A Friend Contemplating Bankruptcy

I got a call yesterday from a friend that I haven't heard from in a while. She was in tears. A few months before, she found out her boyfriend was abusing prescription drugs. She broke up with him, and he moved out, leaving her alone in their rented house.

I was under the impression she was having money problems even before her druggie boyfriend moved out. When she called yesterday, she told me she had a $700/month shortfall in her cash flow, and she was thinking of filing bankruptcy.

I told her that she should regard bankruptcy as a last resort option, and that if she was going to do it, she needed to make darn sure that she'd be able to pay her bills and, more importantly save money, after she filed and her debts were discharged. I told her that bankruptcy wouldn't do her any good if she was still coming up short a few dollars every month. I told her that if she couldn't solve the cash flow problem, filing bankruptcy would make things even worse.

She had apparently called several of the non-profit credit counseling services, and they all told her that they couldn't help her because she wasn't making enough money. They recommended that she file bankruptcy.

I told her she was going to have to make some hard choices and figure out how to get her living expenses lower than her income. That might mean moving to a smaller place, getting roommates (both which will be tough, considering she has a large number of pets) or getting a second job. I'm not sure if she heard me, because she didn't like what I was telling her.

"I didn't call you for advice," she whimpered, "I just wanted to know what your experience was."

My experience? My experience with bankruptcy is that it sucks. I'm ashamed that I had to go through it. It was my own stupidity that got me there, and it's not a road I would recommend to anyone. I told her that, in my experience she wouldn't be able to get any kind of credit for several years, landlords wouldn't want to rent to her, and that employers might regard her as less desirable. I told her she needed to solve her cash flow problems first, before she filed, so that she didn't incur more debt after her bankruptcy that she wouldn't be able to pay.

I told her that this was a time for hard choices, and she was probably going to have to do some things that were uncomfortable and not fun. Suddenly, she had to go because her cell phone was ringing with a call from work and that she'd call me back later.

I never heard back from her. I guess she didn't like to hear what I had to say.

How Much Do I Owe, Anyway?

Although the overall debt situation is better than it was last month, I've noticed an ugly downward trend in our net worth over the past couple of years. Since we had several clients finally pay, we were able to pay off a loan my father had made to us, and to get all of the credit cards, except one, paid off. Last month, our net worth (excluding the value of and mortgage on our home) was at the lowest level since I started keeping track in 2000.

Not counting our mortgage debt, things aren't looking too pretty:

Account	Amount
Credit Card	$1,414
401(k) Loan #1	$12,906
401(k) Loan #2	$4,800
Total	$19,120

Both of the 401(k) loans are being paid off according to schedule, and if we don't pay anything off early, we'll be debt-free some time in 2009. If this "life changing" job turns out really to be as profound as our client says, then perhaps we'll be able to get things paid off early.

The last time we had a positive net worth was over two years ago, when we were working a big job for a client. It was steady work, and we were getting paid. Unfortunately, our client was mismanaging money he'd received from his customer, and in the end he stopped paying us for our work. He kept promising to pay, and didn't. Ultimately, we got ripped off for $14,000 by this guy.

We've really been scrambling, financially, ever since. I hope the tide changes, soon!

When Clients Don't Pay

I pulled my company's A/R (accounts receivable) report this morning and continued to see a discouraging trend. Clients are not paying their bills in a timely fashion. At the moment, we have two clients that are 31-60 days late, and three clients that are 1-30 days late. Although frustrating, it's an improvement over where we were last year when we had some clients who were more than 90 days late, and much better than two years ago when we had two clients completely stiff us for a total of about $20,000.

On the plus side, some of our clients paid on time or early, so we were able to pay off my father for a loan he gave us last February to repair our damaged car, and we paid next month's mortgage payment and health insurance premiums early. It's a good feeling to be a month ahead on those two major bills, but I have to admit to a significant amount of concern, since we haven't made any estimated tax payments so far this year.

It's really hard to stay motivated to do quality work when clients don't pay their bills on time. I'm staring to develop this really fatalistic attitude that it doesn't matter if I do a good job or a lousy one, because the end result will be the same -- bills will come due, and I'll be stressing out over the fact that I don't have the money to pay them when they arrive. Although things always seem to work out so I can pay everything on time, every month paying bills is definitely a stress-fest, because I'm constantly having to juggle things and figure out who can wait a week or two.

I would like enough money in my checking account so that I can just pay the bills and forget about it!

Thou Shalt Not Covet

I have a friend, I'll call him Harold. Although I really like Harold as a friend, I really hate visiting him. He's got this awesome house in a really nice neighborhood, with a fantastic view of the city below and the ocean. Although his place isn't a mansion, and he bought it many years ago when real estate was cheaper, I always get depressed after I visit. The place is gorgeous, bright and sunny, and I'll never own anything like it. Although I'm really happy for Harold's success, it makes me sad when I look at my own situation and wonder if I will ever be able to make it better.

It's not that I want Harold's house, or even a house exactly like his. It's just a reminder that I am not doing nearly as well I'd like, and certainly not as well my parents, and there are a lot of things I don't have. I drive a beater, Harold drives a fancy european car, though in his defense it's a few years old.

I've gotten to the point where I really hate to go shopping, even if it's for things like groceries, because I walk through aisles and aisles of things I can't afford or shouldn't waste my money on. There's lots of stores that are basically off limits, including book stores, electronic stores, and even the local Wal-Mart, unless I'm shopping from a list. Although I used to love to eat out in restaurants, I don't enjoy it anymore because I'm constantly thinking about the bill that will be coming at the end of the meal. It's just not fun anymore!

I keep reminding myself thou shalt not covet, and trying to remind myself that I should be grateful for what I do have. I have a roof over my head and food in my belly, and a huge portion of the world's population doesn't even have that much. Even so, it's really hard to be part of white, middle-class America, and being stuck on the sidelines, watching the American Dream pass me by.

Are Things About to Change?

A client of mine has been bidding on a multi-million dollar contract, and told us that if he was awarded the job, there would be considerable work for us. He said that the contract would be "life changing." We've been waiting for several weeks to hear, and yesterday afternoon he called.

"We got it," he said calmly. He was almost too calm. Too many late nights had taken their toll on him, I guess.

I put the phone down for a moment and shouted to my partner, "Yeehaw! We got it!" My client and I exchanged a few pleasantries, and a few key pieces of information, and plan to meet next week.

We got the contract.

At first, I was really excited, but now that I've had a moment to process things, I really don't know what it means. Does it mean we'll finally be earning enough money? Does it mean that we'll finally be able to stop worrying about money every time we go to the store or pay bills? Does it mean we'll be able to start paying off our debts? Does it mean we'll be able to actually save some money for a rainy day or for retirement?

The end customer is a Fortune 100 corporation, so they are going to expect a very high level of customer service. I know this is going to be life changing for my client in a positive way, but I'm scared that this might not be so great for me. I'm worried it will mean another year or two of IT slavery, being on call 24/7, for inadequate money. I hope it will mean good things for us, but I've worked on many projects where I made my employers a lot of money and came up short.

I'm trying very hard not to let my fears overtake me, and I'm trying to be cautiously optimistic. I'm not worried about my ability to do the work; it's just an extension of work I've already been doing for this client, anyway. What I'm worried about is the money, and the impact it's going to have on us. I'm concered, too, what happen when the contract ends? The job is only guaranteed for a year or so. After the job ends, will we just go back to living our hand-to-mouth lifestyle?

In my 15 or so years in the IT Industry, I've never had a job where I was able to live an "abundant lifestyle." When I say "abundant" I don't mean an extravagant or wasteful lifestyle; I mean a lifestyle where there is enough money for all the basics, plus enough for savings, and extras like vacations and fun stuff. An "abundant lifestyle" would mean I'd have enough money decent housing and transportation, and to be able to keep my home and car in good repair. I'd have enough money that a trip to the dentist (I haven't been in four years) would be possible.

My best earning year was when I was living in the RV. Although I was earning enough to put the maximum into my 401(k) plan, and was paying my bills with ease, had no debt and could afford a few extras, I wasn't earning enough for "normal" housing. I lived in a cramped trailer with a dog and a cat, and it was the absolute best I could afford.

Is it possible things might change? Is it really possible?

Everything Is Broken

One of the many things I find frustrating about my current financial situation is that there are so many things we have to do without because we don't have the money to pay for them. The other day, I made a list of all the things in my house that are broken, need repair or need attention, and the list was quite long. Some are big things, and some are small, but it's frustrating to have an growing list of problems that I can't address because it all costs money. The problem is compounded, too, by the fact that I'm completely hopeless at fixing things around the house. I've tried, many times, and only seem to make things worse.

1. I haven't been to the dentist in four years.
   
2. My partner hasn't been to the dentist in four years.
   
3. I own a 30-year old convertible that can't be driven because it needs a few minor engine repairs and needs new tires. Since I can't afford the tires or the insurance, I filed a certificate of non-operation on the car. It has sat in the garage for seven years. I kept hoping I'd have the money someday to get it back on the road.
   
4. My truck needs new tires and can't be driven. They are bald. We aren't talking worn tread here, we are talking no tread.
5. Our $500 junker station wagon needs a new radiator, fan and fan housing It's leaking coolant, so we have to check it whenever we drive it, and carry water with us.
   
6. Our house desperately needs an exterior paint job.
7. Our driveway is full of cracks.
8. Our yard looks like an overgrown jungle. We can't garden because we are terribly allergic, and the next door neighbor kid isn't capable of doing much more than mowing the grass. We really could use a lawn service.
9. We need new carpet. The house had white carpet, and we knew it would be a problem when we moved in. The carpet is now really gross-looking, even though we have a shampooer. A wood floor would be so much better.
10. The house could stand an interior paint job.
11. There's a leak in the master bathroom shower. Water is seeping out one corner onto the floor and into the ajoining cabinet.
12. The shower head in the guest bathroom is broken.
13. The tub in the guest bathroom needs to be re-glazed.
    
14. Our "home theater" system (if you can call it that) no longer works. It turned 20 years old this year. The amplifier no longer powers up and the tape deck is malfunctioning.
15. Our birds haven't been to the vet for their annual checkups this year.
16. My partner sometimes misses her asthma medication because we don't always have money for the Rx co-pay, even though we do have insurance.
17. Our dishwasher rack is rusted out and needs to be replaced. (Better, we need a new dishwasher, because this one doesn't clean worth a darn)
    
18. Our chimney needs a visit from the chimney sweeper.
19. Our front and back yards really could use some landscaping.
20. The springs and the recliners in both the sofa and loveseat are broken.
    
21. We can't sit on one side of the sofa because the springs are so broken down that it's like sitting in a hammock.
    
22. The loveseat's stitching is coming apart in several places.
23. I need a new pair of comfortable dress shoes.
24. Our furnace needs a new filter.
25. The RV has a leaky roof.
26. The RV needs a new battery.
27. The RV needs new tires
28. The RV's hitch is rusty and needs to be repainted.
29. The house is a mess and we could really use the services of a professional organizer. The place is really too small for our needs, so it's like trying to cram 10 pounds of $h*t into a 5-pound bag!
30. The lock is broken on the guest bathroom window.

And the list just keeps growing...

UPDATE 9/19/2005: Although the list is growing, I've managed to actually cross a few items off the list...

Credit Rebuilding

Since I know this is a point that a lot of people worry about, I thought I'd share my experiences with credit rebuilding. There's really no magic to it, and despite what all the expensive books and credit repair companies say, the truth is that it just takes time.

In my case, here's a timeline of what I did:

• Early 1997 - Opened an American Express account. AMEX, provided that you don't owe them any money and don't include them in your bankruptcy, seems to be willing to keep your account open if you file. I don't know if this is still true, but I opened the card earlier in the year thinking that I might file later. I used it a few times, paid it off every month and left it sitting in a drawer.
• June 1997 - Stopped using my credit cards, went to paying minimum payments on all bills in preparation of filing.
  
• September 1997 - Bankruptcy filed.
• October 1997 - Received re-affirmation agreement from Citibank. Since I only owed them about $500, and I knew I'd need to have a Visa or Mastercard for work-related travel and expenses, I reaffirmed. I had to fight my lawyer tooth and nail on this -- he felt that I should reaffirm nothing. I'm glad I did, because I have a very low interest rate on this card (about 10% now) and a long, positive credit history with this company.
  
• January 1998 - Bankruptcy discharged.
• February 1998 - Bought a secondhand pickup truck. I got hugely crappy terms, at 21% APR. In my opinion, recently bankrupt people should never buy a new car. If you have to buy a car at all, buy the cheapest one that will meet your needs. I bought a truck because I was living in an RV, and my nine-year-old 4-cylinder Toyota was wheezing to an early death from all the towing.
• September 1998 - A tree totaled my RV, so I used the insurance money and a 401(k) loan to pay off my truck loan and purchase a secondhand trailer.
• Early 1999 - I applied for a Capital One secured credit card. Yes, Capital One can be crappy to deal with, but they seem to have the fairest terms for people with sucky credit. They do have an interest-free grace period, and pay interest on your security money. If you pay your bills on time, after a year they will convert your card into an unsecured card. Although I've heard complaints about Capital One, they aren't nearly as bad as some of the other predatory lenders. Beware of any company that expects you to pay a non-refundable fee for the luxury of getting a credit card. It's a screwed deal, and you should pass it up.
• August 2001 - Applied for home mortage. I was turned down, but we got the house anyway. My partner applied alone, and we did a no-doc loan. The interest rate was 8.25%, and we had to pay PMI, which wasn't great, but it was better than no house!
• Sometime in 2002 - Applied for a business credit card. I was turned down, but my partner was approved, so I was just added to the account as an authorized user.
  
• April 2003 - Refinanced our mortage, and the bank approved me as well as my partner. The bankruptcy (and the fact that we were self-employed) gave us a slightly higher rate at 6.00%. However, it's a fixed-rate, 30-year mortgage, so we can't complain too much. (Interestingly enough, my average credit score at this point was 666!)
  
• September 2004 - Applied for a Sears card. Turned down flat. When I got the rejection letter in the mail, "prior bankruptcy" was the reason given for the turn-down.
• November 2004 - Considered applying for a home equity line of credit, so we pulled our credit reports with scores. It turned out that my partner, who had a dispute with a credit card company the year before, had been reported 30 days late. My lowest score was 723, but my partner's were no longer good enough to qualify for the best rates, so we passed on the idea.
  
• July 2005 - Applied for a music store credit card. To my suprise, I was approved and given a pretty high limit. Woo-woo!

Some of the lessons I learned along the way:

• Credit card companies are not your friends - Always read the fine print before you apply, and make sure that you understand their terms. Many companies will use a bait and switch technique where they will invite you to apply at a really awesome rate, review your credit, and then give you lousy terms.
• Don't buy a car using dealer financing - Credit unions, I found out later, almost always have better terms, even for people with crummy credit. Don't let a predatory lender take advantage of you. If you have no other choice go with the crappy loan, but buy the cheapest vehicle you can get by with, and double or triple your payments. Better idea: buy a really cheap junker and pay cash!
  
• Pay your bills on time every month - Okay, maybe it means you are going to be eating generic macaroni and cheese for the rest of the month. Never pay a bill late if you can possibly help it.
• Learn the difference between wants, needs, and emergencies - A "want" is something you can get buy without. When your kid tells you, "but Mom, I need a new iPod," it's not a "need", it's a "want." A "need" is something you can't do without, like decent, nutritious food, or gas for your car so you can drive to work. An "emergency" is something that you really can't do without. Your home theater system breaking is not an emergency, and neither is the dent in your car door. An "emergency" is something like your only car busted it's timing belt, so you have to get it fixed.
• If you use credit cards, pay them off every month - The only exception is if you are paying for an emergency that you can't otherwise cover. If you have to carry a balance, pay at least two or three times the minimum payment. As the minimum payment drops, don't reduce what you are paying -- keep paying two to three times the original payment, or more if you can afford it. Don't let debt evolve into an anchor.
  
• Open a savings account, and put money in it every month - Even if you still aren't earning enough after you've filed bankruptcy, put something away. Even if it's only $25 a month, it's still something. If you can afford more, by all means, do it. Become a saver, not a consumer.
• Never file bankruptcy again - Remember the mistakes you made that got you into the mess in the first place, and don't repeat them. In most cases, bankruptcy isn't a sudden surprise. It's usually a slow decent into financial chaos, that's usually started with a few bad decisions and then culminated by a stroke of bad luck. In my case, I could have avoided bankruptcy entirely had I not invested/borrowed so much money to keep a dying business alive. If I had been smart and cut my losses several years before, I wouldn't have gotten in over my head. Hindsight is 20/20 and there's no rewind button on the VCR of life, so learn from your mistakes and don't repeat them.
  

Why I Created This Blog...

One of the things I've noticed when I've searched the Internet for post-bankruptcy information is that there's basically nothing out there for people who are more than just recently bankrupt. There are quite a few books, discussion groups, chat rooms, etc. for folks who are considering, or just recently filed bankruptcy. I haven't seen any stories about people who filed five, seven or even ten years ago.

I've always wondered, once people get past the initial trauma of the filing and some of the early phases of credit rebuilding, do they just forget the bankruptcy ever happened? Do people just bury the whole event and move on, or does filing bankruptcy forever change people? Do most filers get back on track, or do they continue to have financial problems that continue past their discharge date?

It seems that a common public sentiment is that many bankrupt families are somehow taking advantage of the system. People believe that individuals who file for bankruptcy were behaving irresponsibly. They were spending wastefully, running up huge credit card debt for expensive vacations, toys and fun. When they get in over their heads, they buck the system, file Chapter 7 and walk away from their responsibilities.

That's the common perception.

Although I am sure that there are a few people who used bankruptcy as an avenue to live a lifestyle beyond their means, I don't believe that to be true of most filers. Of the people I personally know who filed bankruptcy, each of them had an event that was out of their control that pushed their finances over the brink. In some cases it was enormous medical bills. In others, it was extended job loss. In each case, these families weren't living fancy, extravagant lifestyles. They were middle-class wage earners who had a financial crisis larger than their savings and their ability to earn.

One couple I know declared bankruptcy after they were hit by an uninsured motorist. Their medical bills topped $100,000 and they had no way to pay. Their own medical insurance refused to pay, claiming the responsible driver would have to cover the expenses. When the bills came due, the hospital and doctors looked to the injured couple, since the uninsured motorist had no job and no assets. Although my friends did their best to pay as much as they could, and tried to make payment arrangements, the medical bill collectors had no sympathy. They wanted all their money now. My friends couldn't pay the amount demanded, so they filed bankruptcy.

I don't know anyone who is proud they declared bankruptcy. When I went to my own hearing, the room was filled with many discouraged people. There wasn't a smile in the room. Everyone looked downcast, depressed, and ashamed that their lives had taken such a terrible turn. Many of the women were crying, and most of the men looked like they were holding in their emotions as best they could.

In my own case, although I was relieved that the collection calls and the stress of trying to pay bills each month was gone, I felt very ashamed. I felt a certain amount of peace, yes, but also a huge amount of grief. Even now, some eight years after filing, I still feel bad. I feel that there's this invisible letter "L" (loser) tattooed on my forehead. Most people can't see it, but it's still there. Although my credit reports show no late payments since my bankruptcy was filed, and all my credit scores are all above 720, I am still a deadbeat in many people's eyes. My best efforts weren't good enough and I'm forever damaged goods.

Even with very good credit scores, I am reluctant to apply for new credit for fear of being turned down. Last summer, our aging refrigerator died rather suddenly and we needed a replacement. We went to Sears, and I decided to apply for a Sears card. I thought I had a good chance of getting a card, since my bankruptcy was more than seven years old. I was turned down, and the clerk was rather gleeful about the entire thing, making enough of a show to attract the attention of nearby customers. Fortunately, my partner was able to get a card, so we were able to save ourselves 10% on the purchase and receive no-interest financing for a year.

Things seem to have improved recently. It seems that the seven-year mark might be some kind of magic number. I applied for a music store credit card recently, and was given the advertised terms, including a 12-month, no-interest account. Maybe it was luck, or maybe this company just has looser credit terms than Sears. In any case, I applied because I could do so over the Internet, and I didn't have to worry about other customers staring and saying, "Oh look, that poor slob just got turned down for instant credit!"

Although my financial situation certainly was improved by filing, I can't honestly say it was like a magic wand curing all my problems. It got rid of the overwhelming debt, but it didn't cure the problem of under-earning, and it didn't solve the problem that it's just damn expensive to live where I live. It didn't solve the problem that in order to make it, you really need to have inherited money or be a dink (dual income, no kids) so that you can spend thousands of dollars on housing. It definitely didn't make me feel better about myself or my situation. It was a solution for an untenable situation, but it had huge cost, too. I traded my debts for living in a tiny travel trailer for four years. I traded a cessation of collection calls for my self-esteem.

For those who have filed bankruptcy and are struggling with the aftermath, all I can offer is to take one day at a time. There are no miracle cures, and no magic bullets that will solve your problems. To those out there who call us deadbeats, all I can say is that I hope you never find yourself in the same situation.

My Story - Part 3

Although I thought that homeownership would be the start of a new and improved life, I found that there were a lot of negatives. Unlike living in the trailer, where we had few expenses, we really had to stretch to pay our bills, and our new $1,800/month mortgage was often a real struggle. The post-9/11 recession didn't help, and as we started to see the dot-com era come to a crashing end, we weren't able to find the kinds of jobs we wanted.

We thought that our own company would be a temporary gig until we found regular employment, but that never happened. As the months of self-employment stretched into years, we realized we'd probably never go back to working regular jobs again. Although we sent out resume after resume, we didn't get call-backs. We kept finding 1099 contract jobs, but long-term contracts fizzled, clients didn't pay on time (and sometimes not at all) and we kept struggling along.

After we'd been in the house for nearly a year, the housing market had gone up enough that we were able to refinance. By this time, my bankruptcy was old enough that my name could be added to the mortgage. We got rid of PMI, got a lower interest rate, and our monthly payment dropped by about $700/month. Unfortunately, the relief from the lower payment didn't last long. The recession continued, and we had several clients fail to pay their bills.

In the four years that we've run our business, we've had a total of four deadbeat clients stiff us for nearly $30,000. My share of the business' profits last year amounted to $16,000, which really isn't enough. The under-earning problem seems to follow wherever I go...

I majored in Computer Information Systems not because I loved tech, or because I loved computer programming. I chose CIS because my father wanted me in some sort of technology-related career, such as engineering, computer science, or mathematics and I felt that CIS was a reasonable compromise. I'd taken computer classes in high school and always managed to get an A, even though I didn't particular like the work. Job prospects were supposed to be great, so I did what a good kid was supposed to do. I tried to please my parents. Although I didn't find computer programming to be odious, I didn't really love it, either. I saw it as a way to make a living, but not a burning passion.

When I graduated college, many of my classmates were getting unbelievable salary offers. The offers I received were pretty disappointing, generally $15,000-20,000 a year less. I had terrific grades, and graduated with honors, but the really great offers just weren't there. Most of the companies interested in me were offering sub-standard deals. Since I had to take a job somewhere, I took the best of the offers I had, and things slowly went downhill from there.

When I graduated from college, I thought I had the ticket to the American Dream. I thought I'd be able to buy a home, have nice things, and put some money away for the future. I thought I'd be able to afford a life equal to, or better than, what my parents had. What I have instead is an overpriced, tiny dump of a house, junker cars, and I live hand-to-mouth every month. Cash flow is always a problem, and I frequently find myself buying groceries on a credit card because there's no money in the checkbook.

About a six or eight months ago, we spent quite a bit of time having weekly telephone consultations with a financial planner. We thought that perhaps she could teach us the money management skills we lacked. When all was said and done, she confirmed what I already knew. We weren't living extravagantly. We didn't eat out excessively; we didn't buy new clothes, fancy toys, or drive new cars. Our basic problem: we aren't earning enough money, period. Although what she said was helpful, and she certainly helped to reduce our regular fights about money, it didn't solve the underlying problem.

When I look around me, I wonder how my neighbors are making it. One neighbor has a similar house, four kids, but always manages to drive nearly-new cars. They take vacations, and their kids are enrolled in a lot of extra-curricular activities which must cost money. They seem to have it together financially. Our neighbors just a few houses down have an immaculate yard, fresh paint, gleaming new windows and shiny new cars. Another neighbor bought a fixer-upper that was a complete dump, and he's refurbished it to be a cute little house with nearly-new cars on the driveway. Our house has a scruffy yard, needs paint and other minor repairs which we can't afford, and we have rusting and barely-running cars. One of our cars leaks so much oil we park it on the street so it doesn't mess up the driveway. We are probably the second- or third-worst-looking house on our block. All of these things take money and time to fix, and we don't have either. We work and work and work, sometimes 60 hours a week or more, and seem to have nothing to show for it.

As I look back on my life, I realize that I've made plenty of mistakes, and ultimately I'm the only person who has control over what has happened. I'm nearly 40 years old, and somehow I need to figure out how to turn this ship around so that I'll be able to retire someday. Although our house has nearly doubled in value since we bought it, we have very little else to show for our efforts. We have very little money in retirement funds, no investments, and about $20,000 in unsecured debt. Most of it was money we had to borrow against my retirement account to pay taxes. Since we didn't earn enough for several years to pay our bills and pay our estimated taxes, the money had to come from somewhere.

I feel like I've become stuck in a form of middle-class poverty. Although I have a roof over my head in a seemingly nice neighborhood, there's no money for extras, and when clients don't pay on time it becomes a serious crisis. When they say that most Americans are a paycheck or two from being homeless, I believe it. It wouldn't take much for us to miss a house payment, and then I'd be right back in the same spot I was eight years ago.

I'm not sure where to start, or how to fix things, but this blog will be my journal to document my voyage along the way.

My Story - Part 2

When I left my home that November day, I stood out front for the last time. I looked at the house and remembered back to when my ex and I first were thinking of buying it. We'd walked over to the house one evening, after dark, and just stood in the neighborhood looking around. We felt this huge sense of anticipation and excitement. I remember standing there, alone, and for a moment feeling overwhelmed with grief. The wave passed, and I climbed into my truck and drove away. I didn't look back.

I wasn't exactly sure where to go, so I decided to head for one of the county campgrounds. Since it was winter, they allowed campers to stay for 3 months. During the summer, they only allowed a 14-day maximum stay unless you worked as a camp host (which required 20 hours/week labor in exchange for free rent) so I knew I'd have to find another place.

My bankruptcy was discharged in January of 1998, and I remember feeling oddly empty when I received the discharge letter. I didn't give it a whole lot of thought, though I was relieved at being able to start using the credit cards that I'd been able to keep through the bankruptcy to buy gasoline for my commute. It made me nervous to go to the ATM after work, and I didn't like carrying around a lot of cash.

The following February, my aging Toyota truck started giving me a little trouble. It had over 181,000 miles on it, and it was slowly dying. It wasn't being helped by the fact that I was frequently towing a heavy trailer around, so on a lark I called a local auto lot. I was curious to see if it were even possible for someone in my circumstances to buy a bigger truck. To my surprise, they said yes, and I ended up with a secondhand full-size pickup. The loan terms were terrible at 21% interest, but I paid extra every month with the idea that I would pay it off early.

I ended up staying at the county campground for the full three months, and the ranger even offered me the opportunity to work as a camp host. I couldn't figure out how to juggle my full time job, plus the responsibilities of camp host. Truthfully, I wasn't too keen on the idea of cleaning public restrooms every day (and this was part of the job) so I thanked the ranger but declined. As it was, the move turned out to be necessary. That year was the winter of some very severe storms, and I couldn't make it in to work for a couple of days because of road closures. The power was out in the campground for nearly a week, and my trailer was narrowly missed by a falling tree during one of the storms. Fortunately, I had been looking the entire three months to look for another parking space, and I found another spot that didn't require a credit check. I moved in, and for a trailer park, it was actually pretty decent, since it mostly catered to tourists, but allowed a small number of long-term residents.

When I moved into the trailer, I always figured it was going to be a temporary arrangement, but things kept happening to keep me there. Almost a year after I began my trailer odyssey, a tree that hadn't been properly trimmed dropped a giant branch on my roof in the middle of the night. It totaled the trailer, causing more than $11,000 worth of damage to a trailer that was worth perhaps $5,000.

Although I'd expected that living in the RV would help my post-bankruptcy recovery, in some respects it made things harder. I couldn't get a loan for a replacement trailer partly because my credit sucked, and partly because I didn't have a "permanent address." I still wasn't able to rent an apartment for the same reason. Fortunately, I discovered I could borrow money from my 401(k) plan at work, which I'd been funding to the max. With the money I got from the insurance payoff, plus money I borrowed from my retirement account, I was able to buy another, slightly bigger, secondhand trailer. I also paid off the loan for my secondhand pickup, since the interest rate was much lower.

Every few months, I'd try to look into apartments, but never did manage to come up with anything. The apartments that might be willing to talk to me were in terrible neighborhoods and wouldn't accept my pets, so I kept living in the trailer. One month stretched to three, which stretched to six months and then a year. At the 18-month mark, my current partner decided to move in. Things were definitely cramped, but we were both working, so it wasn't too bad.

Things were going along fine and we were starting to build a little nest egg when I was unexpectedly laid off during the summer of 1999. It took me three months to find another job, and I had to take a $12,000/year pay cut. A few months later, my partner was laid off. We ended up at the same company, where we worked until the end of 2000. Then we both lost our jobs when the company started having financial problems. We ended up starting our own custom software development company since one of our former employer's clients had some web programming they wanted done. Our former company wanted out of the custom software business, so we were on our way.

We ended up living and working in that tiny 22' travel trailer for nearly a year before we got to the point where we couldn't stand it any more. We were fighting constantly because we were so cramped for space, and our dining table was cluttered with laptops and a printer so we could work. We had a server on the floor in front of the refrigerator, and reference manuals piled everywhere. I started calling apartments again, and this time they had three reasons not to rent to us: 1) We had a dog (my cat had ended up moving in with my father since my partner turned out to be violently allergic); 2) I had a previous bankruptcy and they looked at both our credit histories; and 3) we were self-employed and couldn't show steady self employment for two years. We were stuck.

I called around to all the local homeless service agencies to see if they might be able to issue us a referral for housing. Although we technically met their requirements for being "homeless" since we didn't have a permanent address at the the trailer park, and the RV technically wasn't designed for full-time, year-round living, they couldn't help us because we were considered single adults. The homeless problem in our county was so bad that they would only serve single mothers with children. Couples (married or not) or single people weren't eligible for assistance. The best they could offer us was a cot in the local homeless shelter, which was a step down from where we were living.

After nearly four years of trailer living, I was ready to give up on the nomadic lifestyle. After nearly three years of trailer life, my partner was just about ready to kill me! We mentioned our dilemma to a friend, who happened to know a "friendly" mortgage broker. It turned out after a certain about of finessing (translation: lying) on the application forms, my partner was eligible to get a no-doc loan for a honest-to-goodness real home. We'd applied together, but at the last minute we had to withdraw my name from the application because it turned out the only bank willing to loan on a self-employed, no-doc loan was the same mortgage company that had taken it in the shorts on my mobile home four years prior. They were, understandably, still holding a grudge.

We found a very good real estate agent, and she helped us find halfway decent homes that were relatively inexpensive. When I say relatively, that doesn't mean that the prices weren't absolutely, heart-poundingly shocking. The housing market was starting to go through the roof, and houses that sold for $100,000 a few years before were now selling for double that amount. Although our friends encouraged us to take on a bigger loan, I was terrified that we'd run into financial problems if we did. We bought the least expensive 3 bedroom/1.5 bath we could find that had space for our RV. We signed a deal, I handed over my down payment to my partner, who in turn gave it to the escrow company. The loan was granted, and a quit-claim deed was filed to add my name to the title a few weeks after the loan closed. Virtually all our savings were eaten up by the downpayment, but the place was ours!

In September of 2001, right after the World Trade Center disaster and nearly four years of living in an RV, I finally had a home again...

My Story - Part 1

Eight years ago I filed for personal bankruptcy.

The summer of 1997 was the final chapter in what had been a long, slow decent into a financial abyss. I had made a lot of stupid financial and personal mistakes, any one from which could have been recoverable, but as a sum total became completely overwhelming. My seemingly-endless mistakes included marrying and subsequently divorcing the wrong person, buying a mobile home (instead of real estate), and investing a small inheritance I received in 1989 into a business that ultimately failed. My problems were further compounded by the fact that despite having a supposedly "marketable" Bachelor's degree in Computer Information Systems, I was chronically underearning. During my worst earning year, which was in the middle of the tech boom days, I earned a paltry $8,000.

About a year before I started contemplating bankruptcy, I had found a job that finally paid something. I was still being underpaid probably by $20,000/year, but it was certainly better than what I'd made during my worst year. Unfortunately, it was not enough to cover the debt service on the massive debt that I'd foolishly incurred operating my business. It was a high-tech business, with a lot of overhead, and I kept investing in it, thinking that if we just were able to get one more piece of software or tool, it would give us the competitive edge to "get over the hump." By the time I took the job, the business was failing but still open, and I was having to take $500 or more out of my paycheck pay the business' bills. At the end of the month, after everything was paid, I didn't always have enough to buy groceries...

I felt like a complete deadbeat, but couldn't see a way out of the problem. The job was 50 miles away and the two-hours-a-day commute was killing both me and my car. My life had degraded into an endless cycle of wake up, drive, work, drive, work and then crumble into bed so I could do the same thing the next day. During evenings and weekends, I worked as much as I could, trying to keep my flagging business generating at least some income so that I wouldn't have to give it my entire paycheck. Things got so desperate at one point that I had to call my father to buy some groceries because I didn't have enough to eat.

One by one, I started calling creditors to see if they could do anything to help me. Could they lower my monthly payment, or drop the interest rate? The mortgage on my mobile home (which by then had depreciated to the point where it was worth about $40-50,000 less than what was owed on the loan) plus the space rent was whopping $1,200 a month. I'd hoped that the bank would be willing to drop the almost 14% interest rate to something a little more reasonable. I was willing to pay everything I owed, I explained, but I simply wasn't earning enough money to cover it all. Even the mobile home park made my troubles worse because they required the homes be owner-occupied, so renting out the house (or even a room) was against the rules. Everywhere I turned for help, the answer was a resounding "NO!"

If' I'd managed to get a break somewhere, I might have been able to avoid filing. If the park manager would have allowed me to rent out the house, if the bank had been willing to drop the interest rate, if the housing market hadn't have gone so soft so that I could sell the home for what I owed, or if my boss would have given me a raise even close to market rates, I might have been able to turn things around.

After getting no help from my creditors, I consulted with two attorneys, a CPA and a financial planner. All of them said the same thing, "You would be foolish not to file bankruptcy." In July of 1997 I found a bankruptcy attorney, and by that September my petition had been filed. The worst day of that period was the day of my bankruptcy hearing. My bankruptcy filing was one of the largest they had ever seen, because I had listed some 1,200 customers that were receiving services from my business. The trustee accused me of deliberately ripping off my customers. "Take their money and file for bankruptcy," he said loudly. It was all I could do to hold back tears. Afterwards, I had to go back to work and pretend nothing had happened.

As part of the bankruptcy proceedings, I surrendered my mobile home. I'd tried to give it back to my ex, since it had been awarded to me in our divorce, but that didn't work out. The ex told me the house was my problem, so I gave it back to the bank. With ruined credit and two pets, I couldn't rent an apartment. In November 1997, I moved most of my possessions into storage, and moved into a beat-up 18' travel trailer that I'd bought for camping several years before.

The last night in my house I slept on the floor. All the furniture had been moved out, and I had nowhere else to go. The next morning, I climbed into my truck and trailer with my cat and dog and headed out into world of semi-homelessness. As I pulled away from my house for the last time, I felt both a huge sense of relief and regret. I wondered what would happen next...