How I Learned to Stop Predatory Lenders and Love Bankruptcy

It isn't easy to lose a job and have to go on unemployment. However, I still had some money left in my IRA, so I would still be able to make ends meet for a while. My employer gave me no notice that I was going to lose my job, so I had neither prepared for a job loss, or been given any separation pay. In fact, two days before I was going to leave for my first two-week vacation they told me they wouldn't have work for me when I returned and I should clear off my desk and return my office key!

I didn't think I would be out of work for long due to many years of experience in Information Technology and programming. After two months I was compelled to start using my credit cards to supplement my income after my meager IRA funds were exhausted. Unfortunately, I was no longer able to make my house payments and still pay my credit cards after four months of unemployment. I'd even been compelled to borrow funds from a family member. My credit cards were all at or near their limits and I was beginning to be charged 'over-limit' fees. I'd barely been able to make the credit cards payments without the overlimit fees, and one of the 'penalties' for going over limit is that the credit card company charges a higher interest rate. Citi Bank increased my interest rate to 29.9% on two of my credit cards, which drove the monthly payments up to more than $200.00 per month for each of the two cards I owned.

By September, seven months after losing my job, my credit cards and the mortgage company, ASC were constantly phoning my home phone until I was compelled to change my phone number. I was getting monthly fees, interest, and overlimit charges which cost me nearly $1,000.00 per month just for credit cards! I was not alone.

Meanwhile, the nation's economy was taking a nose dive and hundreds of thousands of people were being laid off. Financial institutions, on Wall Street, had utilized their lobbying power to enact laws and remove controls enabling them to make loans to the "secondary market". As it turns out, the 'secondary market' was people like myself, who had no financial reserves to draw upon in a financial crisis like illness which prevented earning a living, or job loss. This had enabled Wall Street executives to make billions of dollars by making loans to these people and collecting multi-million dollar annual bonuses!

I heard that the United States was the ONLY industrial nation in the world which had permitted the national personal savings rate to slip to a negative value! That meant that the millions of folks who were losing their jobs, were unable to work because of uninsured health issues, had absolutely no reserves to draw upon in an emergency would simply have to default on their mortgages because they had no money to pay!

Two months after I stopped making mortgage payments I contacted an attorney to inquire about declaring bankruptcy. He told me that I couldn't declare a Chapter 7 bankruptcy because the newly enacted bankruptcy laws had changed from a five to a ten year waiting period before a person could declare a Chapter 7 bankruptcy if they had declared any type of bankruptcy. I had declared and discharged a Chapter 13 bankruptcy less than ten years earlier. However, I could declare a Chapter 13 bankruptcy if I didn't find a job before my home was foreclosed upon. My attorney told me that it would be between seven and twelve months before my home would be put up for auction if I went into foreclosure. I thought I would certainly be able to find another job before then, and I would be making enough to pay the accrued payments (which might be reduced) when I was again able to make my mortgage payments. Nevertheless, I was not even able to afford my credit card payments now, and I heard that the economic conditions were getting worse - especially with Wall Street and the Secretary of the Treasury telling Congress and America that unless the American taxpayers coughed up $800,000,000,000.00 ($800 Billion) our nation could basically go bankrupt! This later proved to be a lie, but nevertheless Congress gave Wall Street over $250 billion dollars before they realized they had no clue where the money had gone, or whether it was being used to pay Wall Street executives their multimillion dollar bonuses Congress had promised, faithfully, they would not permit the taxpayer funds to be used for!

So here's how the financial institutions made their billions and basically perpetrated the greatest travesty and robbery against the American people ever! Innocent workers who were barely making ends meet and struggling to get by without any health insurance or financial reserves were promised the opportunity to buy a home in a market which was driving housing prices up at exponential rates! Lending companies were virtually guaranteed enormous commissions by selling and reselling the mortgages they had taken out with these people who only wanted to realize the dream of every American - to own their own home! The financial institutions knew that these were extremely high risk loans which would very likely be defaulted on, but they also knew that Fanny Mae and Freddy Mac would likely bail them out if these people defaulted on their loans. They also knew that the loans were secured (backed by real property), so they would always have the option of foreclosure to ensure they would NEVER suffer a total loss. They would also be able to collect the monthly mortgage payments regardless of whether the mortgagee defaulted. It was a win - win - win situation for the lending institutions and the people who bought the homes would basically 'buy the farm' if they defaulted. They would lose their home and all the money they put into it!

How could I ever hope to keep my home with all the odds stacked against me? In November, nine months after I lost my job and four months after I made my last mortgage payment, I received notice that my home was going into foreclosure and would be sold at auction in February of 2009! I was extremely concerned and wanted to do whatever I possibly could to ensure I'd be able to keep my home - especially since I was about to marry the woman I'd been trying to get into this country, LEGALLY, for the past six months. I was told that there may be new HUD programs available to assist with my mortgage, so I called and made an appointment with a HUD representative. She subsequently told me that I would need to provide a great deal of financial information regarding my mortgage, and noticed there were some inconsistencies and irregularities with the Truth in Lending and HUD disclosures on my loan papers, suggesting that I have an attorney evaluate them. She also asked why I was subjecting myself to the ordeal of making unsecured credit card payments while I wasn't making secured mortgage payments.

In November I took my mortgage papers to an attorney to evaluate whether or not there were any inconsistencies in my documentation. I also consulted with my bankruptcy attorney beforehand and asked him what his thoughts were regarding the struggle I was having with the credit card companies who were driving me to a nervous breakdown with their continual calls numerous times a day, seven days per week. I even contacted the police department to complain about the telephone harassment (I don't know how many employer calls I may have missed because of having to change my phone number or simply being unable to respond to the continual telephone harassment) and the police told me there was absolutely nothing I could do except to write a letter to the credit card companies to tell them in writing they no longer had permission to call me for any business. After my attorney told me that it was an exercise in futility to continue making payments on unsecured loans if I was considering bankruptcy I ceased making any payments to any of the credit card companies. I had tried my best to negotiate with them, but was given marginal courtesy and abusive telephone calls from people who were downright rude and threatening.

In early January I told my attorney I was going to be compelled to declare Chapter 13 bankruptcy. He told me that the only way I could declare bankruptcy was if I had employment which would provide me with sufficient income to make my mortgage payments, pay my living expenses, and also pay the bankruptcy trustee.

The HUD representative told me she was not optimistic regarding my chances of the mortgage company renegotiating my loan, even though I finally secured employment for half of what I'd been working for in the past. My attorney told me that I needn't worry about losing my home any longer, and that I'd done everything I needed to do to save my home by getting a job!

These are the things I learned from this ordeal:

1) If a I lose my job and cannot make all my payments, it is better to pay secured debts, such as auto and home payments, than unsecured debts such as credit cards.

2) A mortgage foreclosure is something that can take many months to execute. The laws in the state of Oregon will not allow foreclosure on my home in less than eight months (I was told that this period varies from state to state).

3) There are good attorneys and bad attorneys (like any other occupation) - it's an extremely good idea to have an attorney you can trust, and no attorney should ever charge for an initial consultation.

4) Bankruptcy laws prohibit declaration of a Chapter 7 bankruptcy without a ten year waiting period since any previous bankruptcy.

5) In a Chapter 13 bankruptcy a person can forfeit any secured property or possession they have if they don't continue to make payments under the terms of the bankruptcy judge ruling.

6) Creditors are allowed by law to use the telephone to harass the debtors unless they request, in writing, that they cease and desist calling.

7) Creditors can set up automatic payments which will only pay enough to keep the account over the credit limit indefinitely.

8) Creditors may increase interest up to 29.9% on any and all credit card accounts if a person misses a payment, goes over their credit limit, or has a check returned.

9) The laws of the United States are set up to strongly favor creditors and finance companies because they use the billions of dollars in interest, fees and penalties to fund extremely effective Congressional lobbyists who pay great sums in the form of campaign contributions to gain access and influence with government officials.

10) American taxpayers should be aware that these corporations are NOT our friends, they have no moral or ethical standards and their only motive is to maximize profit, minimize losses, and remove any obstacle to achieving goals one and two!