I would like to provide you with our hardship letter. We have suffered serious personal financial crisis, due to loss income. In July 2008, my spouse lost his job as the Director of a nonprofit organization, (85k per year plus car pmt and all medical paid, etc.), due to the many cutbacks in government funding (state, federal and local city funding sources) and the severe curtailment of fundraising opportunities from foundations, lenders and the public for our organization. With the specter of insufficient cash flow, even from the many rental properties we owned, our organization was forced to layoff staff and close the doors after 20 years of successful operation.
His job loss produced a severe loss of income which occurred right at the beginning of the national economic “crash”, but he was able to form an LLC and to secure a consultant contract with a state funded agency, which gave us steady, monthly income based on an annually renewable contract, during 2009.
Unfortunately, due to the current economic climate and cutbacks in program funding by the State of California, his annual contract was not renewed. Therefore, in August, 2009 he applied for unemployment benefits based on his prior position as an Executive Director. His last EDD check will be issued at the end of January 2011, as I will be a “99er”. My position is secure and earns $65,000 per year. I will also begin her Social Security benefits of about 1400 per month, beginning in February, 2011.
However, we believed that my spouse would find work through his new venture and that things would improve, (they did not) or that he would find a job (I have not). We have borrowed on our credit cards to the hilt and most of the larger ones have (rightly so) cut off our ability to use more of our credit lines. We have absolutely no more resources and have used up our 401 K, savings etc. Nor can we prudently borrow any additional funds, which would only serve to create additional debt. Our credit card debt is about 55,000, plus we have two car payments and a second. Our cash flow is simply way to short to pay all of the required debt each month.
Obviously, we are trying to find a way out. Unbelievably, we waited to hear from B of A over 9 months regarding our request to modify our mortgage payment. On New Year’s Eve, we FINALLY received a federal Express informing us that we did not qualify for the making Homes Affordable (federal) Program, as they could not get our mortgage payment down to 31% and still pay the investor of our loan, under the current terms of our loan. They indicated that it was going now for an in-house ‘review’ of other options, including short sale, deed in lieu, etc.
We called them right away on New years Eve, and were told that our file would be immediately be assigned to a specific specialist. We are going to contact them today, to see what they have to say. We need to tell them that we have additional income, beginning 2/1/11. Also, I may have a bit of fee income that I will realize the end of Feb, so that we can at least pay the back mortgage amts due, (we are 1 payment due and about 2200 in arrears). IF they are able to modify (reduce) our 3140 per month payment, it would be a huge relief. I am not holding my breath.
If they modify our loan, we will use some of the fee income to pay off smaller debts, and then go to Consumer Credit Counseling Agency of Orange County (CA), for a debt repayment plan. If they do not modify our loan, we think CH 13 is our only answer. We would plan to contact an attorney, and shelter (exempt from the BK), one car and our home. Does this sound like the right way to go?
Sounds like a reasonable approach but regardless of what happens on the house it seems a consultation with a local bankruptcy attorney would serve you well.
This previous article I wrote might be helpful as well. See The Honest and Unvarnished Truth About How to Get Out of Debt.
Please post your responses and follow-up messages to me on this in the comments section below.