Reflecting on the experience - my journey in and out of crippling debt

[nceguyfromne]

Not sure why, but was just reflecting on the last 5 years and my journey in and out of crippling debt.

I should probably note, just for posterity, that within this timeframe I also met a new special someone, married her and started a wonderful life with my new family. She has been with me through most of this ride (thankfully, not as a co-debtor) and has always stood behind and supported all of my decisions, even the incredibly poor ones fueled by my stubborn pride. Read on and you will see just how costly one's pride can be. Hopefully this serves as a story of both hope and caution.

Late 2005 - the beginning: I am a married homeowner with near-perfect credit. We had weathered a layoff the year before and were getting back on track financially, but it had taken a toll on our relationship. We decided to be spontaneous and finance a couple new cars. We made the down-payments on credit cards (about $3K each), then opened new, high-limit/low-interest credit cards and transferred the balances there. Seemed like a smart decision, right? Just a few months later, we decide to call it quits and it begins.

05/06: We informally separate and agree to divorce.
06/06: Put house up for sale.
07/06: Move in with my parents.
09/06: Divorced; ex agrees to begin paying mortgage in 2 months in exchange for pocketing all proceeds of sale.
11/06: Ex does not pay mortgage as agreed; not wanting to jeopardize my credit, I pay; move into my own apartment later in month; ex now officially "squatting" at house; begin using CCs to finance my life while continuing to pay mortgage plus my own rent.
12/06: Ex takes house off the market while still squatting; still paying mortgage; still financing my life w/CCs.
04/07: Start new job; ex puts house back on the market for even higher price and is still squatting; still paying mortgage; still financing my life w/CCs.
08/07: Arrange interest-only forbearance with mortgage lender; still financing my life w/CCs; ex still squatting.
11/07: Mortgage forbearance expires and payments officially stop; credit cards basically maxed out by this time to the tune of $30K; ex still squatting.
01/08: Begin formally budgeting what little finances I have; begin making plans for 5 year payoff of all CCs thanks to low interest rates.
02/08: Mortgage lender begins foreclosure; ex still squatting.
03/08: When I actually learn, from the realtor, that lender is foreclosing; ex has abandoned property.
Later that same day: File motion in superior court to enjoin foreclosure on grounds of improper notification, arriving minutes before they close for the day; a very kind clerk rushes it to a judge; motion approved, enjoined for 30 days; lender's attorney reschedules foreclosure to June.
04/08: Serious work begins to sell the house, with ex unaware of anything; list price is slashed; attorney acquaintenace hired to help negotiate and close short sale.
05/08: Prospective buyer makes a short sale offer and I accept; contact ex and let her know house is being sold.
06/08: Lender approves short sale day before closing and snowballs me with a contingency that I must sign a promissory note; attorney begs me to reconsider and just let them foreclose, but I am too proud and want to salvage my credit; after discussing with my fiancee, we decide I will sign the note myself in hopes of keeping my ex our of our lives.
10/08: Begin making monthly payments on promissory note to mortgage lender, ~$200/month for the privilege of not being sued.
Early 2009: CC interest rates begin skyrocketing after new CC legislation, 5-year plan starts looking more like 15- or 20-year plan.
07/09: LAID OFF.
09/09: First unemployment check finally arrives.
10/09: Cancel first CC after receiving notice of impending increase from 10.25 to 30% interest.
12/09: Make what will be my final CC payments.
01/10: Start my new job; decide to file BK and consult with local attorneys; collection calls begin later in the month.
03/10: First letter from a creditor's attorney (CC with largest balance); collection calls continue.
04/10: Choose and retain attorney; file Chapter 7; collection calls stop.
05/10: 341 meeting; smooth sailing, lasts only about 60 seconds.
07/10: Join the 60 day club with no issues but no signs of discharge; attorney says this will likely be held up by my reaffirmations needing approval from the judge.
10/10: After a long, quiet 5 months, the court finally approves reaffirmations, discharges and closes case; no hearings needed!
12/10: Get the 10% raise I was promised when hired.

Now: My new family and I are living within our means with no credit and doing wonderfully. My dear wife no longer works at a job she hates just to pick up the slack of my paying $1200/month in minimums to creditors. We are working on building our savings and even saved up for a couple small home upgrades in the last half of last year. By the end of this year we will no longer have car payments (woo hoo!) and will have another several hundred dollars to save each month!

When I look back at how quickly I got into trouble and how long I waited to do something about it, I wish I had done things a lot differently. I guess that's why they say hindsight is 20/20! I think my layoff was actually a blessing in disguise because I not only got a better job but it made this decision a lot easier to make. I am not so sure I wouldn't still be wrestling with these minimum payments every month were it not for that!

[99lawdog99]

Good for you. Glad all is going well. As far as I am concerned, the banks created this mess themselves. I have so many clients who were current with their credit card bills and for no reason, their rates tripled and their monthly payments doubled. Instead of allowing people to payoff their debt at reasonable rates, they felt that charging 30-40% interest and demanding ever growing minimum payments was a smart business move. Everyone who owes a penny to a credit card and could afford to file bankruptcy, should and leave them with nothing. There comes a point where their greed should destroy them.

[clevelandmom]

NCEguy: Wow - what a GREAT story. Thank you for sharing and taking the time to write it all out. You learned a great lesson - and that's what life is all about! So what if we make mistakes along the way? As long as we learn from them, right?

LawDog: You are my hero! Are you an attorney? I work at a law firm in Ohio. You are a gazillion percent right about the blood sucking bastard credit card companies doing this to themselves. ALL of our credit cards decided to triple our minimum payments and charge ridiculous interest rates. I am actually quite anxious to see what the future holds on these idiots. How much money are they going to end up losing by becoming so disgustingly greedy? How many people are going to be forced into bk because of them? They pulled this crap in 2009, so we are actually going through this pretty early. I wonder what the statistics are going to show 3 or 4 years from now. I actually wonder if the credit card companies will even exist anymore since so many people will actually be forced to default on them. I just. . .wonder. . . It will be interesting to see what happens.

[nceguyfromne]

Thanks for the feedback lawdog and clevelandmom! I agree, the banks did this to themselves. I lose no sleep at night because I know I tried. I was hellbent on paying my debts down. Heck, look at what I went through to spare the foreclosure. I had it all planned out and then the CC companies got greedy after the Credit Card legislation. The APR on my highest-limit credit card, also the one with the lowest rate, tripled in about 6 months. Minimum payments shot up. All they had to do was play it honest and I would probably still be paying on these every month. Never missed a payment, even when I was out of work.

In the end, I know I made the better choice. Just wish I'd made it a little sooner.

[BrokeinMD]

Great blow by blow, Nceguy. Continued success to you!