Wendi blogs at Sudden Silence. Her story is ongoing and will be updated when updates are available.
We walked in to the Making Home Affordable seminar with high hopes. Arriving just after it opened at 1 pm, we signed in and took a seat to wait for a rep from our mortgage provider, CitiBank. As we waited, a video clip played over and over. We listened to homeowners who had received mortgage assistance last year at this seminar talk about what a relief it was, how important it was to save your home and not let it go into foreclosure. The various options were described (modification, interest rate reduction, principal write-down) and the basic message was: You did the right thing by coming here and talking to your lender, because now they can help you. There’s help for everyone if you just ask!
After waiting for over three and a half hours while other people with other lenders were taken back within five minutes of sitting down, we were finally called to meet with our rep. (Apparently computer trouble was the reason for the horrible delay.) We had every document required; we had every form on the website downloaded and filled out…all nine pages of information. I was feeling unexpectedly hopeful after listening to the video clip for over three hours. I should have known better.
We sat down and explained that nearly half of our mortgage was currently being paid by the Illinois Hardest Hit Fund, and that agreement was ending in July of this year. We were hoping to get a permanent modification similar to what we had from HHF (Hardest Hit Fund) – where you pay 31% of your monthly income instead of your full mortgage payment. We had been doing this for over a year and getting by okay, but we would not be able to handle the full mortgage come August. We hoped that our track record of 100% on-time payments on all of our debts would work in our favor.
What Do You Do When You’re Only Offered A Bad Deal?
As the rep asked questions that we had already answered on the documents we’d filled out (which were apparently unnecessary), he scrolled through screens and eventually mumbled that he could offer us a 3.5% interest rate. We’d already explained that we weren’t interested in an interest rate reduction; our rate is currently a low 4.5% already, and a drop of 1% would barely make a dent in our monthly mortgage payment. He was apologetic, but said we didn’t qualify for any other programs because we have a VA loan, and they don’t participate in principal reduction plans. Within 15 minutes of sitting down, we were done. We got up, shook the rep’s hand and left.
We tried to salvage the waste of an afternoon by reasoning that at least we had done what they recommended, and we had tried everything. We got the information we needed, just not the result that we wanted. I hadn’t gone into the seminar with high hopes, but I had gotten progressively excited as we waited. It was very, very hard to leave there knowing we were still facing August with no plan in place. I had to fight back tears as we silently walked the long, long path back to the parking garage.
This was Thursday, and I really needed the weekend to recover from the disappointment. I was trying not to panic, trying to really believe things would work out and that whatever happened was meant to happen. I really, really like having a safety net, though, a Plan B. I felt so vulnerable and unsure of what our next move should be. I really didn’t want to foreclose on the house, even though we’d met with a Realtor the previous month and she’d told us we could not sell the house for anywhere near what we needed to pay off the mortgage. The real estate market in our area of Illinois is still very depressed, and we have lots of houses either in foreclosure or short sale that are killing the value of the surrounding homes. It was so frustrating – we want to move and sell the house and do the right thing…pay off our mortgage and other bills, then downsize to a smaller house in a more affordable area. But no matter what we do, it just will not come together. Everything we try seems to fall apart.
Maybe A Lawyer Could Offer Some Solid Assistance
Dave had made an appointment for Monday afternoon with a bankruptcy attorney. I knew we’d have to file bankruptcy at some point, since the housing market was so terrible. Our original plan, back when our house was valued at over $270,000, was to get the kids both through high school and into college, then sell the house, pay off all our debt, and move to a smaller place. Now, we couldn’t even sell the house at a price high enough to pay off the mortgage; there was no way we could pay off our credit card debt, which had grown to an enormous amount over the past 11 years.
I went into this meeting with a very downbeat attitude. I expected to find out that we didn’t qualify for bankruptcy or hear some other hope-dashing announcement. I was hoping to be able to wipe out the credit card debt but keep the house. As it stood, we could afford to either pay the credit card minimums or pay the mortgage, but not both. I figured if we wiped out the credit card debt and kept the house, maybe the market would rebound in the next year and we could sell it for enough to pay off the mortgage.
So we met with the lawyer, and he confirmed that we could file for bankruptcy with no problem. We talked some more about our long term goals and he pointed out that we really would probably need much more time, possibly 10 years, before we could sell the house for what we needed to get. I kind of knew my idea wasn’t realistic, but it was different hearing it put so plainly. So we talked about the ramifications of including the mortgage in the bankruptcy. Even though it seemed like a fairly obvious course of action, I needed some time to digest this new information and decide if it felt like the right move.
By the time we left the lawyer’s office, I pretty much knew that I was on board with including the mortgage in the bankruptcy. And as some time passed and I thought about it more, I could feel a huge weight lifting off my shoulders. There were so many things connected to selling the house that were worrisome to me – passing the two inspections (one required by the village, one for the buyer) and how we would afford to make any repairs that were required; all the stress involved in having the house for sale and showings and worrying if we’d ever get an offer on the house that was enough to even pay off the mortgage, let alone pay for the closing costs and leave us with enough to buy another house; all the improvements we still needed to do just to list the house and even have a prayer of getting within $10,000 of the amount we needed to pay off the mortgage. After that visit from the Realtor in March, I really was not feeling confident that we’d ever sell the house because she seemed to think a LOT of improvements would need to be made before we could list. Here I was, thinking the house was really in good shape and looked good enough to list just as it was!
My main concern with giving up the house was finding another place to live. I felt like we could never qualify even to RENT a place with a bankruptcy on our record and the subsequent hit our credit score would take. (For the record, as of June 2013 my credit score was 749, which is fairly decent.) I was under the impression that as soon as the bankruptcy was filed, that meant we stopped paying on the credit cards (thank God) but also that we would have to leave the house and immediately find a new place to live…a place that would allow us to bring our four cats.
The lawyer explained that that’s not how it works. The foreclosure has to go through the courts, and right now that’s taking 18 months. As he said, “You stay in your house for 18 months and you save the money you would have paid on your mortgage. (Note: For us, that’s $1,500 per month.) When you do have to leave, you’re leaving with enough money to put down six months’ rent or a big down payment on another place. With so many people filing bankruptcy, they will most likely understand your circumstances.” Our goal all along had been to find a place in Michigan that we could buy on land contract, which is like a rent-to-own situation. We could put enough down that we wouldn’t need to make payments for very long, and we don’t have to secure a mortgage through a bank (something we most likely would not be able to qualify for).
Uncertainty Eats Away At Hope No Matter How Prepared You Are
There’s still some uncertainty that makes me nervous, since there’s no guarantee exactly how long we can stay and, therefore, how much money we can ultimately save. I really don’t want to be in a position where they’re dragging us out of the house and we have no place to go – I’d like some warning, so we have enough time to find a new place and get moved. But that’s less stress than the stress that would be involved in trying to sell the house in this terrible real estate market, AND find a new place to live with pretty much no money down. So I’m going for the lesser of two evils.
I’m writing this over time, adding on as things progress. It’s now the second week of June and we’ve given the lawyer the retainer fee and the paperwork he needed, and we’ve taken the online Debtor’s Education class that we’re required to take. That was a hoot and a holler, and deserves its own special section!
The first thing that I found amusing was that you have to pay for the online class…with a credit card. Which is one of the main things that got us in trouble in the first place! We aren’t using credit cards anymore, and we had to come up with a way to pay for this class. Thank God for PayPal; I was able to use our PayPal debit card for the payment, since it’s a MasterCard. (I don’t let PayPal pull from our checking account to cover debit card transactions; if the money isn’t already in our PayPal account, the transaction won’t be approved. I prefer the extra security in case someone nefarious gets a hold of the number.)
Once we figured out the payment issue, we settled in to take the class. It was a timed class, 60 minutes, and there was a timer at the top of the screen so we could keep track of our progress. You weren’t allowed to finish the class in less time. We’re both fast readers, but we read through each screen slowly and then got up to do things around the house to kill enough time on each screen. Most of the information I already knew; we didn’t get in this situation because I’m an idiot and have no self control. I know how to save, I know the right and wrong things to do with credit cards, and I use a budget. We don’t have ANY extra expenditures. We never go out, we don’t drink or smoke, we don’t eat out, we never buy clothes (except, rarely, at Goodwill). But I went along and read the suggestions, basically just to confirm that I hadn’t missed some kind of magical way to save money that I didn’t already know about.
Along the way, we plugged in our monthly income and monthly expenditures. I didn’t bother with the credit card payments because we already knew we were filing bankruptcy and wouldn’t have to deal with those much longer. I mainly wanted a budget we could follow once the bankruptcy was filed. I did enter in the mortgage payment, just out of curiosity. Again, we knew we were giving up the house and wouldn’t be making the mortgage payment, but the amount we plan to save is just about exactly the amount of the mortgage payment. I wanted to see if that was something we could really handle financially.
Saving Money By Doing Everything You Were Already Doing
As we went along, the class gave us suggestions on ways to save money, all of which we were already doing. But I was surprised at how little advice we really got; there are many things we did to save money that were never suggested in the class (increasing deductibles on home and auto insurance comes to mind). In fact, the main thing the class advised was to get a second job. This advice was given to those who had already lost their ONE job and couldn’t find another. Just get a second job! Everything will be fine!
It got to the point where Dave and I were just laughing out loud at each new screen, as the timer counted down. I suppose this would be a helpful class for someone who was absolutely clueless, but for two intelligent adults, it was really a waste of time (and money). We learned nothing, except that our mortgage should only be 30% of our income and ours is currently over 80% of our income. All it did was solidify our decision to let the house go, save our money until we absolutely have to leave, then find a more affordable place to live.
At this point, we’ve received the bankruptcy papers and had to go over them to verify all the information and make sure nothing was left out. This was my job, and it was very hard for me – I was in the throes of monthly hormonal turmoil, which didn’t help. I basically sat in front of the computer, reading along with tears dripping down my face as I silently sobbed. I know this is the best move for us; really, it’s the only move for us that makes any sense. I know this. It was still very hard to see it all laid out in black and white. It makes me feel like a complete failure. Dave keeps telling me to look at it as a business decision and to keep emotion out of it. I know he’s right. I just can’t help myself; it feels like I’m getting a big fat F in ‘Life.’
Cut to July 13
We are officially filed, as of June 30. It took a while to get the official document in the mail (which contained our case number). Then things started rolling along briskly. Bank of America canceled our cards, as well as American Express (which is pretty funny, considering we had a ZERO balance on that account). We also started getting lots of offers for car loans in the mail, for people with ‘credit problems’ and things of that nature. The sharks start circling pretty quickly, don’t they?!
We were surprised and happy to see our creditors’ meeting is July 23, just a couple of weeks away. I’m a little nervous about this, just because, not for any specific reason. It should be short and painless, though. After that we wait; creditors have 60 days to dispute things in that time period. After that, we should get a notice that the bankruptcy has been discharged, providing nothing crops up to screw with the process.
We had to take a second and final debtor’s education class online within a month of the filing date, so we decided to get that out of the way quickly before we forgot. Again, it was $9.95 with payment method via credit card which just seems ridiculous when they know you’ve filed bankruptcy. (We used the PayPal debit card again.) We figured this class would be an hour long like the first class, but no – it was TWO HOURS long. Still, though, if I have to waste two hours of my life I’d rather do it at home than in some class at a physical location with other people.
I was sort of looking forward to this class, since it was meant only for people who’d filed bankruptcy. I thought we’d find out what to expect in the bankruptcy process, maybe learn some ways to help repair our credit, or at least find out how it would affect things for us in the future. But no…instead, we sat through two hours of the same unhelpful ‘budget advice’ from the first session. We couldn’t believe it! Parts of it were even exactly the same as the first session.
When we realized what we were in for, we knew we’d be killing LOTS of time to make this last for two hours. I don’t understand how they expect people to take two hours to read through this material; we could have done the whole class in 30-45 minutes easily. It’s timed, though, and you can’t finish with any time left on the timer. We ended up turning it into an exercise class; we would read the screen, get up and jog around the house a few times. For every screen, we did something after we finished reading: calisthenics, jogging, walking, check the mail, go to the bathroom, check on the garden. It was really silly but it was the only way to kill two hours on a class that you could finish in a quarter of that time.
So we finished, got our certificates, and then we had to rate the class. Now, you have to understand that the class was not helpful AT ALL. I mean, the budget advice was condescending and didn’t apply to us at all; I am the queen of budgeting. What got us in this mess was mostly the horrific real estate market in our area, since we aren’t able to sell our house to pay off the debts like we planned to. Of course, living off the credit cards didn’t help but I also didn’t plan to go deaf and incur huge medical bills, and we never planned for our business to take a nosedive after Google changed its algorithms a few years back. It all mushroomed from there. But yes, I know how to live on a VERY tight budget and we were doing things way beyond what the class was teaching. We certainly didn’t get into this situation by buying designer clothes and Caramel Macchiatos all the time.
I wanted to be honest but Dave refused; he didn’t want it to jeopardize anything. So he gave the class high marks across the board while I sighed in disgust. I guess I could see it being helpful for someone very young, just starting out in life and basically clueless, but I think most adults already know this information. Who knows, though? Maybe other people find the classes immensely helpful. All I can say is, thanks to the class I got a nice workout that day. *rimshot*
Get Me To The Judicial Building On Time
Skipping ahead to the last week of July here, and our 341 Meeting of Creditors is now behind us. Even though I’d read over and over that this was nothing to worry about, and I hadn’t really been worrying about it (just a little anxious when I thought of it), I found myself seriously nervous the day before and in the hours leading up to the meeting. I just felt that if anything was going to go wrong here, it would happen to us. I mean, all over the US we’re hearing about real estate booming back and people selling their houses right away, and for us it is the worst it’s ever been, with no chance of our house selling for near what it’s worth. So I figured even though nobody else ever has any creditors show up at this meeting, they would be there for ours.
We got to the judicial building with plenty of time to spare, went through security and up to the second floor to look for the room we needed. We walked past a man in a little cubicle area and Dave stopped, backed up, and asked, “David?” To my surprise, the man nodded and stepped forward to shake Dave’s hand. I had no idea what he looked like; we met with Stuart initially and never saw his partner. I found out later that Dave had seen his photo on their website. Smart!
He asked if we had any questions, and my only real question was about the mortgage. For whatever reason, on our bankruptcy filing they had checked off that we were interested in a loan modification for the mortgage. This really baffled me, but I figured it was a way to drag out the foreclosure and give us more time in the house; the lawyers did know that we planned to include the house in the bankruptcy and not reaffirm the mortgage.
Because of that checked box, the mortgage company had been contacting us (with Dave’s approval) to try to get information for a loan modification. (Which cracks me up, by the way, considering that we ALREADY DID THIS, YOU IDIOTS…don’t they keep any of the copious paperwork they make us fill out?!) So I asked the lawyer if we should be doing anything regarding these attempts at contact – was it okay to ignore them or were we supposed to be playing along and acting like we wanted to try (AGAIN) for a modification? He confirmed that if we weren’t planning to keep the house, we should just ignore these attempts at contact.
He went off to meet with a couple other clients who were waiting, along with us, in the hallway. Things were behind, so we spent about 30-35 minutes sitting on a bench. I eyeballed everyone who came down the corridor, trying to see if they looked like a Creditor who might possibly be arriving for our meeting. Luckily nobody seemed to fit the bill, and when our name was called (‘KAST!’) we were the only ones who walked into the room, other than our lawyer.
The room was small, with a basic table and a few chairs. A woman sat behind the table with a laptop, and a younger girl (assistant? trainee?) sat next to her, silently. We took a seat, took an oath that what we declared on the bankruptcy papers was true, and then answered the questions that were quickly volleyed our way. No, we didn’t have valuable jewelry or coins, no stocks or bonds (other than my meager IRA CD), nobody had died and left us money. I explained about my failing candle business. We confirmed the general value of the house and what was owed (although Dave said I heard incorrectly and told her what the house had been valued at, $150,000, was what we still owed on the mortgage; we really owe more like $160,000). Even with my little screw-up, the questions went by quickly and less than 10 minutes had gone by before the trustee said, “Okay folks, I’m finding No Assets. Thank you and have a good day.”
As we left the room, David told us that we’d be getting a letter in about 60 days telling us that our discharge was final. He said we probably wouldn’t be hearing very much from them in the meantime. Now, I know that during these 60 days our creditors can object to the discharge, so I won’t breathe easy until we get the official letter. David’s attitude gave me the feeling that objections don’t happen very often and that they don’t expect anything to happen in our case. Hopefully that’s true!
As of this date, we’ve gotten letters from American Express and Bank of America canceling our accounts. Every day we get more offers for car loans. I checked online, and our Chase and Discover accounts appear to be canceled even though they didn’t notify us. Of all those accounts, only American Express had a zero balance so I expected the accounts to be canceled. Out of curiosity, I checked today to see if I still had access to my Kohl’s account, which had a zero balance when we filed for bankruptcy. It’s still there and I still have access. It will be interesting to see how the credit card accounts play out when the discharge is final.
Dave signed up for a Credit Karma account yesterday and it shows the bankruptcy (called a Derogatory Mark). Even with that, his credit score with TransUnion is 710 right now. We’ll keep an eye on our credit scores over the next year, obviously.
No mention was made of the Parent Plus loan, which we’re due to begin paying back in November. I know student loans aren’t included in bankruptcies and Stuart said they are only discharged in rare instances, so I expect to be paying it back. It will be a good way to rebuild credit. But I can’t lie … if we found out it had been discharged, I would be pretty happy!
The bankruptcy is discharged! Now we just have to make sure we don’t win the lottery or come into some money (an unknown rich relative dies and leaves their estate to us) for the next six months.
We consider the credit cards to all be canceled, which is fine. A couple show up as still active (Sears, Kohls) on credit reports, but my online access is gone so I cut up the cards. The Parent Plus Loan is still there (sigh) but the $50/month payment is doable.
We decided to apply for secured credit cards, because having NO credit cards is really a pain. We don’t plan to charge them up, but it’s nice to have a credit card number for places that require one. Dave got a $200 secured Capital One card with an $80 deposit. I tried for an unsecured Capital One card and was approved (!) with a $3,000 limit. Color us shocked!
We are now free and clear from the bankruptcy; those unknown rich relatives can bestow their riches upon us left and right. The few things we’ve been charging on the credit cards (mainly the monthly TiVo bill of $7.95 and random things that we can’t pay for with PayPal) are paid off in full. It feels so weird to have no debt beyond food, utilities and car insurance.
The car has acted up twice since we filed bankruptcy – it figures. In July we had to fix the AC to the tune of $700, and this month a cable for about $200. We also had to replace tires and wheels in January, so that took another $450. Since we paid cash for all the repairs, it cut back on our monthly savings. In the months that have no big setbacks, we’ve been able to save between $1,000 and $1,300. We live very frugally, trying to save every penny to put down on a new place to live.
Dave is watching houses in Michigan, many of which can be had for under $50,000. We can’t qualify for a traditional mortgage, so it will be renting or (ideally) a land contract for us. We aren’t sure we’ll be able to rent because of our four cats (we refuse to give them up). That’s probably my biggest worry right now – will we find a house on land contract? It’s not like we can just rent an apartment in the meantime; I think it will be very hard to find a place to rent that will accept cats, especially since they aren’t declawed.
The next step is a trip to Michigan in May, to check out the towns we’re interested in and hopefully find a realtor we can work with.
Right now we feel like we are in limbo, just biding our time. I’m no longer worried that the Sheriff will knock on the door and drag us out of the house; I finally realize that so much has to happen before it reaches that point (plus, they try to avoid scenarios like that because it looks bad and costs the mortgage company money). But I am itching to have this all behind us, to know where we’re going to land.
If you remember, we stopped paying the mortgage in July 2013. We got the actual Notice of Default in Jan. 2014. Everyone in IL seems to get about 2 years from the NOD before they get an auction date, so we assumed it would be the case for us too. We were planning to look for a place in Michigan in early spring of 2015.
Luckily, my husband was checking the DuPage County foreclosure auction website every day, just to be safe. And on June 6th, he found our name on the list with an auction date of August 12, 2014. !!!! (And, BTW, as of today we still don’t have an official notice from the mortgage company or anything — I think they will wait until August 12, and then give us a notice saying we have 30 days to move. Nice, huh?!)
Let’s just say that I became hysterical. That’s putting it mildly.
We’ve been saving, but didn’t have near as much as we planned to have. On top of that, we have pets (cats) and a bankruptcy, which makes renting in a complex basically impossible. All the cute, cheap little land contract homes in MI suddenly disappeared. We had NO IDEA where we could move.
We spent some time looking at super-cheap mobile homes ($5,000 to $8,000) that we could buy, since we did have that much saved. Lot rent in that area of Michigan is around $350-$400/mo. so I figured I could keep saving if our housing was that cheap. It was so depressing, though — either the mobile home was really trashy, or the park it was in was trashy, or both. I was crying every day, it was so depressing and scary.
Finally we started looking for houses to rent. We didn’t think we could find one that would allow the cats but we figured we’d try. I’ll spare you all the details, but on Monday we went to see a place about 2 hours away in Michigan. It’s tiny (the two bedrooms are 9.8 x 9) but in great shape, on an acre of land, has a full unfinished basement so we can store all the furniture that doesn’t fit upstairs, and we can bring the cats. We had to wait a nerve-wracking 24 hours for her to show the house to 4 other people and then decide who was going to get it (yikes!) but we found out yesterday that she picked us. I am afraid to consider it a done deal until the lease is signed (hopefully we’ll get it later this week).
I can’t wait to get moved and put this all behind us. I’m ready for downsized living, to be honest. And I really, really hate Citimortgage. They can kiss my ass!!
Jenny here…I know I’m really looking forward to reading the rest of Wendi’s story as it unfolds… how about you?