Day 5 of Katy Widrick’s blogging challenge is “share a time when you felt defeated, and what happened next”. This is an easy post, because it falls in line with one of my themes: financial distress. Particularly, the time that I filed for bankruptcy!
I had always had a serious problem with money- as in I spent too much of it! Growing up, my family was pretty poor and did not have money for frivolousness. I could not wait to secure a real job! I was 15 (almost 16) when I was hired at McDonald’s. I was not able to work until I turned 16, but I was so excited! As soon as I began working, I also began spending.
This habit continued into my adult life. I would make money, and immediately spend it. The process of buying the things that I wanted fascinated me! By the time I turned 18, I got my first credit card! I really went crazy then! And I kept going crazy until I had my first child and no longer worked. Those credit card bills ended up going to collections accounts.
A Whole ‘Nother Level
While I had gotten myself into small trouble with money when I was younger, nothing could prepare me for the future. My husband and I had been married for about 7 years when things really started picking up for us. He had a pretty good job. I began teaching, and making more money. We purchased new vehicles, and ended up with 3 car payments. This is on top of some of the finance company bills that we had. But we were making around $80,000 per year- we could handle it!
We thought we were on top of the world- until all of a sudden we were not! One day, my husband came home from work and said “I think my company is in trouble.” By the end of that week, he had been laid off and his company was shut down. I don’t think I mentioned that I was pregnant with our 3rd child at this time, and had not been at my job long enough for maternity leave.
We had done some planning to sustain us while I was out of work with the baby, but we were completely unprepared for the loss of an income! My husband received unemployment payments, but it was a drop in the bucket compared to our expenses.
So what did we do? What any other money fools would have done- we went into more debt! Whenever we were short for cash (which was all of the time), we borrowed more money! We were so far in debt, that banks (and any other smart financial institution) would not lend us money. We made yet another foolish choice- payday loans and title loans.
This may have been one of the worst decisions yet! We ended up borrowing money from places like Plain Green and Great Plains Loans. These institutions are payday loans, and they deduct money from your account every payday. They also have an interest rate of about 100%! These places and title loans were what finally put us out of our misery.
By put us out of our misery, I mean completely broke us down! We got to a place where we were not even able to pay our rent! Our bank account was so far in the negative that we really felt like we could never climb out from under it. That is when we made the decision to file for bankruptcy.
Now, we were not cured from being financial fools overnight, so even our bankruptcy was flawed. Our lawyer advised us multiple times to get rid of one of our cars and file chapter 7 (where most of your unsecured debt is wiped out). We were so attached to that 3rd car, that we kept it and filed chapter 13 (which requires you pay back each month for a specified time). Our payment for the bankruptcy was $1450 each month, and this was before rent and utilities were considered.
We thought that we could handle the payment because my husband was working again. We had a plan. But it quickly became evident that our plan would not work. We had to move out of our home, and back in with parents. This gave us some breathing room with the payment, but it still was not easy.
What Happened Next?
I would love to say that we lived happily ever after, but that is not true. My husband and I were uncomfortable living with each others parents, so I lived with my Dad and he lived with his parents. My children stayed with me, but constantly begged to stay with my In-Laws. This ended up being a very rocky patch in our family life- it almost tore my family apart. By this time, I was feeling completely defeated.
Once we had our financial bearings back, we were able to move back into a place of our own. We also decided to default the bankruptcy status, and take on our debtors ourselves. While we are still working on them, we are definitely further ahead than we once were.
I greatly regret how stupid we were with our money and have made it my goal to never be that way again by committing to becoming debt free. I also plan to have a spot on this blog that helps people avoid these major financial pits that I once walked into.