Finance 101: Debt Elimination and Credit Restoration

 

It is difficult to anticipate being laid off however once the downsizing begins within your company you realize your job is not secure.   I think  the unfortunate part is the company cannot give you advance notice.   When you have a mortgage, bills and children the possibility of losing your job is a stressful situation.   In 2009,  I was laid off from my job after almost five years with the company.    Initially, I thought it would be little bit of a break before I started looking for another full-time position.  My company provided about 5 weeks of severance and my medical/dental benefits were e extended for 6 months.     I was a bit relieved to know that  I was able to apply for CHIP for the kids.

I thought being married provide a financial safety net.  Wow was I in for a rude awakening!   It became extremely draining as the bills were behind with no job prospects.   In a haste I thought using my 401k to eliminate some debt was a good idea.   This imposed a tax penalty and wiping out my retirement money.

It’s funny how quickly 6 months creep up so quickly.  One saving grace is the state of PA provides CHIP for children who are uninsured.   After completing the application, the agency determines your eligibility based on income.   The added bonus to CHIP is it offers a variety of healthcare companies.  In my case I was able to stay with an HMO and keep the same doctors.   Now for myself healthcare was a 6 month waiting list.  Luckily I had no health issues that required healthcare.  I learned that some ob/gyns offfer a reduced rate for uninsured patients and I was able to find a center that offered free mammograms for women who are uninsured.

Fast forward to the next year and I decided to move forward with my divorce.   I was currently living in a jointly shared property.  When I realized this was going to be a stressful situation, I packed up the house, scheduled a moving company and placed most of the furniture in storage.

Now here I am unemployed, uninsured, no savings and the only assets were the house bearing my name and my vehicle with one one year left of payments. This left me to move back  into my mother’s house.

I quickly learned divorce is only easy in the movies and what lied ahead was no picnic.   In the real world, jointly owned property in a divorce is either sold and the proceeds split between both parties.   Another option is for one party to buy out the other party out and continue to live in the property.    This requires paying the other party a percentage of  the equity in the property.    My situation was very difficult in terms of reaching  an amicable agreement to sell the property.  Due to the mortgage inching closer  and closer to foreclosure I thought selling the property was the best alternative.  A few things I learned real fast is if one party wants to assume the mortgage that party must apply for refinancing.  This removes the other party off of the mortgage.    A short sell is another option however this requires both parties submitting credit information.  In my case, neither was an option.

After numerous attempts to sell the property it was not sold, abandon and eventually taken back by the mortgage company.  If a property is deemed unoccupied the bank has the right to preserve the property, maintain the property and prepare for resell.   Ultimately taking a loss on the property was a better option than allowing it to go to sheriff sale.   There were so many opportunities to take a different route than where the property ended up after it was all said and done.  It took three years for the house to go to sheriff sale.

In addition to the mortgage payments going into default all associated bills for the property were in default such as the homeowners association and the municipality(sewer and trash) bills.   Although I moved out of the property my name on the property makes me financially responsible.   Any debts owed on a property now becomes a lien on the property so in addition to the mortgage company there are various companies filing liens against the property.

Another lesson learned is that a company has the right to sue you in civil court for what is owed and can file a petition in court to gain access to your property.  If your residence is located within a subdivision with a homeowner’s association and you owe, they can gain access to the property to remove any tangible items of value to collect the debt.    While this was done in my property, the company can still sue you in court to collect the debt.    I noticed when the homeowners association company’s lawyer removed items from the property the items were valued at far less than the retail value.   Wow, all the things I did not realize when I left the property.

Right now my debt feels insurmountable with no light at the end of the tunnel.   My house has gone to sheriff sale which means it can be sold to the highest bidder.   I  am unsure if the bank can sue me for the difference of what is owed to the bank minus the amount sold at the sheriff’s sale.   I have the mortgage, old debt, and new debt impacting my credit.  It is time to face the music and make the first step.

From all of this I felt it was time to take some real action and prepare to clear away some of this debt.  Step 1, meeting with a financial planner with expertise in debt elimination, credit restoration and building a nest egg.   My appointment is next Saturday and although this will be a journey I have to start some where in order to build a better future.

The purpose of this series is not to play the blame game or to replay an episode of coulda, woulda, shoulda!   It is meant to educate women on how to become financially savy in your individual finances and to plan smarter if you choose to marry and merge finances.

I feel I cannot move forward without “cleaning my house” to build a better future!  Hopefully, my readers can take away some valuable information while giving you the financial freedom to plan a  better future.