photo: phxpma via Flickr

As we grapple with an economy that is somewhere between 15 and 25 million in deficit with jobs, the number of people that are or will be declaring bankruptcy is on the rise. In fiscal year 2008 1.25 million Americans filed for bankruptcy protections. Starting today, my wife and I will be one of the ones filing in fiscal year 2009.

It is surprisingly hard to write that. There is a stigma attached to filing bankruptcy, the assumption is you are a bad person because you entered into debts that you could not repay. Even knowing that I am not a bad person, I still feel some of that social conditioning as my little family faces its financial ruin.

Since I am a writer, I am going to write about this. This is path that I never thought I would be on, which I think is like most folks who face bankruptcy. Since there is this wall of silent shame and since there may be some of you reading this who will find themselves in the same straights, I am going detail the process and what it does to my wife and I in the course of this series.

There will be a lot of personal stuff in this series, as well as information about the bankruptcy process so I hope those reading it will bear with me. This process is not a dry clinical one like it might seem from a distance. When you are talking about admitting that you can’t pay back the people who you owe money to, well, that is a hard thing. Still this is not about sympathy, it is about letting the readers know what the process might be like if they ever wind up in a similar position.

So, let’s get started. Today Liz and I will be visiting a bankruptcy attorney. We have come to the decision that we will not be able to pay back our bills and waiting will not make things any better. One of the things that the attorney wants is a list of our debts. We have that, since we have been living with it and worrying about it for months. Since we will be telling the attorney how we got to this place I think I should detail it to you as well.

One of the quintessential American traits is hope. We bought the house we live in during the spring of 1996. It is nothing huge, but it is a three bedroom, 2 ½ bath house in what was called a “starter” neighborhood. 1400 sq feet, a small back yard and a tiny front yard. Just like a million other houses all over the country.

We refinanced a couple of times, and in 2001 took out a second mortgage which brought the total we financed up to $164,000. Since then we have not used the house as an ATM, and before the bubble burst we were ahead of the appreciation game. That is no longer the case.

Real troubles started four years ago when Liz’s boss at our local housing authority was fired. Since she was his executive assistant, she was let go as well. We were like most Americans, living right up to the edge of our means, with no savings outside of 401K plans. Still we had been making modest progress in paying down debt. We had only one car and were keeping up with our credit cards and other expenses, there just wasn’t anything left over at the end of the month. This is where the hope starts to hammer us. I had a very good and stable job, so we were not too worried. Liz had to find work, but it was not a crisis, or so we thought.

We reduced our expenses, but we even with unemployment, we were not going to stay afloat. We chose to put just a few minor things on the credit cards, you know, to keep our cash flow smooth, and keep our credit good. Liz would have a good job in a month or so and that would allow us to get ahead and pay back anything we put on the credit cards.

Well, one month turned into two, then five. We decided that we had to stop putting more debt onto our credit cards, so instead we raided Liz’s 401K. There was 16,000 dollars in there, and while we knew we were making a mistake, it seemed like the responsible thing to do. Pay your bills, pay your debts, if you have to work longer before you retire, well, then it is your own fault, right?

Liz found a job with as a temp with an engineering firm. The job was supposed to turn into a permanent one, but it did not when the contract they were expecting fell through. No ones fault, just one of those things. So, after only three months on the job, she was back on unemployment.

We continued to spend her 401K and eventually it ran out. Things were getting desperate, so she took a job at Starbucks. It was way below her normal pay, but it was enough that if we really buckled down to only necessities we could get by. That year an unexpected $14,000 dollars came in from my Dads estate. We used it to pay off our car loan and 10,000 of our credit card debit.

In the summer of that year Liz’s leg was hurting a lot. She went to the doctor and was told that she would have to have surgery on her tendon, and have it sometime in the next three weeks. This meant she would be out of work for at least two months, as work at Starbucks means standing and she would not be able to stand. The good news was that Starbucks has a pretty good short-term disability program, so she would get 70% of her income, the bad news was that is was not enough to cover our bills, and we started to rack up debt again. It actually took three months for Liz to recover enough to go back to work.

This brings us up to the end of 2007. Prices on everything were soaring including gas. Liz worked at a Starbucks in downtown Denver, about 20 miles from where we live. Since she mostly opened she could not take a bus, so the cost of gas, even for our four cylinder Subaru was eating us alive. To make matters worse, there were too many people at her store and no one was getting 40 hours. She even became a shift supervisor, which meant a 10% raise, but the cost of living had pushed us into negative territory again.

By December, things were bad. We were getting lots of hostile calls from our credit card companies, we were maxed on all the cards, and we were behind a month in both our mortgages. We bit the bullet and arranged payment plans with all the cards. This would freeze what we owed, stop the penalties from accruing and if we kept up with the plans give us a much lower interest rate when we emerged. We looked at all our expenses and cut out clothes and reduced our cable service to the most basic of packages and took a complete moratorium on buying books (I read two to three books a week, so even buying them used adds up). With all of that we could commit to making these payments.

We had some hope, Liz was told she was on the list for a full managers position, which would have been about a $10,000 raise and we could tough it out. I got a good raise that year and was in a job that had bonuses, which while not steady were at least earn-able. We’d get past this tough patch and things would get better.

Things did not get better. The regional manager that had told Liz she would get a store left and the new one had other ideas and other favorites. The cost of living continued to sky-rocket with the cost of gas going to $4.00 a gallon. The bonus program at my work was cut back severely, so the money I thought I would be able to bring in did not materialize. All of this, pushed us to the point where we had to start using our credit cards to keep up with food and other expenses.

That year the car kind of fell apart. It needed $300 in break work, which revealed that there was a problem with both front bearings, another $1,000. Then a rock hit the sunroof and that had to be replaced before the winter came, another $800. Still we were not in too bad a shape.

Liz’s leg had never really gotten back to 100%. Frustrated she went to see a different surgeon. He took one look at the MRI and said that she would have to have another bigger surgery. The first operation had not fixed the problem and now they would need even more effort to repair it. This time she would be off her feet for four months. Again we had her short term disability, but it was not going to be enough.

We swallowed our pride at that point and asked her brother to cover our house payments while she was out of work. We would owe him $4800 at the end, but at least we would not go under while she could not work. I have to admit that I did spend some money on restaurant food during this time. Between caring for Liz, working full time and doing all the house work, I just could not cook every night. Obviously this money went on the one credit card we had any credit left on.

Liz went back to work on Christmas Eve 2008. The economy was crashing but we both had jobs, so we should be able to start pulling ourselves out of the hole we were in. The price of gas had plummeted and that gave us a little breathing room.

Usually at my work we got a raise every year. This year all raises were frozen, as our sales were off by 25%. It was a way to keep everyone working we were told and while I really could have used the money I thought it was better if the company did not have to lay anyone off.

In April 2009 Liz was fired from Starbucks. It came as a complete shock to both of us. In Colorado we are what is known as an “At will” state. This means that an employer or employee can terminate the working relationship at any time for any reason. As gob smacked as we were, there would be unemployment. It would be a lot less than the last time Liz was on it as she had been making a lot less at Starbucks, but it would be something. That is until Starbucks contested her unemployment. We eventually won the appeals (two of them) but it took 10 weeks in past the usual time when unemployment would start. During this time we used up the little credit we had left and started to go behind on our bills again.

The massive blow to the economy affected me as well. In July 30% of our company was laid off. I was part of that lay-off. I got a decent severance package; one weeks pay for every year I had been at the company and all my vacation time converted into cash. In all about 2 ½ months of my normal pay.

I was devastated, but I am a 6 Sigma Black Belt, which is a (or was) a pretty in demand profession with good pay. It would be okay, I’d have a job before the severance ran out. Since I was no longer working there, I could access my 401K and we did to buy ourselves some breathing space.

We used some of the money to get current with our bills and decided to hoard the rest against emergencies. One thing about bankruptcy is that is never happens when your life is going great. My mother become very ill and had to have surgery. She was in the hospital for five months, four of them in Intensive Care. She lives in Michigan. Since for most of this time it looked as though it would be the end of her life, this meant I went back to Michigan three times for a total of 23 days. Even driving her car and staying some of the time with friends and family, this cost a lot of money. Between this and trying to stay current on our bills, by the New Year the 401K money was gone.

Part of the problem in losing my job was that it came with great insurance. I was covered for free, and Liz was covered for only $100 a month. Even with the COBRA subsidy our insurance cost $400 a month. Liz, because of her back injury, takes seven different prescriptions that even with insurance cost $150 a month. We can not be without insurance. In December, we went back to her brother. We asked if he might be able to cover the COBRA payment. He kindly agreed.

Even with that burden lifted we are not making enough to cover our bills. We are behind with the mortgages (one month) and behind a month on most of the credit cards. We can not even get back into their payment plans, as you have to have an income to do that.

This is where hope ends. We have applied for literally thousands of jobs. No offers. We can not know when we will get a job, given the state of the economy. In all we owe $224,000 but that might as well be a billion at this point.

So, we will have to go bankrupt. I am sorry this is so long, I thought it best to explain the whole situation and breaking it into two posts did not seem to work. In the next installment I will talk about what we find out from the lawyers.

The floor is yours.

Bill Egnor

Bill Egnor

I am a life long Democrat from a political family. Work wise I am a Six Sigma Black Belt (process improvement project manager) and Freelance reporter for Govtrak.org