CHESSNOID

The beginning of a new month is a beautiful thing. It is a chance to review my goals and to see what I accomplished and what I need to improve on. I made it a point to write everyday on this blog and I have succeeded. Of course, that is an easy goal. I love goals that I can reach. Helps me build momentum in the rest of my life. Things have been going really well for me. I guess that is just a matter of perspective. There are always good and bad things going on in all our lives, but I think our attitudes are shaped by how we handle things and what we choose to focus on.

The housing market is bad for a lot of people but it is opportunity for me. In the collection business, things just get better. When the economy starts to dip, the collection business booms. You can always get a job in this field. It is all about communication on the phone and persuading people to pay their bills. It is not a glamorous job, but it is a living.

That couple from Dr Housing Bubbles site making a $130,000 a year with a big house and 2 expensive cars did get in a bad situation almost overnight. Some comments argue they made their bed and deserve to sleep in it. Actually, these situations can happen to anyone. I know because I talk to people in that situation almost everyday. I think people deserve a second chance. I would have done things differently, but that is because I am in the collections business. There are many people living from paycheck to paycheck. Maybe not you, but I am sure we all have family, friends, or neighbors who do.

The first thing I would have done is called the mortgage company as soon as I lost my job, and see if they have any type of forbearance or payment plans to help me on a temporary reduced income. Chances are they won’t. Most in house collections don’t do anything to help until you are down and out about 2 or 3 payments. Of course that varies from company to company. The purpose of that would just to have it documented on the file that I attempted to show good faith. This could make the difference of being able to sell the house as a short sale down the road if you are lucky to get a buyer. The mortgage company basically operates on auto pilot, and they usually just don’t try to help before the loan is past due. At least that has been my experience working in the field. The collectors are just basically instructed to tell you to try to borrow money from family or friends to make a payment. The only way to keep your house is to have the money to pay for it.

Going through a foreclosure is a tough emotionally draining process. It can definitely rip a family or marriage apart. The key is communication. If there are two incomes and one person loses their job especially because they are in the real estate or related field, then you must identify that problem and deal with it accordingly. Knowing I would be losing my house like the couple in that example, I would start saving my money and keep it in cash. I wouldn’t borrow money from family or friends. When you won’t be able to pay them back, it will sour the future relationship. Personally, I know they would be happy to help, but that would be just more stress down the road for me. Chances are I would not get another high paying job under the current market conditions in the near future, so I would basically take any job just like the person did in that example. The best thing to do is keep everything in cash where creditors can’t get at it. They probably have your bank information from the credit application you already filled out. Trust me when I say collectors have no problem checking to see what your balance is and they have ways of finding out. They have all your personal information so it isn’t that hard.

I would have to accept the fact that my credit will be in the toilet 7 to 10 years. If the house isn’t current because a loss of income, chances are all the bills are behind. Once you get past the pride factor, the budget will be easier to manage. Yes, I would just let all my bills go if it meant choosing to have a home for my family and feeding them. I think we all would do the same thing.

The second thing I would do is cancel the phone. The phone is the collectors most powerful tool. Unfortunately, if you have no money to pay them, 100 collectors calling you every spare minute of your time Every day will stress you and your family out. I would get pre-paid cell phones for the home. They are actually cheaper than land lines and more difficult to skiptrace.

Lastly, I would file bankruptcy chapter 7 and stay in the house for as long as possible which is usually just 3 months then the stay is lifted. Usually your bankruptcy is discharged or dismissed. You just give back the house if it wasn’t able to sell in a short sale. You will need a bigger deposit to rent a place because your credit is shot. Sometimes 2 months rent plus security, so save up. The reason I would file bankruptcy in this extreme situation is because all those creditors will come after you. Maybe not right away because they know you have nothing. When it goes to the collection agencies 2-4 years later and you are trying to turn your life around, they will pursue you legally. You don’t want to be sued and have your wages garnished when you are still trying to get back on your feet. Bankruptcy is also the time you should give up the cars. In the case of this couple I would give them both back because the costs are too much. If one was a dependable toyota or honda with reasonable payments, I would keep that 1 car. Carpooling with your spouse would be the way to go. Yes, it will be inconvenient, but trying to buy a car after bad credit situation will only get you high interest rate financing for a car you probably don’t really want.

To recap, this is what I would do if I were in that situation. I would put my ego and pride aside for the sake of my family. I would create a budget based on the current income situation. If the household income was cut in 1/2 or more permanently, I would accept that fact, and sell the house and cars if possible. Chances are in this market, you probably are upside down on the loans to your house and cars. Turn off the landline phone, and go prepaid cell. Then file BK 7 and save my money and plan on living a cash only no credit life for the next 7-10 years. You can actually file the BK papers yourself or just go to a legal aid since that will be cheaper than an attorney. Also, don’t re-affirm any of your debts in court. I would focus on moving on with my life. I know the whole thing sounds like it sucks and that is because it does. If I lost my job and was in foreclosure, I would kiss the house good bye and would focus on making a decent life for my family.

I think it is great if you are in a situation where you have a steady income coming in and money in the bank. I am grateful to be so lucky. You don’t want your family to become homeless and hungry, just because you were too proud to tell your creditors you can’t pay them anymore. We have a big homeless problem in America and I think many of them were living paycheck to paycheck before their financial disaster hit them. With some knowledge and planning , who knows, maybe they could have avoided it. The creditors have budgeted a certain percentage that won’t pay and have made more than a fair profit on their portfolio of accounts receivables. They will still be making money for a long time by charging those high interest rates, late charges, and over the limit fees. Bottom line, no one deserves to be homeless or hungry.