So in my last post, I talked about the mental challenges I had to overcome in order start living my cool nomadic life. Now I’m going to tell you about the logistical process I went through to actually make it happen.
Prior to becoming aware of my mental blockages, all I could think about was getting out of my house and how I was going to do it. That was my MAIN GOAL in life and the impetus for everything that has followed. Every day I would look out my window and loudly silently curse my neighbor for being such an inconsiderate bitch, and that hatred dissatisfaction fueled my desire for immediate movement. I knew I wanted to force a foreclosure, so that I wouldn’t have to pay the difference between what I owed on the house and what unfortunately I could sell it for on the open crappy market (and I’d tried short sales, but as soon as the buyer found out they had to work with Bank of America, they backed out), but Ohio has a rule that the bank can come after your sorry ass if they want to, for the difference. How to get out of that annoying possibility? Even though I was now earning less than what I was making in my old job, the bastards bank still legally had that option to pursue me if they so desired. Who wants to pay for a house they no longer own or live in? Try no one.
So. I had to figure this out. I thought I was being brilliant, by coming up with the idea of foreclosure defense (which is stupid, because all that does is help you KEEP your house, which obviously I didn’t want to do, duh), so I went to a lawyer to discuss this awesomely dumb option. But it got me to the lawyer, which, in effect, was smart. They looked at all my debts, which were considerable, because since I was making so much less money than before, I was using 0%-interest-for-a-year cash advances on my credit cards and I know many of you have done this too, so no shaming to pay bills I wasn’t able to pay anymore, since such a huge portion of my now relatively low income was going to pay this insane mortgage (actually, my mortgage wasn’t insane, it was the taxes and insurance that were through the roof – taxes and insurance took up 60% of my total mortgage payment and kept rising, yo). Naturally, they encouraged me to declare bankruptcy.
As I mentioned in my previous post, I hadn’t cleared out my fear and misaligned priorities at this point. So I left the lawyer’s office, disillusioned, and pondered my options. Which were somewhat limited. I could leave my cool job that paid little but made me happy and had the potential for better income in the future, or get another crap job that paid more now and keep life the way it was until I could sell my house outright. Or, I could take my chances with a foreclosure on its own and hope the bank wouldn’t stalk me for the next two years.
OR, I could get over myself and declare bankruptcy, thereby eliminating ALL my debts, including my horrible mortgage, and then finish up with foreclosure without having to cough up a cent.
Hm. Whiccccccchhhh onnnneee tooooo choooooosssssseeeeee……
I know, I know, the first thing everyone thinks about with the third option is WHAT ABOUT MY CREDIT SCORE?????
God. Come on, people. Credit scores are inherently designed to keep you in debt. In fact, like my incredibly smart parents, if you have no debt at all for long enough, you eventually have no credit score at all, and can’t get…. credit. Thankfully, my incredibly smart parents don’t need credit, since they’ve remained smart with their cash and can buy cars and houses with… CASH. Whoo hoo Mr. and Mrs. Skomp!
However, I’m not quite there yet.
So what was the middle ground, you ask? How did I go through this horrendously damaging-to-credit process, and still have a good credit score at the end?
I’ll tell you.
All roads were leading to bankruptcy, even though I was SURE I could avoid it. And I could have avoided it easily, if I was willing to go back to selling my soul and giving all my soul-sold money to a giant behemoth bank, or, keep going further into debt until the money fairy came along and showered me with thousand-dollar bills. But after many hours of mental debate and endless online research, I came to the realization that bankruptcy really was the smartest strategy for me to take, given my options and my very strong desire to get the hell out of that house.
So I started plotting my path.
Thankfully, I didn’t have anything that I had to give up. My car was paid for, and the value was under the state’s vehicle exemption amount. Check. All my other stuff added up to below the exemption amount for personal property you can keep (yeah, you can’t keep your $100,000 necklace or your $15,000 collection of Pez dispensers, sorry). Check. All the cash I’d saved from skipping mortgage payments (yes, I did start that, but was within the 90 days before they start foreclosure proceedings, just in case I wanted to keep going) paid the lawyer. Check. I had never missed a payment on anything else up until that point (which is really good if you’re thinking of declaring bankruptcy, so do what you can to keep your reputation clean), so my payment record was good. Check. I was officially broke without having to lose anything, and yay! my comparatively low salary qualified me for bankruptcy because it was such a drastic reduction from what I had been paid when I bought the house. Check.
Taking a job you love for less salary can be a good thing.
We carefully planned my bankruptcy filing to be right before payday (back in those days I only got paid once a month, so I didn’t want to have an influx of cash in my account only for it to be considered cash available for surrender) and then filed. The very next day, I got paid and guess what? I got to keep ALL of it. I now owed NO ONE for ANYTHING. Well, except regular bills like electric, water, phone, etc. But other than that, it was all mine!
And I saved everything. For the next six months I saved every penny I could (within reason, I still had lots of fun) until I had over $10,000 in the bank. I went from having NOTHING to having $10K in cash reserves in SIX MONTHS. I know there are some of you out there who are smarter with money than I was, and probably think ten grand is nothing, but for me, who had a tendency to spend everything I made, this was HUGE. Especially considering I was making half of what I typically made before I left corporate America. Who ends up with more money than they ever had, after cutting their income in half? I did. I had no mortgage to pay, no credit card bills to pay, no car payment (I didn’t have that anyway, but it’s worth mentioning because it’s awesome). It sure makes a difference.
And, thanks to our ridiculous foreclosure system, I got to stay in my house rent-free for over two years. Two years! I did leave before the two years were up because I took off in my cash-paid brand new RV a year and a half after I stopped making payments, but that gives you an idea of what you can expect. If you’re not looking at bankruptcy as a means of Santa Claus coming early, you can find yourself far more well-off within less than a year of your declaration than you ever were before.
Gotta love America.
Now. What about my CREDIT SCORE??
I’ll tell you.
First of all, bankruptcy is not the end of anything except soul-crushing debt. In fact, many creditors love you more because they know you suddenly have more free cash! But don’t get sucked into any of that nonsense, or else you will just end up worse off than you were before, and you can’t declare bankruptcy again for another ten years. And seriously, does anyone really want to have to do that again? I hope not.
But what I did immediately to start repairing my credit was get a couple of credit cards for the “bad credit” folks. Yeah, that was now me. I don’t have an official record of how low my score got right after the bankruptcy, but I believe it was about 620. It never got below that even with the bankruptcy because I had always paid everything on time up until I declared, so it’s very important always to pay your bills on time, even if it’s the minimum payment. Anyway, I got two cards (I didn’t go hog wild and get ten, it’s not necessary at all), one was a secured card with a $500 cash secured limit (because hello, I had the cash now), and the other was a $1500 credit limit with no cash security required. The first one I got based on recommendations from BankRate (pretty much guaranteed to accept you). The second one I got after a couple of months of responsibly using the secured card, from an application I got in the mail.
The interest rates were stupid. Well, not as stupid as some I’ve seen, but one was 12% (the secured card) and the other was 20%. However, it matters not, since I never ever ever ever ever EVER keep a balance. The SOLE PURPOSE of these cards was to repair my credit. That’s IT. They were not for buying a new flat screen, they were not for going to DSW to get twenty new pairs of boots, they were not for flying off to Italy for a week. They were to repair my credit. They are just tools. A means to an end.
So, all I used them for was gasoline, something I had to buy anyway. That’s all. Every month I would pay for my gas on my credit cards, pay the balance every month, and soon enough I started having a history of being a responsible credit user by only employing a tiny percentage of my available balances (always good), and always making payoff payments every month (always good). After about eight months, I needed to buy a new computer for my recent transition into self-employment (thank you Alan) and because of my (now) good credit history – even after only eight months! – I was able to get a $2000 limit on a third card with 0% interest on my computer purchase for a year. I paid that off in about four months. So now I had three cards, with $4000 worth of available credit in less than a year.
What is even more amazing is that after about another six months of doing nothing but buying gas on all three cards, the first secured card upped my limit to $700 (no cash security required), and the third card upped my limit from $2000 to SEVEN THOUSAND DOLLARS. Do I use it? Of course not. But it sure makes me look good on my credit score because now the percentage of available credit I use is miniscule. Credit reporting agencies love that.
And, just to test what my options were before I would have to leave my house, I applied to rent a townhome at a rather expensive giant corporate apartment complex – the ones who have the strictest rules about creditworthiness – six months after the bankruptcy. I admit, I was worried no one would have me in my shame, and then I’d have nowhere to live except in a neighborhood where people shoot up in their front yards. You know what happened? I applied for a home that rented for $1200 a month… and they approved me in twenty minutes.
I turned them down to live in an RV, but I had options. More than I ever thought possible.
And now, less than two years after declaring bankruptcy and carefully monitoring my credit, my score is 740. I have thousands still in the bank and it’s ever increasing, I have work that I love, I can and did afford to up and live in an RV for a year without incurring a single cent in debt ($5000 new engine included!) and freedom to do whatever I want. Bankruptcy and foreclosure and all. Not bad for following a dream, eh?
The point I’m making here is that the worst thing you can imagine for yourself (um, like losing your house and declaring bankruptcy) is never as bad as you think it might be. If you handle yourself well, the worst thing you can imagine could very well be the answer to everything you ever dreamed of. You just have to educate yourself on what you need to know to make the best possible choices that are in alignment with your dream, and then let all other ego-related blockages go. It’s really that simple (which, I admit, is not the same as easy). I know your stories and circumstances will be different than mine, but there are always ways to get where you want to go without ruining your life. Always. You just have to believe it’s true.