I had a very good paying job for many years, +70k per year, and didnt carry a huge amount of debt but I did have a mortgage, a home equity line of credit, a car lease and some credit card debt but all that was manageable and well within my means while I was working. Up until the time when I lost my job, I had an excellent credit rating and a stellar record of on time payments.
Then in 2008 I lost my job. As I had been under contract as an independent contractor at my last job, I was not eligible for any unemployment benefits so when my contract was unexpectedly terminated, I had zero income. I had a good amount in my emergency savings funds and I used that to pay my mortgage and other bills as I looked for work. I contacted all the credit card companies to work out reasonable payment plans; tried to negotiate lower minimum payments or defer payments for a time, but all I got was threats and abuse and harassment on a daily basis from most of them. I was trying to do the responsible thing and worked hard to keep afloat but when my savings was running out and I had to make the choice of paying my mortgage and utilities and eating (beans and rice and ramen noodles BTW) and paying my cc debt. Guess how I ended up prioritizing that?
I was able to sell my house but in a short sale (only about $2,000 dollars under what I owed BTW) so I walked away with nothing. I voluntarily turned in my leased car so all I had left was some cc debt and a debt to the IRS for back taxes on my self-employment income for the last two years that I will probably be paying for with penalties and interest for the next 15 years. I moved in for a time with a relative while I tried to get back on my feet and saved to buy a used car so I wouldnt have to continue to borrow my neices and saved to move into a modest apartment.
But the cc companies were relentless, all raised my interest rates and raised the minimum monthly amount due to the extent that even though I was working again, there was no way I could pay them what they were demanding that I pay them. I tried to negotiate terms, sent them $20 or so bucks a month, but by now most of them had sold the debt to third party debt collectors.
Unfortunately some of these 3rd party debt collectors often try to skirt or operate outside the law, like making threats, calling after hours and calling and harassing people at their workplace. For instance I got calls from one debt collector trying to collect an $800 cc balance who told me that you must have friends or family who you could borrow money from, if not, you must be one sorry and miserable excuse for a human being with no family for friends and you obviously arent starving to death, so if you can find money for food, you can certainly find money to pay your debt and Im calling you on your cell phone, so if you can find money for a cell phone, you can certainly pay me at least $200 a month and dont you have any furniture or jewelry you can sell? And I dont give a good flying F**k about family heirlooms BTW. F**k you and your mother, if you have anything worth anything, your need to sell that s**t
Seriously. I wish I was making this up but Im not.
As much as I really wanted to pay off my debts, the daily harassment and abuse was not worth the effort and so in 2010, I declared bankruptcy. It was the best thing to do under the circumstances but I hope to never have to do that again.
Even God considers debt cancellation the right thing to do on occasion. Under Moses, every 50 years the year of Jubilee occurred, in which all debt was cancelled among the people of Israel. This discouraged long-term debt formation by either lender or borrower. Israel was to be a free people, and generational debt tends toward slavery.
Yes, there are irresponsible people who try to game the system, but an honest credit reporting system, with no PC biasing, would filter them out quickly. But otherwise good credit risks, who have encountered an unexpected and near total disruption of their ability to pay, should not be looking at jail time for circumstances not under their control.
And as I am an attorney, I can confirm that there definitely is a path to jail for those unfortunates who are otherwise fine individuals but really can’t pay certain bills. Child support, for example. If you get a judge who instinctively doesn’t like you, failure to pay (per a court order), even if you appeared, is contempt unless proven otherwise, and can put you in jail at the blink of an eye. Ive seen it happen.
Yes, there are ways to forestall it, maybe. But these people dont know, and judge knows they don’t know, and he can push them hard, if he’s of a mind to do so. Theres no requirement for a court appointed attorney, because contempt for failure to pay is a civil, not a criminal, offense. No protection, especially if you happen to be male. Truth.
Once I waited with my client while a judge told this poor bedraggled street person he’d better come up with the support, or else, and he told him he didn’t care how he got it. I can only guess what course of action that suggested to such an individual. The system is crazy. One of those areas where if you believe the worst, you’re probably right.
Your story is remarkably similar to mine.
Lost my job in 2008, had no unemployment, drained savings and retirement trying to keep paying the bills.
Our problem was the 2nd mortgage not Credit Cards, (we had an 80-20 originally). They would not negotiate, even though I called them when I first lost my job and asked them for help.
The house foreclosed, they sold the debt to a collections agency, and they were ruthless. Drove me into bankruptcy as well. They left me no choice.
One thing I learned from that. The day you loose your job, your creditors become your enemy. Its about survival of your family at that point, and they dont care.
They dont care if you spend every penny you have saved to try and stay current, when it runs out, they will take everything they can even if it means you and your wife and kids are out on the street.
My advice to anyone, if it happens to you, quit paying all debt. Use your savings to survive off of, because in the end, it will all be gone anyway, and youll get no help from them, when your savings is gone, any more that you would if you just cut them off from the first day you were out of work.
I hear you man, unfortunately I was in a similar spot and had to do the same thing.