Filing For Bankruptcy

Homeowners!

2009-10-05T18:10:00.001-04:00

We just finished our closing, and we are officially homeowners!

I feel relief, freedom, and pride.

More details later.

Close to the Close

2009-09-30T22:55:00.000-04:00

Just a very quick, very brief update:

Today we received clearance to close on our home loan, and the closing has been scheduled for MONDAY. Just five days away from becoming homeowners, and in less than one month after first contacting Quicken Loans. They worked so much faster than Union Savings Bank, whom I have become convinced was just trying to stall us.

More info on the closing and our new home-ownership soon.

Nearing the Finish Line

2009-09-17T21:49:00.001-04:00

Just a quick update on the home mortgage.

After returning home from vacation and contacting several new lenders, starting over with the home mortgage process completely, things are progressing quite nicely. Our appraisal came in today perfectly in line with the purchase price of our home -- that was one of our biggest concerns. We've been approved and have an anticipated closing date of October 5.

It's a good feeling to be this close to finally owning our own home.

The experience with Quicken Loans has been rather pleasant so far. They work fast, seem to be quite thorough, and everything has gone amazingly smoothly (knock on wood).

Stay tuned for future updates.

Back to Square One

2009-09-12T21:10:00.001-04:00

In June, I contacted the same banker that I spoke with initially last December. It was two months before our Bankruptcy was due to mature to two years, but he had indicated that we might be able to be prepared for a closing date that would coincide with the maturity date if we started in June.

It has become obvious over the past three months that he was stalling, as he continually sprung upon me hurdler after hurdle that dragged the process out. It was just before our recent family vacation that I decided to drop the process and resume after our vacation with a different lender.

Since returning from vacation, I contacted three lenders, including Chase, Fifth Third, the Lending Tree, and Quicken Loans.

The Lending Tree was no help. The representative from Chase Bank that contacted me was rude and pushy, insisting that I tell him what other lenders were trying to do for me so that he could show me how he could serve me better. He refused to present me with a Good Faith Estimate so that I could make the comparison on my own.

Fifth Third Bank, where we bank (though they didn't know that) contacted me only by email.

Quicken Loans was the fastest to respond, the most eager to serve me, and the most professional I have dealt with of the four. I am happy to say that our loan is currently being reviewed by an Underwriter, and we hope to have a closing date the first week of October.

That bank that I was working with originally? Union Savings Bank. We're back at square one now, but things look more promising than ever.

Two Years Debt Free

2009-08-04T22:46:00.000-04:00

It has been two years today since our bankruptcy was discharged. With this momentous event comes many more opportunities for the financing of our home. More details in the week to come.

Being debt free is a wonderful feeling....

Foreclosure, Bankruptcy, and Unemployment

2009-07-31T21:47:00.000-04:00

Question: "How can I trust God when I am facing unemployment, foreclosure, or bankruptcy?"

Answer: The loss of employment and/or income is one of the most distressing events in life, especially for those supporting a family. Foreclosure on the family home or having to declare bankruptcy due to unemployment adds additional fear, uncertainty, and emotional turmoil. For the Christian man or woman facing unemployment, foreclosure or bankruptcy, there can be additional doubts about God’s goodness and His promises to provide for His children. How is the Christian to react to these catastrophic life events? What biblical principles can we apply to the loss of a home or a job and benefits (health/life insurance, retirement)?

First, it’s important to understand that God has ordained work for mankind. Work is described in the Bible as beneficial in that it provides for our needs (Proverbs 14:23; Ecclesiastes 2:24, 3:13, 5:18-19) and gives us the resources to share with others in need (Ephesians 4:28). Paul reminded the believers in Thessalonica that anyone who was not willing to work should not eat (2 Thessalonians 3:10) and that he himself worked at tent making so as not to be a burden on anyone (Acts 18:3; 2 Corinthians 11:9). So loss of employment should not be an excuse for laziness, and all due diligence should be exercised to find other employment as quickly as possible (Proverbs 6:9-11).

At the same time, it may not be possible to find a position equal in pay and status to the one that was lost. In these cases, Christians should not allow pride to keep them from taking jobs in other fields, even if it means lowered status or less pay, at least temporarily. We should also be willing to accept help from other believers and our churches, perhaps in exchange for work that needs to be done in homes, yards, and church facilities. Extending and accepting a ‘helping hand’ in these times is a blessing to those who give and to those who receive and exhibits the ‘law of Christ’ which is love for one another (Galatians 6:2; John 13:34).

Similarly, loss of the family home through foreclosure or bankruptcy can even be a time of blessing for the family, a time when parents and children “close ranks” and become more keenly aware of their love for one another and the important things in life—faith, family and community—and less focused on material things that have no eternal value and can disappear in a moment. God can also use these circumstances to remind us of the truth spoken by Jesus in Matthew 6:19-20, and refocus our hearts on heavenly treasure.

Above all, renewing our faith and trust in God’s promises is of utmost importance during times of financial stress. Revisiting passages that speak of God’s faithfulness to His children will strengthen and encourage us when the future looks bleak. First Corinthians 10:13 reminds us that God is faithful and will not test us beyond our ability to bear it and will provide a way out of the trial. This ‘way out’ may mean a new and better job that comes up right away. It may also mean a lengthy period of unemployment during which God’s faithfulness in providing our daily bread is shown to us. It may mean a new home or it may mean living in reduced circumstances with relatives for a period of time. In each case, the way out is really the ‘way through’ the trial, in which we learn of God’s faithful provision as He walks by our side through the entire ordeal. When the time of testing is over, our faith will be strengthened and we will be able to strengthen others by bearing strong testimony to the faithfulness of our God.

Recommended Resource: When God Doesn't Make Sense by James Dobson.

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Appraisal, and Other Hurdles

2009-07-19T19:24:00.000-04:00

In my last post, I mentioned that we would be considering our home mortgage through a different lender because the first lender we spoke to had sprung additional costs and restrictions on us nearly 45 days into the process. Well, there is news.

First, after speaking with the second lender on the phone, explaining the situation (including the fact that our bankruptcy would mature to two years on August 4), and providing the necessary information for the credit reports to be run, I heard nothing back from the lender. I made several attempts to call this lender (and because my goal here is to help others going through bankruptcy, I'll share with you here that this secondary lender was Fifth Third Bank), with no response. Finally, I called a toll free home mortgage hotline they list on their website and learned that 5/3 Bank uses only an automated underwriting system, which would automatically reject our application if we apply before the bankruptcy is two years old. Which put that idea on the back burner for another few weeks.

Second, the lender we've been working with contacted me about having an appraiser come out to the house to assess it's value, and he was willing to do so without having yet received the application fee, so I agreed. The appraiser came out on Friday morning and was here for less than half an hour. He took some pictures -- inside and out -- and asked some questions, then left. There were two things he was asked to determine, and I got the news early Friday afternoon.

The value of the home was appraised at $6000 less than the agreed upon sale price in our purchase contract.
The fair market rent of the house was assessed at $100 per month less than we have been paying for the past nineteen months.

An FHA loan, which is what we applied for, limits the loan amount to 96.5% of the lower of the appraisal value or the purchase price. This means we would have to come up with a significantly larger down payment than initially planned.

Because the underwriter will only accept that portion of the rent paid that is over the fair market rent to be applied toward the down payment, the high fair market rent effectively eliminates $3000 of our rent credit from being allowed toward the down payment -- further increasing the actual amount of money we would have to raise for the down payment.

I have contacted the seller to discuss adjusting the purchase price and other methods that the rent credit can be used toward down payment -- such as rebating the rent credit to us in cash so that we can apply it as a cash down payment rather than a rent credit. I will also be speaking with the lender this week about using my VA loan eligibility instead of FHA, which has fewer restrictions than the FHA loan.

Of course, the process just cannot be simple. It seems that we've done everything over the past twelve months to prove that we can afford the home (including paying a monthly rent ON TIME every month that is greater than our monthly mortgage payment would be), and new hurdles keep popping up in our path.

I hope to get something figured out in the coming week and get this process behind me and start our life as Homeowners. Stay tuned...

The Mortgage Application Process Resumes

2009-07-08T12:49:00.000-04:00

Nearly six months ago, I mentioned the possibility of getting a VA Loan. The VA has a provision where they can waiver the two-year post-bankruptcy waiting period under certain circumstances, and that's what I was hoping for. Unfortunately, that didn't happen.

Our bankruptcy will reach it's two year maturity date on August 4, less than one month away. I contacted the same lender I spoke with in January and we met on June 10 to start the process in preparation of the maturity date. Having completed the entire loan application, the Loan Officer said he wouldn't collect the $325 application fee until the underwriter had indicated an approval.

I must say, I have been less than satisfied with this particular Loan Officer. It took nearly a month for me to receive any word through him from the underwriter, and at that time, the response wasn't exactly what I had been hoping for. The underwriter had a couple of concerns.

The $5000 rent credit we're receiving from the seller of the home cannot exceed the difference between what we paid and what the fair market rent value for the home is. In other words, the home has to be appraised in order to determine the fair market rent value before we can proceed. By my calculations, the fair market rent value cannot exceed $920 per month for the underwriter to accept our $5000 rent credit toward the down payment. Of course, the requirement to appraise the home has changed the Loan Officer's flexibility about the application fee. He said he would need to collect the application fee in order to send out the Appraiser.
The underwriter was concerned that we have not established several new lines of credit since the bankruptcy. The one credit card account I have opened is apparently not enough for him to be satisfied that we are now credit-worthy. The Loan Officer asked me to email him an explanation for why we haven't opened additional lines of credit. As if going through the bankruptcy in the first place isn't enough reason not to open several new lines of credit.
In addition to the above, the last time I spoke with the Loan Officer to lock in our mortgage rate at 5.25%, he mentioned (for the first time) that there would be an additional fee of $325 required to get the rate because of our current credit score. No mention of that fee before.

My concern is that this lender had shown now sense of urgency about our loan, has sprung undisclosed fees upon us, and that the underwriter isn't happy with our existing open lines of credit and isn't certain he can accept the rent credit as a down payment.

What makes this funny is that I have not yet emailed the Loan Officer with the explanation he requested, and I have not given him the application fee, yet I have heard from the Appraiser twice trying to schedule a time when he can come to the house to do the appraisal. I am putting him off until I decide how to proceed.

Needless to say, I have contacted a new lender and begun the process anew, assured (so far) that we should be able to close in approximately thirty days. We'll see how that goes, and how the entire situation pans out.

The lesson learned in this is that it isn't always best to go with your first lender choice. It really does pay to shop around to different lenders, as they all set their own mortgage rates, their own fees, their own guidelines for things like rent credit, and some are more aggressive in obtaining approval than others.

Stay tuned for updates soon.

FHA Loan = NO. VA Loan? Just Maybe...

2009-01-18T09:53:00.001-05:00

The latest word from our mortgage lender is that the underwriter will not approve our FHA loan under two years post-bankruptcy. Apparently, the rule requiring the borrower to be two years past bankruptcy to qualify for an FHA loan is insurmountable.

Having served eight years in the Army, I also qualify for a VA loan. I did a little research into the requirements for a VA loan, and found the following:

	Inquiry
	If I filed for bankruptcy, do I qualify for a VA home loan?

	Answer
	The fact you have been adjudicated bankrupt does not in itself disqualify you for a VA home loan. The following rules apply: * If the bankruptcy was discharged more than 2 years ago, it may be disregarded * If the bankruptcy was discharged within the last 1 to 2 years, it is probably not possible to determine that you are a satisfactory credit risk unless both of the following requirements are met: 1. you have reestablished satisfactory credit, and 2. the bankruptcy was caused by circumstances beyond your control (such as unemployment, medical bills, etc.) * If the bankruptcy was discharged within the past 12 months, it will not generally be possible to determine that you are a satisfactory credit risk.

It appears that the VA loan requirements have a specific provision that allows borrowers who are over one year but under two years post-bankruptcy to still qualify for a loan under certain circumstances. In my case, our credit score is actually back over 700, which should qualify for "satisfactory," and the two biggest contributing factors to the financial difficulties that led to our bankruptcy were unemployment and medical bills caused by the birth of my son (and, subsequently, my daughter as we were still trying to dig our way out).

I have applied for my VA certificate of eligibility and hope to pursue some other lenders on the possibility of obtaining a VA loan.

Check back for details...

The Home Loan Process Continues

2009-01-08T21:57:00.000-05:00

I just got word today from our loan officer that the FHA loan is a no-go right now. The underwriter was unwilling to approve the loan less than two years outside of bankruptcy. We still have the VA loan option to pursue. I've emailed my loan officer to get his opinion about whether it's worth pursuing.

Stay tuned for updates....

Mortgage Application Process

2008-12-18T22:53:00.002-05:00

I spent two hours yesterday with the Vice President of Sales at a local bank branch, putting together a loan application to finalize the purchase option on our home. Doing so on an FHA loan will require obtaining a waiver for the two year waiting period after bankruptcy. Not impossible, but not a simple task, either. Should we fail to obtain the waiver, we still have the VA loan option to fall back on.

The loan application process seemed quite tedious, but I found that the only document I needed was a copy of last years W2 form, which was easily obtained from my employer. You should be prepared to provide the following forms when you attempt to obtain a mortgage for your first home after bankruptcy:

Thirty days worth of pay stubs
Two years worth of tax returns
Two years worth of W2 forms
Current lease information
Prior lease information (if less than two years in current home)
Two months worth of statements for all bank accounts
Your entire bankruptcy packet, including discharge order
Actual copies of canceled checks to verify timely rent payment

In our case, I also had to prepare a letter explaining the contributing factors to the financial situation that led to bankruptcy that I feel justify a waiver of the two year waiting period. That letter follows:

In July 2003, just prior to my one year anniversary of employment with [name and occupation omitted], I was released from my position. The company had been fervently pursuing other companies to acquire them, and [company name omitted] was in talks with the [company name omitted] Board of Directors about a deal.

As the newest [occupation omitted] in the District, I was downsized in order to make room for a more senior [occupation omitted] whose location would be closed shortly after the merger. After my discharge from the company, day-to-day operations of my location were taken over by a [occupation omitted] with the assistance of the Assistant Managers.

Shortly after my release from the company, when the merger was finalized, [name of company omitted] sold off their [type of business omitted] business and renamed the company to [name of company omitted]. They then began to close several locations across the country that they felt were underperforming. While my location was not closed, another location in the area was closed and the tenured [name of occupation omitted] of that location was assigned to my location.

While there is no supporting documentation, it is clear that as the junior Manager I was released to allow for the retention of a tenured Manager whose location was targeted for closure.

At the time of my discharge from [name of company omitted], my wife was seven months pregnant with our first child. Though I diligently pursued other employment, even accepting an hourly position for a short while during my search, the decrease in income combined with the medical expenses of the pregnancy and child birth created a situation that proved to be insurmountable.

We attempted for the next three years to make ends meet and tried to work with creditors to resolve our outstanding debts. Many of our creditors demanded no less than payments of more than one month's salary in order to make arrangements on the remaining balance – payments that we were unable to make in lump sums.

As we continued to struggle with resolving our debts, my wife became pregnant with our second child – a daughter born in 2006 – and the added medical expenses further complicated the situation for us. When it became apparent to us that the only way we would ever be able to provide adequately for our family was to get a fresh start, we made the difficult decision of bankruptcy. Since the discharge of our bankruptcy, we have remained debt-free with two exceptions: my wife's student loan which has been paid on time for the past eighteen months and a small credit card account we opened on the advice of a lender who said it would help us to rebuild our credit and to better qualify for a home loan when the time arrived.

Over the past twelve months, we have been paying $1200 per month in rent on a lease to purchase option for the home that we are now attempting to obtain a mortgage for. Our rent payments have been made on time or early every month, we have insured the home with a renter's policy through State Farm Insurance, and have maintained on-time payment history on all of our bills and utilities.

We are now in the wait period while an underwriter reviews our loan application to make a determination on whether to approve our loan. The process, of course, required obtaining a new credit report, and I'm happy to report that in the sixteen months since our bankruptcy was discharged, my credit score has jumped 170 points to over 700. Not quite perfect yet, but much better than it was two years ago when we were deeply in debt with seemingly no way out.

Stay tuned for more updates on the latest in our saga toward home ownership.

FHA Loan Waiver Provision

2008-12-16T22:25:00.002-05:00

It has been one year (almost) since we moved into our new home -- and almost eighteen months since our bankruptcy was discharged. We moved into our new home on a lease to buy option, which would allow us to build up rent credit toward our down payment while waiting for the FHA mandated two year waiting period to execute and FHA loan.

I have now learned that there is a provision in FHA guidelines that might allow us to take advantage of the FHA loan before we reach the two year post-discharge point. FHA guidelines allow for certain hardships that contributed to the financial situation that resulted in bankruptcy to be given a waiver and receive an FHA loan after just one year post-discharge.

I will be meeting with a lender tomorrow to see how this will work out. Stay tuned...

Home Purchase Agreement Matures

2008-12-05T23:45:00.002-05:00

Almost exactly one year ago, I spoke about our home purchase agreement. That agreement is now in the maturation stage, and we'll begin the process of transacting the actual purchase of our home.

Stay tuned for updates on the entire process, which should be quite interesting with in the current economic state of our country.

Subscribe for updates.

One Year and Counting

2008-08-06T09:27:00.005-04:00

Where have I been over the past six months? Wow, has it really been that long since my last post? Yes, I guess it has. It has blown by quite quickly.

Life on the post-bankruptcy front has been going along well. We are still essentially debt-free. We have just one credit card, which we use occasionally and pay off every month (which, of course, is the only way that a credit card should be used). Our cars are both paid for (we have resisted the wishes to have new cars because our desire to have no car payment is stronger), and our only real debt is our home loan. Life is good.

Since filing for bankruptcy, we have moved into our new home and even begun tithing to our church. Our new house payment is more than twice what we were paying for rent before we moved. But getting our debt relieved and moving closer to work has so greatly reduced my commuting expenses (the price of gasoline being so high) that we have been able to add tithing to our monthly budget and barely notice the impact (financially, that is). Of course, I believe that tithing has also brought God's blessings upon us and made us better stewards of the money we have left.

We have had money in our savings account for the past six months, and haven't been living from paycheck to paycheck as we did so frequently pre-bankruptcy. Having opted out of pre-screened credit card offers, we have eliminated the potential credit trap that so many newly debt-free people find themselves in. We simply don't receive the offers, so we don't have to resist the temptation to respond to them.

We just hit the one-year anniversary of our discharge date two days ago, and it is a wonderful feeling to still be so fully in control of our finances. It is truly a liberating feeling.

That is not to say that there won't still be an occasional challenge to your debt-free status so long after discharge. Just two weeks ago we received a mailing from a creditor demanding payment of a debt that was discharged as part of our filing. The nicest part of it is, a simple phone call to notify them that the debt was discharged was all it took to end the notices.

The birthday season for our family is now fully in swing, with Christmas following closely behind it. This can be a very tempting time to resort to credit cards and other offers to purchase gifts now and pay for them later. I have just one word of advice that has become my mantra in the world of credit:

DON'T!

For those who you still struggling with the decision to file for bankruptcy, it has not been a bad experience at all. You have to first understand that the option of bankruptcy is there because creditors tend to take advantage of consumers, and we need to have an alternative to being buried in debt. The reason for making the bankruptcy laws so much more prohibitive was to prevent abuse by repeat filers, not to prevent legitimate first time filings. It is not really a difficult process at all, and the past year has been nothing but a positive experience.

I am no financial expert. I am just one man who has been there, but I am more than willing to share my experience with you and to answer any questions that you might have. Just leave your questions in the comments, and I will answer them in the comments.

Credit Offer Opt Out

2008-02-13T22:49:00.003-05:00

One quick note worth mentioning. You may notice after your bankruptcy has been discharged that you will once again start receiving "pre-approved" credit offers, and similar solicitations. You receive these because the big three credit bureaus actually sell your information to companies looking to mail out credit offers. And each and every one of these companies can cause an inquiry to appear on your credit report, which does not look good to actual credit providers that you might be trying to business with.

There is a solution. Simply go to www.OptOutPrescreen.com and you can ask to be removed from such offers. While it may take several months for the offers to trickle away, you can up out online for up to five years, and you can opt out permanently by mail. I highly recommend that you put a stop to these credit solicitations before your bankruptcy has been discharged. Check it out today!

By the way, there is no cost involved, and I receive nothing for recommending them here, other than the satisfaction of knowing that I might be helping someone else who has been in a similar financial situation to the one I'm emerging from.

Thoughts From The New Home

2008-02-08T17:24:00.002-05:00

It has been two months since my last update. Things in the bankruptcy arena tend to slow down a bit aftrer discharge. We're in our new home now, and have been for about a month and a half. Details are much as I explained them in December. We're currently renting the home, with a purchase agreement that will go into effect within the first twelve months. The rental arrangement is much as if we already are the home owners.

Getting out of the lease for our old home was only a minor issue. We had lived there for approximately five years, and were on a month-to-month lease at the time, so our only obligation was a thirty day notice (with rent) before vacating the home. We did that, and the landlord actually complained that we weren't getting out a few days earlier so she could re-rent the home at the beginning of the month (our original projected vacate date was January 4).

What was most surprising of all was her reaction to the fact that we were moving out in the winter. Her comment was something to the effect of, "I always treated you guys right, except for that one time when I tried to sell the house. I can't believe you would do this to me, moving out in winter. You try to do somebody right and this is the thanks you get." Talk about being furious!

It turned out that we were able to get into the new home on December 28, so I took twelve days of vacation and we began moving. It felt like a much longer process than it actually was, but we finally got everything moved and dropped off the keys to the old place on New Years Day.

HAPPY NEW YEAR!!!

And so it has been. We have loved the time in our new home, and my wife is already making color choices for paint in every room. She has gone nuts trying to pick out her window treatments and wanting to change out light fixtures here and there. And she wants to buy a new black refrigerator to match the appliances in our new home.

So what has happened on the credit front? Well, I have been attacking the credit repair process. I have looked into the possibility of credit repair companies, but have rejected those. They seem to be nothing but a costly way for a lazy person to have someone else do what he can do easily enough himself.

By simply logging on to view your credit report online, you can submit errors on your report for investigation, and you can do so with all three major credit bureaus from one site. THIS IS THE ONLY SITE AUTHORIZED UNDER THE LAW THAT ALLOWS YOU TO VIEW YOUR CREDIT REPORT ANNUALLY FOR FREE. ACCEPT NO IMITATIONS. Others will look like this site, but will trick you into signing up for some kind of credit protection scheme that you don't need in the first place. It's just another way for services like these to tack more debt onto you. Don't do it.

I have filed for investigations on nearly every item on my credit report with all three agencies. Those investigations take approximately 30 days to complete. At that time, they provide you with an updated copy of your report and give you the opportunity to file for additional investigations, if needed. You can pay more to actually receive your credit score if you like -- that part isn't free -- but if you simply address the issues that need correction, the score will improve itself.

Also, I opened a secured credit card. This is a credit card that is guaranteed to the lender by a savings account that you open with them or a partner bank for an amount equal to the credit limit on the card they issue. Many banks offer secured cards. You may want to check out one or more of the following:

I cannot specifically endorse one bank over another, and naturally you must research which choice is right for you. The above banks are all reputable banks that offer secured credit cards. You can expect to pay some sort of fee, whether they call it an application fee, or an annual fee, or some other name of their choosing, but if you shop around you can find a very reasonable fee to open the account (mine was less than $40). They will make you feel like they are "approving" your credit, but for most of these institutions, all the approval needed is an associated savings account that guarantees they aren't taking any risk.

The above mentioned banks will report your payment performance to all three of the major credit bureaus. This is the most critical part of any secured credit card. The only way to rebuild your credit is to use it. Do not waste your time with someone who will not report your payment performance -- good or bad -- to the three bureaus.

Another important note! It is not necessary to carry a balance on a card to improve your credit. When you receive your secured card, you should do four things:

Sign the back of the card immediately
Call to activate the card
Use the card to make one small purchase or utility payment that you can immediately pay off
Put the card away where using it will be very inconvenient

My wife and I use our secured card to make one payment every month, whether it be for a utility or for gasoline or some similar expense. We then immediately log onto the issuing bank's website and make full payment in the form of electronic check from our checking account. Don't ever wait to receive a statement before paying your bill. By the time you've received your statement, you have already incurred finance charges and interest. The only way to avoid such charges is to keep your card balance at zero every month when the bill is cut.

Rebuilding your credit is easy, if you have the drive to do so and take a little time to do the research.

And remember, you must always be wary of those past creditors from your pre-discharge days. Some of the less reputable ones will still pursue and try to scare you into making payment. If you enter into any agreement to repay any debts you incurred before your bankruptcy was discharged, those agreements are legally binding and those debts are once again valid. After paying so much money to get your debts discharged in the first place, don't let anyone trick you into agreeing to accept those debts as valid again.

We received in the mail today a statement from someone claiming to have purchased a debt we owed to Capitol One prior to filing for bankruptcy. That debt was discharged in bankruptcy in August of last year. This will happen. When it does, don't worry. You have the full power and authority of the United States Court System standing behind you. If you included the debt in your bankruptcy filing and your bankruptcy has been discharged properly, you no longer have any obligation to repay this debt.

I placed a simple phone call to the company that sent the letter. I was very polite to them, and when they asked if I would like to take advantage of their settlement offer, I replied, "No, I'm calling to inform you that this account was discharged in bankruptcy six months ago." You should be prepared with the case number, which district the bankruptcy was discharged in, whether it was an individual or joint filing, when it was discharged, and the name and phone number of the attorney who represented you. After providing this information, if the creditor contacts you again, they are breaking the law and can be held responsible for paying punitive damages.

I guess that's about all for this month's update. I'll try to do these on at least a monthly basis. If you have any questions, please feel free to post them in the comments section (please, no personal information about yourself), and check back for more information.

Our Home Purchase Arrangement

2007-12-08T22:56:00.001-05:00

We have been lucky enough to stumble onto something that we could not possibly have anticipated. Just five months after being discharged in bankruptcy, my wife and I will be moving into our very own home. It is a highly unusual situation the details of which I can only briefly discuss at this time.

My wife originally found the listing and quickly became very interested in the house. I spoke with the seller by phone and explained to my wife that I wasn't sure it was the right time or the right situation for us to buy. I told her that if something like this seemed too good to be true, it probably was. She emailed the seller and explained to her that we felt the timing might not be right and that we would have to pass for the time being.

The seller replied to my wife by email with some very encouraging, enlightening information. My wife and I discussed the situation further, prayed on it together, and told the seller that we had reconsidered and would at least see the home. We made our first trip to the home on the Saturday after Thanksgiving.

When we pulled up to the home, we were both pleasantly pleased with what we saw. The home is in beautiful condition, in a very nice subdivision, on a corner lot with a pond behind it. When the seller met us at the door, we were again pleasantly surprised. The seller was not what we had expected at all. And he had his wife with him (I should mention that the home was for sale by owner, and the owner is an investor). And again, when we entered the home, we were even more pleased. I later told my wife that, upon entering the home, I immediately had the feeling that it could be "Home" for us. I haven't had that kind of feeling since moving out of the home I grew up in.

We toured the house:

2200 square feet on a quarter acre lot
Four bedrooms
Two and a half baths
A large walk-in closet off the master bath
A two car attached garage
A large bonus room over the garage, accessible from within the house
A formal living room with fireplace
A family room
A dining room
A breakfast nook off the kitchen
A laundry/utility room that passed into the garage
Plenty of closet space

We were both thrilled with the home and all that it offered, and felt very comfortable speaking with the seller and his wife.

While my wife spoke with the seller's wife and my kids explored throughout the house, I talked business with the seller. I was completely open with him about our situation -- the recency of our bankruptcy and what led up to it, where we stood on making a down-payment and closing costs, everything that I could think of that might impact our ability to purchase the home and/or his willingness to sell to us.

We concluded our conversation by telling the seller that we were very interested in purchasing the home, and leaving with all of the paperwork we would need to complete in order to facilitate the purchase.

We completed all the paperwork over the weekend and emailed it to the seller. I spoke with a lender and a mortgage broker on the following Monday. I was surprised to learn a couple of things:

My credit score is actually pretty high considering the recency of our bankruptcy
Our attorney did a very thorough job (much of it due to the information we provided) of capturing and recording our debt in the filing
It was very possible that we would be able to secure a mortgage in six to eight months

Six to eight months, however, would be too far into the future to purchase this particular home. But we didn't despair. The seller had mentioned in the past that he was willing to agree to a lease-to-own arrangement if we couldn't obtain a mortgage at the time.

This is where the story becomes even more amazing. Without detailing all of the events in the process, let me say that this particular seller has been unbelieveable to work with. As we dealt with him very openly, he was been very open with us, as well. He told us that he had three other interested parties: two investors and a person who wanted to open a daycare in the home. As the subdivision's covenant does not allow for businesses to be operated from within the home, that cut the considerations down to two.

Clearly, the seller could choose between dealing with our difficult situation, or closing a quick sale with one of the two interested investors. He could probably have even worked out a reasonable price with one of the investors to make it worth his while. Instead, he chose to sell to us. As shocking as that might sound, the deal has already been done.

And there's more. We will be moving into the home soon on a one-year lease. During that one year, we will be earning rent rebates toward a down payment on the home. We have no security deposit to pay, and the lease will include a one year home warranty that will cover the entire property with only a fifty dollar deductible toward any necessary repairs. In approximately eight months we will attempt to secure a mortgage again, working with the same mortgage broker that helped us at first. In order to facilitate the mortgage and make us more credit-worthy, we will be securing the services of a credit repair agency (more on that in a moment), as well as opening a couple of lines of credit to contribute to raising our credit score. The seller will also report our timely payment of the rent to the credit bureaus to positively impact our credit score.

While I don't normally believe that a credit repair agency is the best way to go -- because a determined person can achieve the same results as an agency for virtually no cost -- I have agreed to such terms because it provides assurance to the seller that we are taking the steps necessary to make ourselves worthy of a mortgage in the timeframe desired. The credit repair agency could cost us anywhere from $400 to $700, but the seller will know that we are as serious about home ownership as we portray ourselves to be, and it's a small cost to pay considering all of the concessions he is making to work with us.

At the time of securing a mortgage at some point over the next year, the seller will provide to us a rent rebate that will satisfy a substantial portion of the required down payment. He will then assist with closing costs and the remainder of the down payment. We will then become true homeowners.

So, all of this sounds too good to be true, right? I know. And much of it has been cause for long and serious consideration, and lots of prayer. My wife and I both feel that this is what God is leading us to do, and we feel that he has simply blessed us with a situation that is making it possible.

The seller isn't losing any money in the deal. He'll be making over $14,000 in rent over the period of the one year lease (before rent rebate). He will then be selling the home for approximately 94% of it's appraised value. There are certainly some tax advantages for him, and he has rented the property for the past two years for a total of over $30,000 in rent. While he isn't losing money in the deal, he is certainly making less than he could.

Now, I know that the skeptical reader might say that we're being taken. I can understand how one might have that point of view. But from where I stand, and with what my wife and I have said to each other, and with what I feel that God is telling us, I truly believe that this too-good-to-be-true situation is a gift from God. Only time will tell, for the skeptical, which is why you'll just have to keep checking back for updates.

Mortgage Update, And More

2007-12-01T22:05:00.001-05:00

As I mentioned recently, my wife and I have decided to try to purchase our first home. This, of course, is an unusual thing so early out of Bankruptcy. We are learning that most lenders want you to be anywhere from one to three years AFTER Bankruptcy before they'll take a chance on a home loan.

We've spoken with one lender and one mortgage broker (sort of a lending agent who takes your credit info and shops around to see if he can find a lender willing to take a chance on you). The first lender was with Wells Fargo, and she was unwilling to take a chance on us so soon after discharge. She said that we didn't really need to worry about establishing any new credit at this time, but to just allow some time to pass before borrowing.

The mortgage broker gave us a different story. He said that our credit score actually isn't bad for being so early after Bankruptcy (more on that later). He said that the biggest concern he had was that we have not yet worked to reestablish our credit by opening a few new lines of credit (more on that later, too). He actually said that he felt he could get us signed up for a mortgage in six to eight months if we establish a couple new lines of credit and keep them current.

This mortgage broker actually provided us, free of charge, with a copy of the credit report that he ordered. He reviewed a couple things on the report with me that concerned him and referred me to a credit repair agency that can help me to correct them. Namely, there was a loan for the car that I surrendered back to the lender still reported on our report as open. This loan was indeed filed with the Bankruptcy and should show up as discharged. I contacted the lender and they claim that it is showing as paid off on their end, and that the error is with the credit bureaus. There was also a credit card still on the report as open that should appear as discharged. There is a prior auto loan on the report that was paid in full that still shows up as open. And then there's an item showing as open that I have never seen before. So I have four items on my credit report that need attention that are pulling down my credit score. I would not have known this without seeing my credit report.

Our attorney, as good as he was, never suggested that we pull our credit report again after the bankruptcy and review it for accuracy. You cannot sit still and just assume that everything will be correct on your report after your bankruptcy has been discharged. That is the most important time to become actively involved in ensuring that your credit report is 100% accurate and that you are taking the necessary steps to rebuild your credit. Again, this is something that our attorney did not tell us. Coming straight from bankruptcy, it's natural to think, "I'm never going to get a credit card again." However, that is exactly what you need to get -- get a credit card. One or two of them, three at the most. You get them, you use each one of them once, then you pay them off in full immediately. This will show them as active open lines of credit that will continually be reported as current, causing your credit score to increase.

The mortgage broker I spoke with actually suggested that I get a credit card, use it to pay the utility bill, then send full payment immediately to the credit card company. With most cards, if you pay it in full immediately you will incur no finance charges or interest. And since your just sending the money to the credit card company instead of the utility company, you aren't actually spending any extra money. He suggested we do this with two or three credit cards as soon as possible.

Bottom line is, it doesn't look like we are going to find anyone to finance us so soon on our home loan. What we did find, however, is a seller who is very much interested in helping people to realize their dream of home ownership, very interested in helping people in situations like ours to rebuild their credit, and very patient and flexible. He still has a plan to get us into this beautiful home that we have come to want so badly. We are currently working on a lease-to-own option that will allow us to sign a one year lease for the home, during which time we will open a few credit card accounts to increase our credit score, work with a credit repair agency and the credit bureaus to correct the errors on our credit report, and save up the necessary money for our down payment to purchase the home a year from now. At that time, we will once again contact the same mortgage broker, who we will stay in touch with throughout the year, and ask him to honor his word and get us financed for our first home.

So it looks like we will be moving very shortly into our very first home -- the first home that we will actually be able to call our own. Much closer to work. In a very nice community, with a very nice school district. And with all of the room we could possibly need until the kids are grown and move out.

So don't let yourself fall into the do-nothing trap that is so easy to fall into after a bankruptcy has been discharged. You must get active and make sure that your credit report is indeed correct, and take the steps necessary to begin rebuilding your credit. But open those credit card accounts with caution. Contact your bank first and see what they can do for you. Try to avoid secured credit cards and annual fees, if possible (I'll report on this as soon as we see what options are available to us). And, most importantly, DON'T spend any moeny that you don't have yet. Pay ONE bill with your credit card -- one bill that you would otherwise pay with cash or a check -- then send that same cash or check to the credit card company to pay it in full.

Be smart. Be aware. And be credit-worthy once again.

Post-Discharge Update

2007-11-27T14:18:00.001-05:00

All has been quiet here since our bankruptcy was discharged on August 2. We received maybe a phone call or two from debt collectors, but once I notified them on the phone that we had just been discharged in a bankruptcy, they simply asked for the bankruptcy case number and left us alone.

This week we received on letter from a debt collector stating that the last they heard we were going through a bankruptcy. They asked for information about the bankruptcy and threatened to continue pursuing collection of the debt until they receive our response. My guess is that type of behavior is bordering on the limit.

The big news is, my wife and I have found a home that we are attempting to secure financing on. This is the biggest challenge of all, I think, for the recently discharged. Most mortgage companies insist upon anywhere from one year to three after a bankruptcy before they will give you any serious consideration for home financing. We have already had one lender tell us that the best thing we can do right now to secure a home loan in the future is to just wait.

But we got quite lucky this time, I think. The home we are looking at is for sale by owner. The owner is an investor, and he seems to be quite helpful in helping us to secure the necessary financing, etc., to purchase the home. In fact, if financing turns out to be impossible at this point, he is willing to sign a lease with us to rent the home for a year pending our purchase of it at the end of the lease.

This is a beautiful home with all that we have been looking for. While the deal hasn't been secured yet, it is looking very good.

So there is hope after bankruptcy. I have one thing to day: it's so nice not to be contacted by debt collectors anymore, and it's nice to actually have hope for the future that we didn't have when we were in financial ruin. I guess that's two things.

Freedom From Debt!

2007-09-07T14:13:00.001-04:00

Received the following in the mail this week:

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF XXXXXXXXXXX

DISCHARGE OF DEBTORS

It appearing that the debtors are entitled to a discharge,

IT IS ORDERED:

The debtors are granted a discharge under section 727 of title 11, United States Code, (the Bankruptcy Code).

BY THE COURT

Dated: August 28, 2007

JUDGE XXXXXXX X. XXXXXX
U.S BANKRUPTCY COURT

It's that simple. Seems like a pretty plain letter for such a major event in our lives, especially considering that it cost us $1500 to get here.

Stay tuned for regular posts on the aftermath of bankruptcy, such as new car loan and home loan offers, etc. We are hoping to purchase a home next year, and have heard many tales of how difficult that can be with a bankruptcy. Check back for the real story.

A Bankruptcy Story

2007-08-15T14:54:00.001-04:00

No matter why you might file for bankruptcy, or how much you might try to avoid it, sometimes it is forced upon us by factors beyond our control. In the end, you do what you have to do, and things usually work out for the best.

From MSNBC.com:

When staying alive means bankruptcy
Health insurance didn’t keep cancer-stricken California woman solvent
By Mike Stuckey, Senior news editor, MSNBC
Updated: 6:17 a.m. ET Aug 15, 2007
In our second Gut Check America vote, readers rated health care as the issue of most concern for them. After a false start in Oregon, we found reader Kathleen Aldrich, a Lompoc, Calif., resident who wrote to us about how her battle with cancer drove her to bankruptcy, even though she had health insurance. Here is her story:

LOMPOC, Calif. - Kathleen Aldrich, financially ruined by two bouts with ovarian cancer, is not who you might assume she is.

She raised three kids as a single mom. She worked hard for years. She had good jobs. She paid her bills. She lived in a nice house and drove a nice car. She had a decent credit rating. She had health insurance.

Now she has a record of bankruptcy and is the embodiment of the fear that nags at millions of U.S. families: that they are but one medical calamity away from losing everything. Like Aldrich, they — and perhaps you — could be.

“I didn’t do anything wrong,” Aldrich says thoughtfully, sitting in the neat, pale green living room of her tiny stucco duplex in the middle of this mostly middle-class American town. “I don’t see that I did.”

Just turned 50, tall and blond with a quick smile, Aldrich is gratefully in remission for a second time from the ovarian cancer, the No. 5 cancer killer of women. Despite “feeling like a little black cloud follows me around all the time,” she has a lot to live for, from a budding long-distance romance to a precocious 6-year-old granddaughter named Alyssa.

A cat named Jack and a great boss
She has a friendly Maine coon cat named Jack, a boss she adores and a grassy park nearby where she can stroll for miles as the long summer evenings unwind in Lompoc, a flat checkerboard between the bumpy brown California hills to the east and the Pacific Ocean to the west. The town, best known for a federal lockup that has housed the likes of junk bond king Michael Milken and Nixon confidant H.R. “Bob” Haldeman, also is home to Vandenberg Air Force Base, diatomaceous earth mines and 42,000 residents.

But her life is hardly idyllic. Two years and four months after her second trip through the hell of chemotherapy, Aldrich is embarking on the painful new journey of trying to rebuild her life and her credit rating. The bankruptcy has quashed all thoughts that she might someday retire. More immediately, it has left her unable to obtain thousands of dollars of work on her teeth, which likely were weakened by the powerful anti-cancer drugs.

And it has left deeper wounds of shame and guilt over having to walk away from unpaid bills after a lifetime of responsible living.

Aldrich’s situation is "asinine" but increasingly common, said Dr. Deborah Thorne of Ohio University. Thorne, co-author of a widely quoted 2005 study that found medical bills contributed to nearly half of the 1.5 million personal bankruptcies filed in the U.S. each year, said that ratio has likely worsened since the data was gathered.

Bankruptcy in the light of large medical bills is “unfortunately the only choice many people have," she said. "They will never in their lifetimes pay them off.

“To talk with these people again and again is so frustrating. They’re such thoughtful, kind folks who are being set up by the system we have now. What’s most appalling is they’re ashamed.”

Like Aldrich, Thorne said, three-quarters of the individuals in the study who declared bankruptcy because of health problems were insured.

"When the illness began ... they were floored," she said. "They assumed incorrectly that if you have health insurance that you’re fine and that you’ll get the treatment that you’ll need and not have to mortgage the farm to pay for it.”

In the beginning, that assumption appeared accurate to Aldrich.

She was working at a credit union when she was first diagnosed with cancer in 2001. Her employer-paid insurance covered most of her expenses as she underwent surgery and her first round of chemo, which continued well into 2002. She changed jobs later that year, carefully paying her own insurance premiums through a COBRA extended health benefits program until she qualified for the group plan offered by her new employer, a title company in Montecito, an hour down the coast.

But while she was on leave for surgery to repair hernias and a bowel obstruction caused by her first operation, she was laid off. Once more, she used the COBRA process — established by a federal law that lets employees who lose their jobs maintain their health insurance for up to 18 months by paying their own premiums. Again, her insurance paid most of the bills.

Aldrich had landed a new job as a processor for a Lompoc mortgage company when her cancer returned in 2004. Though she didn't have health insurance through her employer and her COBRA benefits had been exhausted, she had continued to buy health insurance, paying $533 a month.

She underwent more surgery and returned to chemotherapy treatments at Santa Barbara Hematology and Oncology, a large medical practice in the area. As the nausea and hair loss subsided in the spring of 2005, she began to receive bills from the practice that eventually totaled more than $15,000.

Where's the $7,000 cap?
Aldrich was stunned, since her policy with Blue Shield of California had a $2,000 annual deductible and a co-payment schedule that was supposed to cap her maximum annual “out-of-pocket” cost at $7,000 when using a “preferred provider,” as Santa Barbara Hematology is.

Still dazed by the chemo, she said, she tried to get the bill corrected, calling both the medical practice and Blue Shield. When nothing seemed to work, she turned to her sister, Mary Beth Fisher, a registered nurse for 35 years who spent the last part of her career in administrative jobs for medical practices, handling plenty of insurance matters.

“I said, ‘I know you can get ahold of someone who can help you get through this mess,’” Fisher told MSNBC.com. In the end, though, she said all they got was the run-around from both the medical practice and Blue Shield. “It was always ‘talk to another person, put your request in through e-mail.’”

Fisher said that in her experience, case workers are available on both sides to help resolve such problems. “I was astounded that she wasn’t offered that kind of assistance or support," she said. "… It really was that nobody would talk to you.”

No help from Blue Shield
Fisher believes the source of the problem was that the oncology practice had been paid more for the same services under Aldrich's previous insurance policy and did not change its billings to reflect the terms of its contract with Blue Shield, Aldrich’s new carrier. But she said Blue Shield did little to make the change clear to the doctors group.

Blue Shield spokeswoman Elise Anderson said privacy laws prohibited her from even acknowledging that Aldrich is a Blue Shield client, but she was confident the company’s customer service process works well.

Lynn Humphrey, administrator of Santa Barbara Hematology, also declined to discuss Aldrich’s case.

According to the sisters, Santa Barbara Hematology sent Aldrich’s case to a collection agency just a few months after the dispute began and refused to discuss the bill after that, a common practice in collections cases. Then, they say, Aldrich was dismissed as a patient for being “a pain.”

The sudden severing of the relationship with the young doctor whom Aldrich still reveres as the woman who twice saved her life was particularly painful.

“I was so devastated and embarrassed,” she said. “Was I a pain during chemo, the whole time? Am I a piece of crap or what?”

Fisher stated repeatedly that she was not looking for any kind of handout for her sister. Seventeen years older than Aldrich, and Aldrich’s guardian after their mother died when Aldrich was 14, Fisher said, “I told Kathleen she had a part in this." She owed money for her treatment. But not any more than $7,000, they believed.

Aldrich and Fisher say they continued trying to work the problem out with Blue Shield, the medical group and the collection agency over the next year. But on July 24, 2006, the collection agency sued Aldrich, seeking nearly $20,000 in debts, attorneys’ fees, court costs and interest. The lion’s share of the total was the $15,239.52 that Santa Barbara Hematology claimed it was owed.

A short time later, Aldrich said, a sheriff’s deputy showed up with the paperwork to attach her wages from Santa Fe Mortgage, where she is the sole employee of owner Fred Bittle, a loyal supporter throughout her ordeal who pays Aldrich more than the going rate specifically so she can purchase health insurance. The prospect of having her $3,820 in monthly pay drastically reduced to satisfy the debt was nightmarish for Aldrich.

Her bank account already had been wiped out as a result of her unemployment and periods when her medical treatments had robbed her of the ability to work full time. She also had borrowed more than $15,000 from Fisher and another sister and had no way to repay the $7,000 she agreed that she owed other than a little at a time.

Nothing in the bank
“I have no savings,” said Aldrich. “I probably have 10 bucks saved. I live paycheck to paycheck.” Her No. 1 goal was to keep up with the premiums on her health insurance, and she remembers thinking, “I might as well quit my job if they’re going to garnish me because there’s no way I can make it.”

After consulting with an attorney, the sisters came away believing that the only solution was for Aldrich to declare bankruptcy. “He said, 'This is such an incredible mess that I don’t think you can afford the amount of money that it would take if we could ever figure it out,’” Fisher said.

“I did not want to do that,” Aldrich said. “That is not how I was raised.” She tried to figure out how to pay the judgment, to avoid the blemish of bankruptcy any way that she could. “I was willing to drive a crappy car. I’m not very materialistic. I was even at one point looking to just rent a room somewhere to cut costs,” she said. It seemed hopeless.

So, swallowing a bit more of her pride, Aldrich borrowed $1,800 more from her sister to pay the legal and court costs for the bankruptcy. Her debts were discharged in U.S. Bankruptcy Court in April, including the $15,239.52 billed by Santa Barbara Hematology. In total, the medical group was paid more than $74,000 for Aldrich’s treatment, which got so expensive that her final round of chemo cost nearly $17,000, according to copies of billing records filed in court.

A familiar situation
Aldrich’s attorney did not respond to MSNBC.com’s request for an interview, but a well-known California lawyer who specializes in medical insurance cases said Aldrich’s experience is not unusual.

“We see it all the time in our practice,” said William Shernoff, who said insurance companies often leave patients on their own to deal with medical providers who bill too much. “None of these carriers go out of their way to help these people. They’re just looking after their own interests, and they don’t seem to have any consumer-friendly people out there trying to assist their customers. They take the first opportunity they can to get rid of any problems, especially if it’s going to cost them money.”

Shernoff doubts that a recent announcement by the California Department of Insurance that it will score Blue Shield and other big carriers on a "healthcare report card" will do much to help consumers.

Blue Shield stands by its service
Anderson, the Blue Shield spokeswoman, said the carrier has a clear path for handling customer problems. “On anybody’s card there is an 800 number, and you call that 24/7,” she said. "There’s a whole process. The key is you start with the customer service number, and anyone at that number should be able to help you.” Calls placed by MSNBC.com to the 800 number were answered immediately by Blue Shield representatives.

Thorne, the Ohio University professor, said that a larger problem illustrated by Aldrich's case is the out-of-control nature of health-care costs and insurance. "We already spend enough in premiums and co-pays that to be asked to pay tens of thousand more for health care is asinine.”

Indeed, Aldrich was paying 17 cents out of every dollar she took home for her Blue Shield policy when she ran up the disputed charges. And she recently got a “birthday card” from the insurer stating that now that she has turned 50, her monthly rate will rise to $619 — just slightly less than her $650 rent. In any year that she needs any major treatment, she’ll be liable for an additional $7,000 in deductible and co-payments, meaning that she would have to devote $14,428 — well over a third of her take-home pay — to health care.

It’s hard for Aldrich to talk about her situation without strong emotions, and some tears, surfacing. But she does not want to be seen as a pity case. She sees herself as a cautionary tale for average Americans: “It can happen to you.”

Her sister agrees, saying that the moral of this story is for people at all levels of the treatment and billing process to pay close attention to details and, especially, to listen. “They don’t realize how critical it is to be exact, what a nightmare it can be for someone else,” Fisher said.

Amid the photos of family and friends, there's a sign on the wall over the TV in Aldrich's little living room. “BELIEVE,” it says, in 6-inch letters carved out of wood. And despite all that has happened to shake her faith in our health care system and doctors’ offices and insurance companies, Kathleen Aldrich still believes.

She believes in working, in getting up and going to the office every day and doing the best she can. She absolutely believes in paying her $619-a-month health insurance premium. She believes that someone is watching out for her. And she believes in love.

“I had some pretty dark times during chemo,” she recalled. “I spent a lot of time alone. I asked God, and I told him the one thing that I wanted to do was to love again, to feel how it feels to be in love and to have a companion.” She gazes fondly at a picture on a nearby table of a handsome man posing in the cab of a truck with a happy dog.

“I met Richard last year. It’s a wonderful feeling to have a companion again and look forward to the little things in life that some couples maybe take for granted. I feel pretty good about the way my life is right now.”

© 2007 MSNBC Interactive

URL: http://www.msnbc.msn.com/id/20201807/

The Standard Legal Lingo

2007-08-07T21:12:00.001-04:00

I got an email from my Attorney today explaining the court order I received in the mail yesterday. He writes:

This is the standard language in the no asset order. What this means is that the trustee is not going to take any of your assets. It also means that secured creditors are free to pursue their claims in state court if you are in default on a home loan or car loan. As long as you are not in default then you may keep the secured property that you are reaffirming on with a secured creditor. This order just means that the chapter 7 trustee is relieved of further duty. It is not the discharge of your case, which will come in the next 30 to 60 days.

The good news, is we don't currently have a car or home payment, so there's nothing for creditors to go after. The bad news is, we still have another month or two before this whole thing is behind us. Can't wait to get it over with!

ORDER IN NO ASSET CASE

2007-08-06T22:51:00.001-04:00

We received the following court order in the mail today from our Attorney:

In reliance upon the Trustee's Report of No Distribution, the Court finds that the property of the estate, if any, should be abandoned and that secured creditors with nonavoidable, perfected security interests in any such property should be granted limited relief from the automatic stay as more specifically set forth hereinafter.

THEREFORE, it is ORDERED that the scheduled property of the estate, if any, shall be, and hereby is, abandoned; and it is

FURTHER ORDERED that secured creditors with nonavoidable, perfected security interests in any such property shall be, and hereby are, granted limited relief from the automatic stay to pursue their valid claims against such property in accordance with applicable law; and it is

FINALLY ORDERED that the Trustee is hereby discharged of his/her trust in the above-captioned case.

THE AUTOMATIC STAY REMAINS IN FULL FORCE AND EFFECT EXCEPT AS SPECIFICALLY SET FORTH HEREINABOVE.

Dated: August 02, 2007
U.S. BANKRUPTCY COURT

Of course, all that legal mumbo jumbo makes a whole lot of nonsense to me. It sure doesn't sound like our debts have been relieved and our bankruptcy discharged. I sent an email to our Attorney for clarification. More on that as soon as I get the details.

Debtor Education

2007-08-02T21:29:00.001-04:00

One of the most annoying parts of the new bankruptcy law is the requirements for pre-filing counseling and pre-discharge debtor education. My wife and I recently spent two hours doing an online pre-discharge debtor education that is required before our bankruptcy will be discharged and our debts relieved. The law requires two hours of training, to be done in person, on the phone, or online. To be honest, there really was nothing there that we found beneficial in any way.

I guess they have no idea what level of education a person has who has filed for bankruptcy. So they've written the training for the lowest common denominator.

Either way, it's done, and we should be only a matter of weeks away from getting a fresh start. There are many places to get this online training, but we chose Springboard, a non-profit consumer counseling company, because they had the best prices and the easiest to use website. In fact, for people returning to them to complete the debtor education after using their service for the pre-filing counseling, they offer a $20 discount. And, while many counseling agencies charge both spouses in joint filings, Springboard charges one low rate for both.

It was essentially painless, though time consuming.

Meeting of Creditors

2007-06-29T08:04:00.001-04:00

We had our "Meeting of Creditors" this week, which is basically this: the bankruptcy petitioner and his/her/their attorney meet in the office of a court-appointed trustee with any creditors that may wish to dispute, prevent, or otherwise discuss the bankruptcy proceeding. It's intended to be an opportunity for creditors to show why they beleive that they should still be repaid the debt that is owed to them. In this case -- as I suspect in most bankruptcy cases of individuals or couples -- there were no creditors in attendance.

The meeting went something like this:

9:00 am: My wife and I arrived at the government building (it didn't even take place in an actual courthouse) thirty minutes prior to our scheduled hearing. We were the first people to arrive, including attorney and the trustee. We began waiting in chairs in the hallway.

9:15 am: The trustee and his recorder arrived.

9:18 am: Another petitioning couple arrived and seated themselves in the hallway.

9:20 am: Our attorney arrived and suggested we go into the trustee's meeting room. My wife and I took a seat in the waiting chairs in the meeting room while our attorney discussed another client with the trustee.

9:25 am: Noting that there was no one else in the meeting room, including the two petitioners that were scheduled before us, the trustee called us forward to begin our hearing.

The hearing process included presenting our driver's licenses and social security cards so that the trustee could verify our identity. We then stated our names for the record. We rose our right hand and were sworn in. The trustee then reviewed our bankruptcy petition, asking a few questions about an automobile loan and the automobiles we currently own, as well as one or two minor debts. He reviewed our income tax statement from last year (which my attorney had forgotten to print for the meeting, but had the TIF file I emailed him on his notebook computer, and the trustee reviewed the file on his computer).

Before we knew it, the trustee was rattling off something about it being a "no asset" case (which means that he has determined that we have no assets worthy of the court forcing us to sell to satisy some of our debt -- a good thing), and that he was recommending discharge of our debts and we should receive the final documents in 45 to 60 days.

9:30 am: My wife and I were once again standing in the hallway talking to our attorney about the final pre-discharge debtor counseling that is required and what to do about creditors who continue to send us demands for payment.

Which, by the way, might be worth mentioning. Not all creditors will discontinue trying to collect from you during a bankruptcy proceeding, even though they are required by law to stop contacting you. My attorney recommended that we first call the creditor when we recieve a notice and tell them that we have filed for bankruptcy and provide them with the case number. Then, he said, if they continue to contact us, we should forward it to his office so that he can send them a letter threatening to file against the creditor for damages if they don't cease contact.

It was all very interesting, very fast, and very painless. The hardest part of the whole process was finding a place to park the car outside the government building before the hearing.

Petition Filed

2007-05-29T20:18:00.001-04:00

Our bankruptcy petition was filed approximately one week ago. Just in time to prevent a wage garnishment order and to hold off an attorney representing the company that towed away my car almost five months ago, looking to collect the balance of the loan after auctioning off the crunched up hunk of junk.

In fact, we've already received the date for the meeting of debtors, which is where we (meaning us and our attorney) have to present our cause for bankruptcy and justify why we should keep what personal belongings we have while at the same time being relieved of our debt. Just under a month away, it's the first ray of light at the end of the tunnel.

Garnishment

2007-05-07T11:16:00.001-04:00

My wife had received a summons for a garnishment hearing that took place today. Interestingly enough, my wife has no income of her own, as she's home with the kids while I work. I didn't receive a summons, but the income that they wanted to garnish in her name was my income. I'm sure that's completely legal.

Anyway, our attorney went to the hearing for us and go the opposing attorney to agree to wait a week before filing the garnishment paperwork. This will allow him the time to file our bankruptcy petition this week, which will put a stop to the garnishment process. What makes this most worth mentioning is that the fees we paid to our attorney for the bankruptcy do not include such court appearances, but he took care of it for us anyway.

But That's Not All

2007-04-26T21:42:00.001-04:00

But of course, there's more. Recently, we were called by a very rude creditor. When I told him that he would need to speak with our lawyer and gave him the necessary contact information, he rudely demanded to know why we had a lawyer. I ended up hanging up on him.

He called again today. The conversation went something like this:

COLLECTOR: May I speak with ...

ME: I'm sorry, she's not available right now.

COLLECTOR: Who am I speaking with?

ME: Why don't you tell me who I'm speaking with first.

He identified his name and company.

ME: I told you the last time you called that you would need to contact our attorney from now on. You have no reason to call here again.

COLLECTOR: Why your attorney?

ME: Is this a financial matter?

COLLECTOR: Yes. Do you have a bankruptcy?

ME: You'll need to contact our attorney from this point forward. His name is ... and you can reach him at ...

COLLECTOR: That isn't the same number you gave me before.

ME: That's his local number. I may have given you his 800 number before. Here's his local number again ...

COLLECTOR: Why do I need to contact your attorney?

ME: You can contact him from now on. Please do not call here again.

Then I hung up. I have dealt with several debt collectors during this process, and most of them have been both reasonable and professional. Very few have been rude like this "gentleman." It is impossible to accurately portray his rudeness with the written word.

Petition Progress

2007-04-26T21:38:00.001-04:00

We finally signed our bankruptcy petition this morning. We met with our attorney, who had everything drawn up and waiting (of course). He walked us through what each page of the large packet was for, indicated where we were to sign on each page (and I literally mean we had to sign on each page), and asked us a few questions for clarification.

He changed some of the amounts we listed for expenses such as food, clothing, and normal day-to-day cost of living things, based on what his experience tells him is typical for a family of our size. In most cases, his changes increased our expenses.

The petition will be filed in a couple of days, and we'll be in court for our discharge hearing in 30 to 45 days. My wife has a garnishment hearing she was summoned for on May 7, and that will now be stayed due to our pending bankruptcy. It's all a great relief, but I can only imagine how the relief will come when our debts have finally been relieved.

Pre-Filing Counseling

2007-04-18T21:16:00.001-04:00

One of the most senseless changes made to the bankruptcy law in 2005 was the requirement to go through pre-filing budget counseling. There are several ways to do it -- in person, by phone, or online. The cost ranges from $40 to $150, from what I can tell, depending on what "non-profit" group you choose to do the counseling.

We chose Springboard, and spent $55 and about 90 minutes going through a counseling that accomplished nothing more than convincing us that bankruptcy was indeed the right choice for us. I mean, look at this spending plan! If we're nearly $60,000.00 in the hole, we don't have much choice but to file bankruptcy.

The counseling describes the most common types of credit counseling available, so that you'll know what other options you have besides bankruptcy. Then it explains the most common types of bankruptcy (Chapter 7 and Chapter 13) to help you decide what you might do if you file for bankruptcy. There's a quiz at the end of each section, and a couple of the questions are worded so that if you actually answer them the way they sound like they should be answered, you'll be wrong.

Then there's the budget plan. WOW! You have to enter all of your income (the easy part), all of your living expenses, and all of your debts. It seems like we just did all of this for our attorney. It categorizes all of your debt in such a way that, for us anyway, we had to refigure things three or four times to get it where they want it.

All of this, at the cost of $55 (which, it seems, is a bargain), for a ridiculous little certificate that my attorney has to file with our bankruptcy petition. And we had to have separate certificates for my wife and myself.

Well, it's done, and we'll sign the paperwork next Thursday. I just can't wait to have the whole sordid affair behind us.

Bankruptcy Counseling

2007-04-05T21:04:00.001-04:00

When Congress passed the new Bankruptcy laws in 2005, their goal was to eliminate bankruptcy abuse -- to keep people who could easily pay their bills from filing for bankruptcy over and over and over. I don't know if they achieved that goal, but they sure did make it difficult for people who truly need the relief that bankruptcy provides.

The next step in our process is Bankruptcy Counseling. My wife and I must each complete a pre-filing course that will help us with a budget, show us other alternatives to bankruptcy, etc. There are several "approved" credit counseling companies that can administer this training and issue the required certificate upon completion. Their fees range from $20 per person to $125 per couple. Some allow couples to take the course together while others require them to do so separately (and charging each as an individual). Depending on the company, the course can last from 45 minutes to two hours.

Then again before the bankruptcy can be discharged and relief ordered, a Financial Management Course is required. I haven't even looked at all of the details for it, but it again requires registration fees.

With the fees involved, it looks like we'll be starting our first course on payday next week. It's time to get this thing moving. We received a summons today for a garnishment hearing in the case that was recently judged against us. I'd really like to get this thing moving before that court date comes up.

Filing Soon

2007-03-04T22:51:00.001-05:00

We completed our bankruptcy packet today. That's the long, long, long list our lawyer gave us where we have to declare all of our assets and debts. Literally all, down to the shirts on our backs. It's not an enjoyable process, but it has to be done before our lawyer can file the bankruptcy.

Another thing that has to be done is a phone call to some kind of pre-bankruptcy counselor. I don't know much about it at all -- it's apparantly part of the new bankruptcy law. I'll post more details when I have them.

Almost There

2007-02-18T00:37:00.001-05:00

Our federal income tax refund arrived yesterday, and the first thing we did was pay the remainder of the legal fees for our bankruptcy. It was a good feeling. I have also sent most of the required documents to the lawyer and hope to get the rest finished up this weekend. That would mean that our case could actually be filed within a week.

Think what you will about bankruptcy, but I'm starting to see the light at the end of the tunnel, and it's a great feeling! A renewed sense of financial freedom is just around the corner.

My wife is concerned how her parents will react if they read the notice in the paper (think Marie from Everybody Loves Raymond). I sympathize with her, but I also feel that it's more important for us to get back on our feet and raise our family in a home of our own than worry about my wife's judgmental parents.

In the end, all will work out, and life will be much fuller for us.

Income Tax Refund

2007-02-04T22:36:00.001-05:00

I did our Federal and state taxes today using one of the online free tax preparation tools recommended at IRS.gov. To my utter amazement, according to the final 1040A form completed online, we'll be getting a Federal refund of $3,422!!! Wow!

That will pay off the rest of our bankruptcy legal fees and get this thing resolved and behind us once and for all. It will allow us to buy a new bed to replace the twenty year old bed we've been sleeping on for years, and possibly upgrade our nine year old computer, which still runs on Windows 98.

In the process of completing our taxes, I discovered that I apparently made an error in our 2005 taxes. Instead of the $23 refund we received last year, we should have received more than $1,900. Needless to say, I'll be filing an amended tax form for 2005.

It's nice when things seem to go your way for a change.

Insurance Jam

2007-02-03T11:05:00.001-05:00

I mentioned recently that my car insurance company (Progressive) notified me of a huge rate increase in my premium, and that I planned to change insurance companies.

First I called GEICO, which gave me a quote that was even higher than the increased premium Progressive was demanding. I then called Safe Auto and recevied a quote that would be $20 less than Progressive for the initial payment and $25 less each month thereafter. It sounded like the best deal I was going to get.

My Progressive policy was set to expire tomorrow night at midnight. So I called Safe Auto back today to start the new policy. Curious if the rate would be better with my wife listed as the policy owner instead of myself, I first asked for a new quote. The result was $10 more to start than Progressive wanted, and $5 more each month thereafter. The Safe Auto rep tried to tell me that it was different because of my accident last August, but I provided her with all of the same information I had provided for the first quote.

To top it all off, this Safe Auto rep was rude. Minimum coverage, maybe. Minimum customer service, definitely. I would not recommend Safe Auto Insurance to anyone.

Needless to say, I called Progressive today and renewed our policy at the increased rate, which was still lower than the competition.

Another Judgement

2007-01-24T08:52:00.001-05:00

We received a default judgement in the mail yesterday for $435 plus $95 in court costs. At first I didn't remember even receiving the summons, but it came just before Christmas, when things are so hectic both at home and at work that they it was easily forgotten.

I don't know if the next step will be for them to issue a wage garnishment,or what. The notice we received yesterday said thing about it.

What gripes me most about this judgement is that it was for a bill that we don't even owe. At least, in my opinion. Part of it is for a food system my wife joined that she can no longer even access because they closed up shop and moved out of town. The rest is for dental work that I already paid for in full.

At least this judgement can be added to our bankruptcy filing.

Rate Hike

2007-01-10T21:28:00.001-05:00

You know, it's no wonder that people with financial problems have such trouble pulling themselves out. I just had a car picked up last night to be returned to the lender. A car that was totaled several months back in a rollover accident that wasn't paid for because we couldn't afford to insure it. After the accident, we found a way to afford insurance.

That was six months ago. Now the policy is up for renewal, and I just got a notice that the rate will be going up $17 a month! And not because of the accident, either (I reported the accident when I applied for the insurance). No, the insurance went up because of our "insurance score," which is just Progressive's fancy way of saying that our credit score stinks, so they're raising our rates.

After making on time payments for six months, they have decided that our difficulty paying our bills has made us a higher accident risk. I think we'll be shopping rather hard for a new insurance company before the policy renews in February.

Sure, their ads say they have the best rates, but what they don't tell you is that they'll stick it to you six months later if they can!

Voluntary Surrender

2007-01-09T21:09:00.001-05:00

My crunched up car has just been taken away to be returned to the dealer where I bought it. I must say that everyone involved in the process of recovering it was quite professional. You normally wouldn't expect such professionalism from a lender repossessing a car and the recovery company they hired.

It's good to have that eyesore gone and to have my garage back. It's one less item I have to report on the assets section of my bankruptcy petition. And one less secured loan that I have to worry about. The debt will now be easily discharged.

I took my son outside to watch the men hooking the car up to the truck. He asked, "They fix it, then it works?" I explained to him that it was being taken back where Daddy bought it. Talking with one of the men in the truck, I told him my son would have been more excited if they had brought a large tow truck. He told my son that the type of truck they brought is called a "sneaker." Which, of course, means they can pull up in it in the middle of the night, hook up a car, and sneak off with it. It literally took less than ten minutes for them to hook up and be gone, and I can see how it could have been much faster if they needed to be stealth.

More On The Totaled Car

2007-01-04T22:04:00.001-05:00

After some additional consultation with my Attorney, he has advised the following:

If you do not want to keep the car, I will advise you to contact the lender
to make arrangements to surrender it to them. Once your bankruptcy is on
file, then they can make no claim against you. The debt to them will be
considered unsecured at that point and you will be able to discharge that
debt in bankruptcy.

My concern was mostly that if I surrendered the car to them, they would be able to add the charges for the recovery to my debt. The point is, if they take the car back, then I no longer have in my possession the item I purchased from them on loan. Even if they added their costs to my debt, that debt would be discharged, effectively eliminating the costs altogether. In addition, surrendering the car to them would mean no more calls from them, no more totaled car taking up all the space in my garage, and no more concern for how I'm going to get rid of the thing after the bankruptcy is final, which is the soonest I would have the title to be able to sell it as salvage.

I'll be contacting the lender tomorrow to make arrangements for them to come pick up the car.

A Quick Response

2007-01-03T19:50:00.001-05:00

I would not have expected to receive a response until tomorrow from my Attorney, but he has already replied via email.

His suggestion is that I NOT take any action with the car dealer, but rather wait until my bankruptcy has actually been filed -- when I'll have more options. Now I have to figure out how to stall the repo man.

Request for Repossession

2007-01-03T18:48:00.001-05:00

I spoke today with a representative of the car lot where we purchased the car that was totaled. After speaking with my Attorney, they assumed that the car wouldn't be listed in the bankruptcy proceeding because the car is worth more than the loan balance. They weren't aware that it was totaled without insurance.

I spoke with the representative and explained the situation to her. She was actually quite nice and professional, which is very unusual from a creditor speaking to someone in the process of filing bankruptcy.

She asked me to send her a picture of the damaged car -- probably to satisfy themselves that the car is totaled.

Moments later I received another phone call that displayed BLOCKED CALL on the caller ID. I let the answering machine screen the call and called back at the number given in the message.

The caller had been from a towing company that represented the car dealer. He wanted to make arrangements to have someone pick up the car this evening. Again, it's unusual to have a "repo man" call you to schedule a repossession -- and he, too, was quite polite and professional.

I told him that I didn't have access to where the car was stored so late in the evening, especially on such short notice (the car is actually stored in my own garage). I told him I might be able to make arrangements for tomorrow after speaking with my Attorney.

When I asked him what the dealer's interest is in the car now that it's totaled, he said that it would be sold at a salvage auction and the proceeds would be applied to the balance of my loan.

I emailed my Attorney for advice with the concern that the recovery fees for the repossession would be ADDED to my loan balance, actually INCREASING rather than decreasing my debt.

It's refreshing to deal with people who act so professionally in a situation when most creditors can be so rude and disrespectful. Of course, I'm just a little wary of their actual intentions.

I should have an update with the Attorney's response tomorrow.

Year End Update

2007-01-01T14:49:00.001-05:00

Things have been a little quiet on the bankruptcy front. The holidays can kind of do that, I suppose. There are just a couple of updates.

The calls from collection agencies have mostly ended. I'm starting to realize that sending letters to creditors might not have been the best method to end some of the phone calls. The two I mentioned writing to have both contacted me since then. The first, which is a car dealership that I still owe payments to for the car I wrecked several months ago, called my attorney, who apparently has forgotten that the car has been totaled. They contacted me again after speaking with him to ask me to contact them because the car is worth more than I owe on it. Of course, they don't know that it has been totaled, either. If they knew, they would also know that the car is worth much less than I owe on it, even though it is only a few months from being paid off.
The second creditor I wrote to is a law office that is collecting on an agreed judgment. These guys just can't seem to get the clue. They called me on both Christmas Eve and New Years Eve, both of which were Sundays. I imaging this one will take a little work to take care of.
We're making slow progress on paying the costs of filing bankruptcy. As I've said before, if we had the money it takes to file bankruptcy easily, it would be easy to pay our bills and we wouldn't need to file. We're about 18 percent paid so far.

Coming soon: recording our assets for filing purposes.

The Biblical Perspective

2006-12-18T23:17:00.001-05:00

So what does The Bible say about bankruptcy? Does it even mention bankruptcy? There has been much debate over this question, and it could surely be answered many ways. But since this is my bankruptcy story, the only answer you'll find here is my answer.

I've thoroughly searched The Bible for passages relating to debt and/or bankruptcy. I've found three of note:

Romans 13:7
Pay everyone whatever you owe them. If you owe taxes, pay them. If you owe tolls, pay them. If you owe someone respect, respect that person. If you owe someone honor, honor that person.
13:8 Pay your debts as they come due.

My interpretation: Clearly, it is expected of us to make every attempt to pay our debts.

Proverbs 22:27
If thou have not wherewith to pay, why should he take away thy bed from under thee?

My interpretation: If a debtor is unable to pay what he owes, this should not automatically result in him giving up everything he owns to satisfy the debt.

Deuteronomy 15:1
At the end of every seven years, you must cancel debts.
15:2 This is what you will do: If you've made a loan, don't collect payment on the debt your neighbor still owes you. Don't demand that your neighbor or relative pay you, because the time for suspending payments on debts has been proclaimed in the LORD'S honor.

My interpretation: In ancient Israel, as instructed by Moses, creditors were to cancel debts that were not yet paid every seven years. This is a built in fresh start for those who -- for whatever reason -- find themselves too deep in the debt hole. Why would Moses teach such a thing? I have a theory.

Look at the world today. Banks get bigger and bigger as they gobble up competitors. Ninety percent of the world's wealth is held by ten percent of the population. And the other ninety percent borrows or does without. How likely do you think the mega-conglomerates like Chase, Bank of America, and others would be to lord their wealth over the majority of the population if they knew that their loans would be worthless in just seven years? Such requirements today would reduce the number of large loans made and decrease the total debt burden for an individual to that which he could reasonably pay off in less than seven years. The end result: less poverty, less debt, less bankruptcy.

Read The Bible and interpret it as you will. I acknowledge that we should attempt to pay off our debts. But what happens when you get in the debt hole too deep? Should the banks be able to shovel the dirt in after you with higher finance charges and late fees? No! They, too, should have some responsibility for their lending practices. They should help to pull you up out of that hole, dust you off, and send you on your way with a fresh start. That's my opinion.

More Creditor Contacts

2006-12-16T10:13:00.001-05:00

I prepared a couple of brief letters today to creditors.

One to the dealership (a Buy Here/Pay Here branch of a reputable local GM dealer) where we purchased two cars over the past few years. The car we are currently paying on was recently totaled in a roll-over accident. As is common among many people with the debt load that we have, we didn't have auto insurance at the time (we've since corrected that). So the totaled car is sitting in our garage while we continue to make $300 in monthly payments.

The second letter was to the law office that represents the company that filed suit against me earlier this year (I mentioned making an agreed settlement with them in an earlier post.

Both of these are accounts that are two payments behind. The body of each letter consisted of just one sentence:

Please contact my Attorney about the above referenced account.

Then I included contact information for our Attorney. Assuming that it wouldn't be long before they started calling me -- or showed up at my door in the case of the car loan (they don't know that it was totaled) -- and I wanted to head off the inevitable.

The agreed judgement was a bit questionable. There's a court ordered amount that I'm supposed to pay each month on an old credit card bill. By not paying, I'm in violation of that court order. According to my lawyer, even a court ordered judgement can fall under the protection from creditors that bankruptcy will give me. I can only hope that he's right.

The Cost of Bankruptcy

2006-12-15T19:53:00.001-05:00

Bankruptcy isn't cheap by any definition. That's another thing that made it such a difficult decision for us. In our case, we'll be filing for Chapter 7 bankruptcy, which will completely relieve almost all of our debts. In our state, the total price tag (court costs, filing fees, and Attorney fees) will be $1500.00. Granted, that's much less than the sum of all the debt we're seeking relief from, but if I had $1500.00 to plunk down at one time, I wouldn't be this far behind on all my bills.

It's almost cost-prohibitive. Those who really need the help that bankruptcy relief provides can't afford it. Those who can afford it could likely apply that cash to outstanding debt.

In this case, we'll be making payments to our Attorney until we reach the $1500.00 bill. Naturally, dealing with someone who is filing for bankruptcy, he isn't extending us any credit. He won't actually make the filing until the whole bill has been paid. But what he does do for us, now that we've sent him the first $100.00 toward the fees, is field calls from debt collectors, relieving us of the hassling phone calls. Having taken care of some of the unwanted calls already, I can honestly say it's a great relief to not have to worry about the phone ringing anymore.

When A Creditor Call

2006-12-14T21:16:00.001-05:00

The first good feeling of having hired an Attorney to represent us in bankruptcy came when the first collection company called.

"Hello," the collection agent said after the automated caller connected the line.

I replied, "Hello." After he asked for me by name, I said, "This is him."

He continued, "This is Mark from Truelogic Financial. I am a debt collector, and the puropse of this call is to collect a debt." That's the standard legalese required when debt collectors call. If you're receiving calls from debt collectors who don't advise you who they are and what their intentions are, then they are breaking the law.

"Before you go any further," I interrupted, "I'll give you the name and number of my Attorney and you can contact him."

"Okay," the caller said.

It was that simple. I gave him the name and number of our newly hired Attorney, and he actually said, "Thank you," when we ended the call. It was a very liberating feeling to know that one less debt collector would be calling us every day.

* * *

If only the second debt collector to call -- less than an hour later -- had been as professional.

"I'm calling from Bay Area Collections," the caller announced, then asked for me by name.

"This is he," I answered.

He asked for me again. "That's me," I repeated. This collector was obviously calling from an out-sourced call center somewhere in India, and the language (and culture) barrier would be apparent.

When he asked me to verify my zip code for him, I asked, "What's the purpose of this call?" I guess in India they aren't so concerned with the legal requirements of debt collection.

When he began to run down the standard phrase, I interupted him again. "Before you go any further, I'll give you the name and number of my Attorney and you can contact him."

"And what will he be doing in this matter?" the caller asked.

"You can discuss that with him," I answered. "Are you ready?" When he didn't answer, I responded to his silence with the name of my Attorney. I had to repeat both the first and last name for him, then I had to correct the phone number when he repeated it to me incorrectly.

The caller then asked, "But it's your bill, why should I call him?"

I answered, "I'm going to hang up now. You can contact my Attorney for anything else you need." And with an abrupt "Goodbye," I terminated the call.

As rude as the second caller was, it was a wonderful feeling to have the tools to be just as rude in return.

I'm sure there will be more callers, for a while anyway, but the phone hasn't rang all evening.

Why Bankruptcy

2006-12-13T20:39:00.001-05:00

My wife and I have struggled for several years with bad debt. From not being able to buy a cell phone or car to having to settle for less than perfect housing because no one wants to rent to someone with bad credit. I can understand their thinking: if we aren't credit-worthy, we aren't risk-worthy.

But how does a couple get out of the debt hole and ever rebuild their credit? The high cost of living and providing for a family of four makes it impossible to put a dent in the mounting bills. First we owed a hundred, then a thousand, then ten thousand dollars: with the high interest rates and late fees the hole just keeps getting deeper with no end in sight.

Then came the phone calls: collection agencies calling at all hours of the day, from the early morning to late evening. Many of them rude and forceful, several others automated recordings demanding we call them back. When the phone started ringing at 6:00 pm every Sunday, I told my wife it was time to do something.

We've tried several different debt repair methods over the past few years.

Budgeting only works when there's enough money to meet the budget. When the bills add up to considerably more than your income, a budget is useless.

Credit counseling services want so much money for themselves that payments aren't actually applied to your existing debts for several months. And they call themselves "non-profit."

Debt consolidation loans are only available to people who managed to build up a little home equity before falling into the debt hole.

After arranging an "agreed judgement" with the first creditor who sued us and then receiving a second suit in the mail, we started talking seriously about our options.

Bankruptcy has always been at the bottom of our list of options. We knew it was there, but always felt like it was in some way wrong to file bankruptcy, erasing debts that we rightfully owe. We heard so many stories about how long a bankruptcy stays on a credit report, but then unpaid "write-offs" can stay there just as long. Our biggest deterrent was how judgemental my wife's parents are: if they hear about our bankruptcy, they'll never let us hear the end of it.

Then I learned of one of my own employees who filed for bankruptcy and built a brand new home just one year later. We would both love to own our own home. One of my wife's friends -- a very religious woman whose husband is a Christian Minister -- opened up to my wife about their bankruptcy. (More on the Biblical perspective of bankruptcy in a future post.)

With two kids whose futures we want to adequately prepare for, it soon became apparent that bankruptcy might be our only reasonable choice. My wife was still concerned about what her parents would think, but I convinced her that our children's futures are more important than her parents' opinions, and we made our decision: we would file for bankruptcy.