- Personal Finance
Bankruptcy and Foreclosure after Unemployment
When my home experienced a major water leak, I did everything in my power to rebuild and improve the house. I was so busy fighting the small war of putting the house back together I didn't even really notice the economy took a nosedive. I was just getting to the point of feeling like I was going to overcome the intense adversity of the last almost 2 years. I had finished replumbing and rewiring my home and was looking forward to starting on the finishing touches of installing drywall and flooring. I had gotten a killer deal on oak hardwood and I was excited to see it laid because it was so close to the original floor of the old house.
I should back up and explain that when I purchased the home, it was a bit of a stretch but I calculated in the rent of a tenant and found that the house payment would actually be lower than what I was paying for a small 2 bedroom apartment. I still had an emergency fund in the bank. And, I would have a yard, a huge basement and a feeling of having roots. I wanted to park myself and my son. I wanted a little bit of stability. Buying a house, in my mind, represented the ultimate in stability and security.
For me, the economic downturn hit in stages. The house had an apartment and I had found a lovely tenant who paid her rent on time and didn't mind the occasional hammering noises. My garden was looking lovely. I had taken out a home equity line just after I purchased the house to start on some of the changes - this was before the water leak disaster struck. I had a new roof and central heat and air installed. The home equity line was the first sign of trouble - the bank wrote and said that even though I had used only a very small portion of it, it was now closed due to the falling value of my home. I really didn't understand because I had used the $$ from the equity to improve the home, so the value should have been going up, right?
Shortly after the home equity was cut off, my hours at work were cut. Not my actual hours, but my overtime hours. My budget factored in having 3 to 5 hours of overtime each week. I cut corners, started cooking even more efficiently, and made sure I wasn't wasting or overspending anywhere. I am a pretty frugal person, not afraid to shop in thrift stores, so I was doing pretty well. I had also gotten my son to embrace frugality. He sold his old video games and was ok with wearing clothes from the thrift store.
The water leak happened in July 2008 - right around the time the economy was doing a major nosedive. Shortly after my boss had to cut hours further and we all went on partial unemployment. I was actually working less than full time, usually 32 but sometimes 24 hours a week. I searched and searched for a full time job, but it was like every job in the area dried up. The major employers began laying off a huge percentage of staff. My head was so busy dealing with the insurance and the creepy contractor I initially hired that I didn't even notice how bad things were getting in the economy. I was still able to pay my bills, not always the full balance on my credit cards like I was used to, but more than the minimums.
Then my credit cards started cutting the credit available to just above what I owed. I had four major credit cards, each with about 25% of the available credit charged - I was purchasing supplies to finish the house, and I sat down and figured out a 5 year payment plan to make sure I was not going to be saddled with credit card debt forever. I had an excellent credit score, over 800, and I didn't want to mess that up. Once the credit card banks cut the available credit, they started raising my interest rates. Most of my cards had between a 6-9% interest when I began charging. Suddenly the interest rates jumped to 19-29% because I was using too much of my available balance (because they had cut it!).
All of the sudden I was in trouble. I called a debt consolidation company and did a free consultation. At the end they said "File Bankruptcy, there is no way you can dig out of this". I was stubborn though. I wasn't raised to walk away from my obligations. I spent the next several months trying to work with my credit cards. Then I heard about "Hope for Homeowners" and tried to refinance my home loan. I went through the process FOUR times before I figured out that even though I was the "average American" the program was supposed to help, it was going to be of no help to me. The red tape was incredible. The bank kept losing my paperwork, telling me they had no information on the program and generally just stalling.
For a while I was able to make minimum payments, but I got a little further behind each month. I started noticing homes in my neighborhood selling for about 1/2 to 1/3 what I owed on my home. I was more than $100 thousand under water on just the house. I started missing credit card payments and the fees racked up. The house and the financial problems would have been enough stress but I was also struggling with the relationship I was in. It was turning into a situation that made me question my sanity and my character every day. I did not want to turn into a person who hurt someone tit for tat because I was being hurt. My boyfriend was not a partner in my problems. I was expected to be there to help him but he was not there for me. Unfortunately he was my boss too.
I finally got to the breaking point. I sat in my house and despite all the blood, sweat and tears I put in, decided that I just couldn't struggle with my job situation any longer. If it meant losing the house, so be it. I quit my job, ended the relationship and filed for unemployment. My bf/boss fought it tooth and nail - he even lied and told them I was still working for him, issued checks to me and deposited them in my account. It took a few months to disentangle, to get unemployment going and to recover from the shock of losing my job. I got a little further behind in my house payment. I stopped paying the credit cards all together.
Somehow I still thought I would catch up. A few months later I got a great job and I thought things were finally improving. I could pay my house payment, start saving to pay the credit cards and just relax a bit. I was just starting to relax into the job when the economy hit again. The company had to start cutting hours and I was again working part time. I realized that I would not be able to recover financially, so I stopped paying the mortgage and filed bankruptcy. I did not reaffirm the mortgage so I knew I would eventually lose the house. I stopped working on it and just lived in it halfway put together. At least I had a bathroom that worked!
What I didn't anticipate was the feeling of relief I would experience once I got past the shame of filing for bankruptcy. I knew that the bankruptcy would affect me for years to come, but I was so past caring at that point. What I didn't anticipate was how fast my credit score would recover. I have waited, rather impatiently, for the bank to finally foreclose the house so I could begin moving forward. It took them over 2 years to proceed with the foreclosure sale. It was a bittersweet moment for me. I would greatly love to finish the grand project I began. On the other hand it would be extremely foolish to keep beating my head against the wall. I must take the lessons I've learned and make the rest of my life better.
I know things about myself I never knew. I know that I will bend and not break despite great adversity. I know how to wire a house and fix a leaky sink. I can apply hot mud almost like a pro. I'm a great painter. I have moved into a life that is beginning to be comfortable. I am learning to trust, both my partner and the economy again. I have a new job with a stable company. I have a lot of friends and family who have stood by me through all of my lessons and I feel very blessed to be back at the starting gate. I know there are so many who are are in the same semi-capsizing boat as me. I am grateful that I had a positive attitude to keep me afloat. OH, and I would not have started dating a wonderful man if it weren't for that house!