I received the following email from one of our site follower friends.
Thank you Lisa for the update and sharing your opinions, experience and inisght.
I just wanted to say thank you for being there and for this blog.
Last year I was laid off. My husband is on SSDI permanently and I knew that in this economy, if I was lucky enough to find a new job, I would most likely take a substantial pay cut. That is what happened. In a way, I was lucky. I had several months advance notice of my layoff and was able to use most of that time on my job search, as my former company had been acquired and there was not much to do at work anyway. I also received a generous separation package, which helped a great deal. However, after a months long search, my only offer came at a salary reduction from my previous position of almost $20K per year. We had been in so much credit card debt for so long that by the time I was laid off we had more going out to make minimum payments than was coming in and I was juggling credit cards to buy basics like gas and groceries.
I looked into debt consolidation initially and the representative of that industry answered my questions thoroughly and, I believe honestly. After careful consideration, we decided that debt consolidation was not the way to go, primarily because of the uncertainty of the outcome. I was very uncomfortable with the fact that it’s not a well-regulated industry, that my creditors did not have to accept or could change the terms of the agreement and that it could take several years – or never – to fully resolve our debt. With my greatly reduced income and the small amount we receive from SSDI, I doubt we could have made minimum payments under a consolidation plan anyway.
Bankruptcy seemed the obvious answer. We spoke to three different lawyers before we found one we were confident with. His fee was a little on the high side – $2000 – but once we retained him, he took care of everything and his fee included everything, i.e., the filing, the two credit counseling courses (he filled in the dollar amounts of our debt on the one that required that information, I think it was the 2nd one) and his appearance at the creditor meeting. So I think his fee was more than fair, and from being in his office, I can tell you, he’s not getting rich, at least he’s not spending his client’s money on a swanky office.
Anyway, I just wanted to add my 2 cents – it’s all we have left, but at least we don’t owe it to anybody! – and say thank you again for the moral support and words of experience and kindness as we began this journey.
For anyone out there considering their options in coping with overwhelming debt, if you are in a similar position as us – mountains of unsecured debt and no way to every realistically pay it off – I would say speaking to a qualified bankruptcy attorney is a vital first step. You may not decide to go that way or you may not qualify, as bk laws have greatly restricted access since they were changed in 2005, but any reputable attorney should give you a consultation for free.
And if you have moral qualms about walking away from your debt, consider this: unsecured debt is a bet that the banks make. They make money from lending money, sometimes at exorbitent interest rates (on a side note, our case was discharged last month and immediately I started receiving credit card solicitations that explicitly acknowledged our bankruptcy, but still make “pre-approved” offers, which I instantly rip up.
One card’s rate was $54.9%!! How is that even legal?!) This may be a bit of a rationalization, but debt is a two way street. Banks get tax write offs for uncollectable debt and bailouts from the government. The financial sector is the one industry that is thriving in this economy and the recent financial reform bill really only amounted to a slap on the wrist.
So temper your guilt and move forward. Remember that bankruptcy laws don’t look at how much you owe, only in what form (unsecured; taxes and student loans are excluded, as are certain other types of debt, like alimony, child support and court judgments) and your ability to repay.
It’s crazy to keep pouring money down a rathole and never have anything left at the end of the month, much less any ability to save for emergencies or the future. The banks will survive without you, you should be able to say the same.