example, their equity in it has long since been blown away. Moreover, the Theobalds' potential losses mount each month. Though their lender, Georgia Federal, agreed last July to an informal moratorium on the $873-a-month payments on their 30-year, 10% fixed-rate loan, the bank is adding the $680 monthly interest to their outstanding principal. Result: They now owe $88,300 and, by October, will owe more than their house used to be worth. Yet they don't want to default, says David, because ''it wouldn't be honorable.'' Even without mortgage payments, their budget is strained by disaster-related expenses. They're shelling out $1,000 a month for the three-bedroom, split- level house they're renting -- $127 more than they used to pay for their mortgage. Plus they're spending an extra $100 a month to cover David's longer commute (up from 15 miles to 25 miles daily) and meals out and babysitting fees to attend meetings with other homeowners, lawyers and town officials. To help pay those bills, the couple have pushed their already fat $10,790 credit- card balance to $13,591, requiring $275 minimum monthly payments at 18%. ''Get kicked out of your house and watch your credit-card bills go sky- high!'' Patsy says dryly. Yet their damaged home value prevents them from getting a low-interest home-equity loan to refinance either that debt or the 13.5% auto loan (monthly bill: $441) they took out in 1988 to buy a slightly used Chevrolet Astro van. Against these expenses, the Theobalds have only David's salary plus the $1,800 a year Patsy earns as a substitute private-elementary-school teacher and $4,644 in child support for Cary ''Buck'' Kercheval, her 14-year-old son by a former husband (Buck's brother Nicholas, 3, is theirs alone). Chatham County paid them $1,750 last fall to help defray evacuation costs, and friends and church groups raised another $1,650. But those monies are long gone. Now their only cushion is $8,600 in bank and credit union savings. The Theobalds had little warning of their housing disaster. The first signs of trouble, which appeared in the spring of 1991, were subtle: Doors and windows began to shift out of kilter in one neighbor's house; a crack appeared in another's foundation wall. County inspectors traced the problem to an old construction-waste dump filled with tree stumps, scrap lumber and other such debris that had covered as many as five of Weatherwood's 12 acres a decade earlier. As this waste rotted, the ground subsided -- explaining the crack and crooked windows. Worse, tests showed that the rot was emitting methane -- or natural gas -- that could seep into nearby homes and explode if ignited by a flame or spark. Buried air pockets that contain more than 5% methane are potentially explosive; methane readings at Weatherwood hit 48%. After issuing written warnings and meeting with residents to explain the threat, county officials ordered all Weatherwood homeowners to evacuate within three days. David remembers near panic as civil defense workers and Georgia State Defense Force volunteers swarmed in to speed the weekend move, mobile television cameras peered over police barricades, and engineers in orange suits roamed around checking for methane. At 4:30 Monday afternoon, utility crews showed up to cut the power. ''I still had clothes in the dryer, but they said they couldn't wait,'' says Patsy. So promptly at 5 p.m., the dryer spun to a halt, and the Theobalds joined a funereal procession of cars -- escorted by police cruisers with lights flashing -- that snaked out of the ill-fated neighborhood. At the county's request, the Los Angeles-based firm SCS Engineers studied Weatherwood and concluded that 20 of the 44 homes could not be made safe (except, perhaps, by moving them out of the subdivision entirely) and another 15 could be made safe only by digging trenches around them to ventilate the gas. But the remaining nine properties, including the Theobalds', could be reoccupied immediately, the engineers said; all had methane levels below the EPA's 1.25% safety limit. ''I'd move my own family into their house,'' says SCS senior engineer Jim Walsh. ''It's completely safe as is.'' Based on that report, the Chatham County Commission voted in August to buy 32 of the 35 endangered homes (the other three are owned by developers or their relatives). County manager Russ Abolt is now trying to sell them to buyers who will either truck them out of Weatherwood or ventilate them as required, but he had not received any offers as of late April. The county, however, has steadfastly refused to purchase the nine homes it considers safe. And for their part, the Theobalds are equally adamant about not moving back. ''It's been eight months since they did any tests,'' complains David. ''How can they say the gas hasn't reached my yard?'' Anyone trying to affix blame for the fiasco encounters a circle of pointing fingers. The contractor who dug the waste dump says he told developer Cleon Lewis about it when Lewis bought the land in 1986. But Lewis, who recently filed for protection from creditors under the bankruptcy laws, says he had no idea how big the dump was, since 80% of it was covered by grass. Chatham County issued permits to dig the pit and, years later, to build the subdivision. But the county blames the state's Environmental Protection Division (EPD), one branch of which approved water lines for Weatherwood even as another branch was investigating the dump. In fact, the county has sued to recoup its $5 million in costs from Lewis and the state; both say they'll defend themselves vigorously. Meanwhile, David and Patsy are trying to regain some sense of normal life. Though 14-year-old Buck has borne up well under the strain, they say, three- year-old Nicholas has suffered. ''He used to be a very outgoing child,'' says Patsy, ''but now he's clingy, cries a lot and won't let me out of his sight.'' His parents worry that, if their lawsuit isn't successful, they will never achieve their main financial goals of saving for their sons' education and their own retirement -- though they did start contributing 7% of David's salary in January to Hershey's tax-deferred 401(k) savings plan (Hershey adds 2.5% more in its stock). But the parents too feel emotional scars: ''A few months ago, I stood out on our back porch, and it all came back to me, and I started crying,'' says Patsy. ''At this point we'd just like to put the whole episode behind us.''

THE ADVICE Don't move back into the house. Atlanta attorney Robert Shields, an expert in environmental law, told David and Patsy that -- based on the general facts of their lawsuit -- they may be able to recover all costs. For that reason, Shields advised them not to reoccupy their old home as long as they consider it unsafe. ''If you move back in,'' he said, ''you undercut the argument that you've lost the use of the property.'' Shields cautioned, however, that there is no way to be sure when there might be a resolution to the case. Since a jury trial and the subsequent appeals could take two years or so, he advised them to investigate the possibility of a speedy but equitable out-of-court settlement. Get your mortgage moratorium in writing. ''Ask Georgia Federal to formally forgo mortgage payments while the suit is pending, in return for full payment once you get a cash settlement,'' he said. ''Try to get them to waive all late charges, attorneys' fees and other penalties usually applied to loans in default.'' A bank official declined comment on the case. Cut your expenses and boost Patsy's income. Financial planner Raymond Howe of Homrich & Berg in Atlanta said they could start by moving to a lower-cost rental house or renegotiating their rent. They should also appeal to the local board of assessors to have their $1,200 annual property tax bill cut in half to reflect their home's loss of value. And Patsy should seek better-paying work. If she could find a $20,000-a-year job in hotel sales, a field she worked in before Nicholas was born, she would add $9,000 a year to the family's income even after losing some $8,000 to taxes and another $3,000 to child care. Pay off your credit-card debt. When their $441-a-month auto loan is retired in October, Howe said, the Theobalds should add that amount to their $275 monthly minimum charge-card payment. The combined $716 a month will pay off the card debt in just two years -- provided they lay off the plastic in the meantime. Start saving for college. Once the credit-card bills are gone, David and Patsy should shift that $716 a month into education savings accounts. If the money earned an after-tax 8% in a bond and stock mutual fund like Vanguard's Wellesley (no load; 11.2% five-year average annual total return; , 800-662-7447), it would cover both Buck's and Nicholas' expenses at a state school like Georgia Southern University in Statesboro (current total cost: $7,000 a year), provided that Buck's father -- as they hope -- proves generous enough to pay half his son's bill.

A month after the advice session, David planned to pursue the lawsuit, as Shields advised, but was reluctant to approach Georgia Federal because ''they haven't bothered me, and I'd like to keep my options open.'' The Theobalds had negotiated a $100-a-month rent reduction and planned to appeal their assessment. They also swore off the use of credit cards and hoped to implement Howe's debt-reduction and savings plan. One particularly bright bit of news: ''We don't take Nicholas to Weatherwood any more, and he seems like a much happier child,'' said Patsy. David, though, was still bracing for a fight: ''This battle,'' he said, ''has just begun.''

BOX: KABOOM!

Although the old waste dump discovered near David and Patsy Theobald's $91,000 Savannah home never blew up, as county officials once feared, the forced evacuation last year still blasted away some 52% of their net worth, which is down from $59,924 then to $28,924 today.

INCOME David's salary $53,000 Buck's child support 4,644 Patsy's earnings 1,800 Relocation grant from county 1,750 Gifts from church and friends 1,650 Other 1,186 TOTAL $64,030

OUTGO Taxes $11,319 Rent (July '91 to April '92) 10,000 Food and clothing 9,800 Auto expenses and repairs 6,413 Auto-loan and interest payments 5,292 Credit-card payments 4,483 Home maintenance, utilities 4,232 School and day care 3,849 Recreation and gifts 2,305 Medical expenses 1,886 Mortgage payments (May and June '91) 1,746 Charitable contributions 1,165 Miscellaneous 810 Life insurance 730 TOTAL $64,030

ASSETS House (estimated) $60,000 Jewelry, antiques and other household items 54,670 '88 Astro van, '71 Jeep 11,000 Bank and credit union accounts 8,600 Rental deposit 1,000 Series EE savings bonds 150 TOTAL $135,420

LIABILITIES Home mortgage $88,300 Credit-card debt 13,591 Auto loan 4,605 TOTAL $106,496

NET WORTH $28,924

BOX:

''IF WE'D BEEN HIT BY A HURRICANE, WE'D HAVE GOT HELP FROM INSURANCE. BUT AS ENVIRONMENTAL VICTIMS, WE HAVE NOWHERE TO TURN. THE HOUSE IS AN ANCHOR AROUND OUR NECKS.'' HOMEOWNER DAVID THEOBALD

''WE THOUGHT THE THEOBALDS AND THE OTHERS WOULD BE RELIEVED WHEN WE TOLD THEM THEIR HOMES WERE SAFE AND THEY COULD MOVE BACK IN. WE THOUGHT IT WAS GOOD NEWS.'' COUNTY MANAGER RUSS ABOLT

''MAYBE WE SHOULD HAVE LOOKED INTO THE LAND'S HISTORY MORE. BUT THE COUNTY DIDN'T DO ITS JOB. WHEN IT GAVE US A PERMIT TO BUILD THERE, WE ASSUMED EVERYTHING WAS OKAY.'' DEVELOPER CLEON LEWIS

''I'D MOVE MY OWN FAMILY INTO THEIR HOUSE. IT'S COMPLETELY SAFE. THE FACT THAT THE HOMES SAT FOR YEARS WITHOUT INCIDENT SHOWS THE DANGER WAS PROBABLY SMALL.'' ENGINEER JIM WALSH

''WE BOUGHT HERE FOR THE NEIGHBORHOOD AS MUCH AS FOR THE HOUSE. NOW OUR REASON FOR STAYING IS GONE.'' HOMEOWNER PATSY THEOBALD