Going bankrupt

In American culture, the idea of anyone filing bankruptcy is seen as a personal failing. People wonder how could you? Why didn’t you try hard enough? Maybe you are just a deadbeat. Never mind the fact that the rich and powerful often file bankruptcy (hello…Donald Trump) even companies use the legal protections afforded under the bankruptcy chapters to restructure themselves and get back on the right track.

No, it’s the average Joe’s sorta like myself who tend to shun bankruptcy because well it makes you look bad, you feel like you are walking away from your responsibilities and a host of other reasons some valid and some steeped in emotions. So it may come as a surprise that I am about to get real open here but it looks like I will be going bankrupt, filing bankruptcy that is.

The truth is that for the last 2 years we have been playing a financial version of three card Monty, robbing Peter to pay Paul but not only are we not getting ahead, we are on a boat that had a slow leak but now that leak is not so slow anymore  in fact water is rushing in our financial boat and threatening to drown us.

I have spent the last two years reading all the financial experts, Suze, Dave, etc…reading financial blogs and truly getting a financial education. Problem is that no matter how I cut it, what we need to pay out, exceeds what comes in. For a while the Spousal Unit was talking about going back to school to change careers, maybe go into teaching and while that is still a strong possibility the fact is it would take a year of schooling and student teaching to make that switch. Then there is the hunt for a new job and sadly first year teachers in Maine still make less than what he earns right now as an editor/writer.

I think going back to school is a great long term strategy since we have no retirement, hell we don’t even have health insurance (it was one of the early casualties of trying to pay the creditors) but its not going to get Visa, Mastercard and the vast array of creditors off our backs. Before you ask we have tried working with them, in fact last week I had a conversation with a bill collector that was the last straw. The bill in question was for $3300, well I offered $25 a month as that is the best I can do since I have a lot of bills at the moment. Mister Bill Collector told me no, that was not acceptable and hung up on me. Yes, he hung up on me….so a sista called back and was told that I was not being serious about paying off my debt. Considering 6 months ago I could have only offered up $5 a month, I thought I was doing good.

Anyway after 2 years of struggling, we are finally at a place where we can pay all our bills and expenses required for daily living. We have learned to live off less, its been hard but we are doing it but the reality is we are not chipping away at our debt, there simply is no cash leftover to do that. Health insurance is still out of reach and apparently despite the government saying they care about insuring kids through the SCHIP program, sadly we don’t qualify for that either. Its only the third time in two years that I have applied and despite the colossal drop in income, I was told last week that our income is still decent.  Yep, just stuck in that gray area, too poor to move ahead and too rich to get any help.

I imagine you may be reading this and wondering how much debt do you have? Well excluding our house which is paid off thanks to the largess of family members, we are over $200,000 in the hole, now half of that is my student loans which sad to say will be with me forever (another reason I need to get rid of the debt that I can). The other part of debt is back taxes (early years of the Spousal Unit’s self-employment), medical bills that were not covered by the crap health insurance we used to have and credit card debt.

In the early years of life in Maine when the Spousal Unit was getting established as a freelancer, there would be lulls between pay and credit got used. I cannot say that we have ever used credit to furnish anything extravagant as evidenced by the fact most of the stuff in my house is second-hand including clothes. Our car is a piece of shit, a 12 year old rust bucket, I bought used off a friend when our other car died after years of mistreatment.

No, the lack of savings when we moved here and the husbter deciding to become freelance played a large role in the debt that we now have. In case you are wondering why he chose to become a freelancer, its because when we moved to Maine, there were no editorial jobs like the one he held in Chicago available in Maine. I knew it was a risk we took when getting him to agree to move to Maine which he was not happy about…that’s another story though. The move to Maine was not entirely voluntary on our parts since it involved my ex-spouse and son.

  I am glad I know how we got here so I can work on ways to never be here again. Which is why I am more convinced that despite my personal aversion to bankruptcy that its time to make that move, months ago I used to break into a cold sweat thinking about bankruptcy but now I am thinking relief.

I know there are some who may judge me and that’s fine, but part of why I wrote this and decided to share such a personal issue is because we are living in  a time where folks are killing themselves because of money. Folks lose a job and end their lives…well, here I sit getting ready to make this major leap and I am actually at peace with it.

And yes,  I know my credit score will be shit but the truth is its already shit, it will just be shit and now I can answer my home phone instead of keeping the ringer off….ok, I know I am being light about this but its better than crying.

In the end, I know I have tried the best I can to honor my commitments to my creditors but by the same token, when I see that my kid needs dental care and I am putting it off because I am trying to pay Visa and Discover Card who wrote me off a long time ago because what I offered was not enough. Instead sending me to collections where the collectors have even less mercy, then its time to change course. I am reminded of how on airplanes when they give you the safety spiel you are told to put your mask on first and then take care of others…this is one of those situations.

Perhaps years ago we should have chosen high paying professions, a discussion we have a lot but sometimes looking back does nothing but create tension, right now I can only move ahead.

10 thoughts on “Going bankrupt

  1. Yes, Shay, move ahead. Self-preservation first!! You’re absolutely right . . .plenty of the rich and powerful file bankruptcy. It’s a tool, a loophole in a jacked up system. If you find yourself in a position to use it, do so, with no qualms. The credit system is becoming irrelevant if not obsolete anyway. Do it so you can breathe a little bit! And get baby girl some dentist services!!

  2. it’s a hard pill to swallow, but it’s going to put you in a much better place. there’s nothing wrong with starting over. this country is good at sinking people into debt.
    my ex-husband had filed for bankruptcy before i met him–due to a business gone bad–& in no time at all, he was being offered credit cards again! unfortunately, he didn’t learn much from his brush with bankruptcy–i think he continued back into dept (doing things like using check advance services & living beyond his means).

    i dream of a day i will have no more debt! dare to dream….

  3. Sis.. do it.. simple as that.. you did your best but it’s no reason to let it hover over your head… its here to use.. and to be honest you shouldnt have to sacrifice EVERYTHING.. get it in and make it happen

  4. I’m sorry to hear of your finance troubles and my heart goes out to you and your family.

    Based on the issues you have described, bankruptcy sounds practical for you under the circumstances. I am not an attorney, but I managed a small bankruptcy law office for over a year in 2007 and I met many good, hard working people similar to you and me, who just could not make ends meet no matter how they tried.

    We had a high volume of clients from doctors, attorneys and entrepreneurs with assets close to $1.2 million to non-citizen house cleaners. The so called “deadbeats” or schemer-type folks were a rare occurrence in our office. Most had fallen on hard times due to an illness, job loss or change, separation, divorce or in most of the Chapter 13 cases, had a mortgage that had adjusted to a much higher rate and payments.

    Today, bankruptcy no longer has the stigma it once held and filings are up significantly. Consumers have to remember, unscrupulous banks, Wall Street, retailers and advertisers have helped fuel the current condition of the economy.

    From what you describe, and again, I’m not an attorney, I suggest you consult with one before you file, but Chapter 13 sounds appropriate for your situation. This spreads your total debt which includes credit card, taxes (interest and penalties stop the day you file) of your total debt is payable over 5 years or 60 monthly payments. Depending on the equity in your home and other assets, you might only pay back 10% of your total debt excluding school loans and tax obligations under 3 years old.

    Chapter 7 is an option which wipes out 100% of unsecured debt, i.e., credit cards, but eligibility is determined by your total family income. But it doesn’t address your the tax obligations of 3 years or less and you might be forced to sell your home, if there’s any equity, to pay unsecured debt.

    Again, consult with an experienced bankruptcy attorney to determine your best option, and most consultations are free.

    I’ve moved on to a job less stressful, but with less pay, I too worry about meeting my financial obligation. But, since my experience there, reviewing documents of likely mortgage swaps/fraud, listening to clients accounts of creditor harassment and their stories of hardship, I would not hesitate in filing bankruptcy.

  5. Filing bankruptcy was one of the best decisions I ever made. I don’t feel any shame around it. It is so incredibly freeing to live without debt, without the option of buying something I can’t afford, and when I do buy something to know that I’m buying it with money I earned and I don’t have to pay anyone back later. I filed chapter 7 and used a bankruptcy atty in Portland who was very good and respectful. It did cost me about 2K to do it, but it was worth every last penny. Go for it.

  6. Please do yourself a favor and borrow the following book: All Your Worth, co-written by Elizabeth Warren. (Yes, the overseer of the TARP; she’s a bankruptcy attorney at Harvard.)

    Although it’s a personal finance book (the best one I’ve read), the last chapter, “Financial CPR,” contains advice on what bankruptcy can and cannot accomplish, the two main types of bankruptcy, the actual process of undergoing bankruptcy proceedings (including what NOT to do at the courthouse), and the best time to file for bankruptcy.

    Not only is her (and her daughter’s) advice practical, it’s nonjudgmental, in contrast to most other personal finance books.

  7. just make sure you include ALL of the debt in the bankruptcy. you don’t want a miscellaneous bill popping up that needs to be paid…

  8. Wow, you and I are in the same boat, thousands of miles apart. I’m really sorry about that. I started my blog as a way to deal with my feelings of despair and worthlessness because of the pile of doo doo our financial lives have become. I am glad you are finding yourself ready to do what has to be done. I know what you mean about the phone. My daughter thinks we’re “avoiding” telemarketers…she’s nine, and I don’t want her to worry anymore than absolutely necessary.

    Once the downward spiral begins, things just seem to snowball on and on. We have no safety net left…that’s probably one of the most frightening things about this entire situation.

    The economic striation in this country continues to widen…the “have it all’s” and the “lost it all’s”. It’s sad, depressing and very scary.

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