I grew up in a pretty normal middle class family. I knew we weren’t rich by any means, but we had a great life. My Dad was a teacher, who then quit to start his own company with my Grandfather. My Mom stayed at home with the five of us kids. We had a few farm animals and wore a combination of new and used clothing. We spent summers in my Grandparents’ pool and vacationed at my other Grandparents’ condo in Florida. A couple of my sisters were foreign exchange students; I took a trip to an acting convention in New York. Through all of that privilege (because I see it a little clearer as an adult), I admit that I thought bankruptcy was a bad word: an option for lazy people who chose to spend and spend, and then get out of their debt for free. I judged people when I heard the word “bankruptcy.”
Well, life has a funny way of humbling you, doesn’t it? My husband and I filed for bankruptcy in 2012. Here’s our story.
The year was 2008. We had just welcomed our second child, a daughter who was an emergency c-section and was born blue. Because of the time she went without breathing, she was put in the NICU. That week or so in our lives is a bit of a blur to me now, but it was the greatest stressor we have ever encountered. The best news is that after a week, she was discharged with a miraculously clean bill of health!
The bad news is that we learned how bad our health insurance really was when we started receiving large hospital bills almost the same day we got home. The NICU is a wonderful place that saves babies, and you can’t put a price on anyone saving your baby’s life. But that doesn’t mean you just magically have the money to pay those bills either. When I called to negotiate payments, they said if we could pay them in full, we could get a discount, so we put several on credit cards. We still had bills left even after we maxed out our cards.
During that time, I stayed home with our (now two) children while my husband went to work. He had been with his employer for four years and had received a promotion. We were doing ok financially. We had bought a small house from HUD and spent a few months fixing it up. I dressed our kids in garage sale finds and was careful with our grocery budget. We were happy.
Then came the financial crash.
At first it didn’t affect us too much, but then my husband’s employer cut everyone’s hours down to 32 per week in order to stay afloat without letting anyone go. We didn’t blame them for this decision, but my husband had routinely worked about 60 hours per week in order to keep his two departments running smoothly. With his overtime pay gone, we lost almost 50% of our income overnight! Besides freaking out a little bit, we immediately tried to cut our budget however we could, but there wasn’t much “fat” to trim. We slowly started relying on credit cards more and more for everyday necessities like groceries. It became obvious that we needed more income, and fast. I set up babysitting with family members a few days each week where I could, found a babysitter we trusted with our babies for the other days, and started applying for jobs. I was amazingly lucky and got hired as a secretary at our local university. It turned out to be a job I really enjoyed and my coworkers were great people.
We tried to sell our house, but the market was awful and the offers we got wouldn’t even cover our mortgage and equity line. We moved out anyway and rented our house to try to cover some of our bills. My parents had just downsized and hadn’t sold their house yet, so they helped us by letting us move in and just cover insurance and taxes as our rent. That and my new job, and it seemed like we’d slowly be able to dig ourselves out of debt. I worked there for two and a half years and we made a tiny bit of headway with our debt.
But then my family members also had to return to work, our car that we had just paid off was totaled, our well pump at the “new” house broke, and childcare was costing everything I made at work anyway. We cut down to one car and I returned home with our kids. Renting our house turned out to be a really big mistake, as our tenant trashed our house and then disappeared with our appliances. We could no longer make our payments and we were in trouble. It was the last straw. I called a bankruptcy attorney to see what he thought of our situation. After hearing our story, he recommended that we come see him immediately. It was late 2011 by this point, and we managed to use our tax return in February of 2012 to pay our attorney’s fee and cover the bankruptcy filing costs.
Together with our attorney, we decided that we would need to foreclose on the house we had rented out and file chapter 13 bankruptcy for our other debt. We had to take personal finance classes and be very transparent with our income and debt payments. For instance, in order to continue being patients at our pediatrician and dentist, we had to be sure to pay those bills and not have them forwarded to our lawyer in the mix. We went to court and the judge granted our bankruptcy on June 1, 2012. We were “debt free” and could start rebuilding our life.
This June will be 10 years since we filed. We have spent a decade rebuilding our credit and being very careful about credit usage, but it was necessary to apply for new credit cards etc. to continue helping our credit score improve. For almost 10 years, we have made 100% of our payments on time, been exceedingly careful about applying for credit, and prioritized saving over spending. And we still have a “high impact” derogatory mark on our credit. When credit monitoring sites tell you a bankruptcy can stay on your record “7-10 years,” they mean it.
We are both looking forward to June, when we expect the bankruptcy to finally disappear for good. We have learned so much about making smart financial decisions like saving for a rainy day. We have a blooming 401k, a savings account, and a 15-year mortgage on our house now. We also know that money is not worth fighting over in our marriage. I am actually thankful that we can say we’ve hit rock bottom financially and lived to tell the tale.