• Disaster

    Minimum payments = evil quicksand

    I found this infographic on the Mintlife blog today and had to share it. Minimum payments are indeed a monster that will eat you alive, if you let it. Click the image to see it full size. I am ashamed to admit how long it took me to figure this out. When I got credit cards, I never intended to carry a balance. When our financial situation took a dive, I started using them for living expenses like gas and groceries, plus occasional episodes of retail therapy. I thought, “Well, as long as I can make the minimum payments, I’m good.” Then the economy crashed and the bank regulations kicked…

  • Disaster

    Bankruptcy 341 Meeting of Creditors

    Yesterday was the 341 Meeting of Creditors for our Chapter 13 case. It was held at the federal courthouse in Atlanta, which was built in 1978 and smells like an old school building. It’s a high-security area, so no cell phones with cameras are allowed inside, and we had to go through a metal detector and have our belongings scanned and searched. The hearing room was not a courtroom per se, but a big open conference room, with a horseshoe of old tables at one end and some old chairs around the edges. The trustee was seated at the tables with a laptop, and called people up in turn. We…

  • Disaster

    Getting started with Chapter 13 bankruptcy

    This past week we met with a bankruptcy attorney to get the process started. The lawyer had emailed us a 25-page worksheet to complete before our meeting. Thankfully a lot of it was not applicable to us (questions about prior bankruptcies, judgments, etc.), but even so, it took a couple of hours to round up all the info we needed and fill in all the blanks. Schedule D was particularly weird because we had to inventory and then assign a dollar value to all of our household possessions. They won’t be taken and sold in a Chapter 13, but they need to be sure we aren’t over the limits for…

  • Disaster,  Rebuilding

    Are your kids financially literate?

    I had to explain bankruptcy to my boy yesterday. I mentioned to him that Tony had a job interview, and he said something like, “That would help a lot of things.” Without really thinking about it I said “Yes, it could even bring us back from the edge of bankruptcy,” so he asked me about bankruptcy and what it means. So on the way home from work and school, I gave him a quick overview of Chapter 7 and Chapter 13, and said that we know some other people who have been through it, including several friends and one of my sisters. It wasn’t a secret that we were considering…

  • Disaster

    The fallacy of the American Dream

    Everyone wants to own a home when they grow up. Whether it’s a city condo, a country cottage, a humble suburban house or a 4,000 square-foot McMansion, we’ve been told all our lives that this is the goal. Renting is for college kids, not adult professionals. Real estate agents and bankers tell you that renting is like pouring your money down the drain. “It will never be yours,” they say. “Invest in something you can actually own! You’ll gain equity! And get tax benefits!” But I’ve come to understand that most people never own their homes unless they buy them outright. Thirty years is an incredibly long term to carry…

  • Disaster

    Sending the right message

    A January 7 article from the New York Times entitled Walk Away From Your Mortgage! mentions the WSJ article I referenced in my January 3 entry about strategic default, where a Mortgage Bankers Association executive expressed concern over the “message” people send to family and friends when they default on a mortgage, and how it harms communities. Even Henry Paulson and President Obama have implied that people who voluntarily walk away from mortgages are irresponsible deadbeats. While they are referring to people who voluntarily default when they can afford to pay, the line determining whether one can afford it is becoming less clear now that the number of unemployed Americans…

  • Disaster

    Strategic default: it’s a business decision

    According to a December 22 Slate article, strategic defaults on mortgages are on the rise. These mortgage defaults occur when people who could afford to pay their mortgages decide they’ve made a bad investment and walk away. In the current market, a short sale or foreclosure generally follow. For a large corporation, strategic default is a logical business decision. Companies and very wealthy individuals who can afford to stay current on payments strategically default all the time — and they do so intentionally, once they determine that it’s the wisest financial decision. The number of companies in strategic default doubled last year to nearly 300, the highest on record. These…

  • Disaster

    Mortgage banks prefer foreclosure

    I found an interesting article on ConsumerAffairs.com entitled Do Loan Servicers Really Prefer Foreclosures?. It’s a little clickbaity, but apparently recent studies show that while mortgage companies make a big show of wanting to help homeowners avoid foreclosures, their actions indicate quite the opposite. This has certainly been our experience over the past month, as Tony and I have been attempting to modify our own mortgage. “Get in touch with us,” they said. “We are committed to helping keep people in their homes. The most important step you can take is to reach out for help today.” So we’ve been reaching out, repeatedly, via our lender’s website and by phone,…

  • Disaster

    Mortgage loan modification

    Over the past couple of weeks we’ve been talking about the likelihood that Tony’s unemployment compensation will end next month. He was laid off a year and a half ago, and with a combination of his severance, my salary, his unemployment, and savings, plus cutbacks on non-necessities, we’ve been able to keep up with everything so far. But it’s not sustainable for the long term, because we’ve blown through our savings, and our credit card minimums and interest rates are rising. Without Tony’s unemployment income, it will be impossible. We are looking at other ways to reduce our debt and monthly payments, and the next step is finding out whether…

  • Disaster

    Pennies add up

    One of my new financial rules is about reducing debt at every opportunity. One way to do that is reducing unnecessary ongoing expenses, so there’s more cash to go towards paying off debt. We have been taking some baby steps in that direction over the past month. Each of these expenses seems small, but combined over the course of time, they will add up. Here’s how it’s going so far: Before Tony was laid off, we had dinner out at least 3 times per week, plus lunch on the weekends. Over the past year or so we’ve cut way back on that, although we would still have our weekend lunches…