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For those buried in debt, bankruptcy is a lifeline

September 12, 2010|By ARNOLD PLATOU

o Creditors lose when customers file bankruptcy

o Bankruptcy filings continue to rise

Together 18 years, the Hagerstown man and his wife were working full time and paying their bills when the bottom began to fall out.

First, his hours at a local auto business were cut as the recession hit. Then her boss stopped paying for health insurance and, as the secretary's medical needs grew, she had to pay the entire premium of $200 a month.

And, for the first time, "we had to begin deciding which bills to pay. Utilities, they always get paid. Credit cards, you get far behind, you can't catch up," the woman said.

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Across town, the same sorts of troubles were building up for a 58-year-old trucker and his wife, 55, who does not work outside the home.

They, like an increasing number of area couples, began considering filing for bankruptcy relief.

"It's very depressing," the trucker's wife said last month.

She said it helped to know she and her husband weren't the only ones facing tough times.

"I know I'm not alone. There's millions and millions of people out there that's probably in worse shape than myself. I've had a lot of friends evicted from homes because they couldn't afford to pay their rent."

The Herald-Mail is withholding the names of the couples interviewed for this story to protect their privacy.

'The only way'



Three years ago, the trucker and his wife bought their first house, a modest three-bedroom Cape Cod on a corner lot with a fenced-in yard.

That was in 2007, just before the nation's recession officially began.

In Washington County, the housing market had plummeted from 2005's dizzying height. With more and more houses waiting to be sold, prices fell as much as 39 percent below their year-ago levels.

That was great news for the trucker and his wife, who will have been married 39 years in December.

To get them to buy, the house's owners put in $23,000 toward the deal, reducing the price to $158,000.

Sweeter still for the buyers was that one of their sons agreed to go halves on the purchase. Every month, he paid half the mortgage and they paid half.

But as the recession deepened, the trucking business slowed and though he went from employer to employer to employer, the father soon was working only 24 hours a week, down from the 40 hours a week he'd been putting in when they bought the house.

That's what his wife calls "strike one" in their financial downfall.

Strike two was when their son lost his job, and his parents were suddenly saddled with the entire mortgage.

Strike three came when a boarder they'd taken in to make extra money lost his job, too, she said.

"So it's been three strikes and it's just time" to move on, she said. Using their income tax refund, they hired a lawyer to file for bankruptcy relief, agreeing even to give up their house.

"Way I'm told, we owe about $174,000 and the value (of the house) is like $114,000 to $117,000. So if it's sold at real estate auction, you know it's not going to bring the $174,000. In this neighborhood, be lucky if (it) brought $100,000. And, whatever this house sells for, we would still be liable" for the difference between the selling price and what's owed, she said.

"Did I want to file bankruptcy? No. Did I want to skip out on these bills? No. Filing the bankruptcy was the only way we could see daylight."

A new beginning



For the secretary and her husband, both of whom are 49, finances didn't seem to be a big problem until about a year ago.

With the recession, work in the car business had begun to slacken in 2008, the wife said, and as that happened, her husband's boss assigned him fewer hours.

By last summer, with her now having to pay for health insurance, money was getting tight. Needing surgeries, she had to pay the deductible, too, she said.

Their main priority was to keep paying on time for the house, a rancher where they raised their children after moving into it in 1996. It is the first house for them both.

"His income was dropping and we had to make sure we made our mortgage payment. I was taking the credit cards and trying to pay the bills," she said.

"It wasn't like taking the credit cards and buying new furniture. It was like buying the groceries. It wasn't paying (for) extravagant things," she said. "We didn't want to borrow money from family or friends. We got ourselves into this mess."

As debts mounted, the couple struggled to find answers other than bankruptcy.

"We battled back and forth: 'What do we do? We have to pay our mortgage payment. We have to pay our lights 'cause we have grandchildren come to visit,'" she said.

"We had to try to figure out what to cut back," she said. "I even cut my newspaper down to one day a week."

"I mean, you try to think what you can cut back on. ... I mean, we didn't go on vacation this year. First time in 18 years, we didn't go on vacation. We just knew we couldn't afford that."

The pain of filing for bankruptcy relief is compounded by the guilt of not paying for services received, she said.

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