When there isn’t enough money at the end of the month

20090113 bankruptcy-01

20090113 bankruptcy-01 (Photo credit: Wikipedia)

I am participating in the Saving Advice $100 Snowflake giveaway. The theme of today’s giveaway is “when there isn’t enough money at the end of the month.” This is an issue near to my heart because it was my life 3 years ago. I’m going to share a story that I’ve mentioned in comments, but never really described in full. It’s about a period of time when money was so tight that we were eating peanut butter and ramen noodles.

In 2009, I quit my job in NJ and moved 1800 miles to Colorado to get married. I thought I would get a job quickly, but soon realized that was just wishful thinking. Money was tight, but we were making it okay. Then things went from bad to worse when the credit union that had already repossessed my wife’s vehicle before we got married decided to garnish her wages to get the rest of the money owed.

The car loan

That was an incident that made me deeply distrustful of car dealerships and why we will never, ever do business with Public Service Credit Union again. Her Corolla died and she was looking for a replacement. This was back while I was still on the other side of the country. She got herself a used $17,000 Ford F150 after the used car salesman assured her that the payments would be $200 per month. That was the very upper end of what she could afford, and only because she had a roommate that paid her that much each month in rent.

Then came the first bill. It was $800! Looked at another way, the payment was roughly half of her monthly take-home pay at the time.  Of course, she couldn’t afford that, especially not when another quarter of her income was used to pay debts accrued from moving out of her parents house. She never made a single payment and after several months, the credit union that issued the car loan repossessed the truck. They sold it at a public auction for the court costs. Which meant that my wife now had no vehicle but still owed the entire amount on it.

After that, there was no word from them until one day, without any warning, her wages started to get garnished at a rate of 25%!

Money is tight

In between the repossession and the garnishment, I moved out and we got married for $200. The roommate moved out and my brother moved in. Unlike me, he did get a job after about a month. But he lasted 2 days before he became the second person to get fired out of a work crew that started together. So total income was down compared to before I moved and expenses were up. We were just making do.

Then the garnishment happened. We were now well past tight. We applied for food stamps. Did you know that $12/hr is $25 per month over the maximum income for a family of three for food stamps?

My brother borrowed money to fly back to NJ. We looked into another roommate, but it turns out that November is a bad time to find roommates in this college town.

Bankruptcy

We decided to apply for bankruptcy. Only my wife applied; the rationale was that one of us would have credit available to us for the future. That turned out to have been a mistake. We were specifically looking at credit checks for rentals, but everyone out here runs checks on ALL occupants. We would have been better off including me on the bankruptcy and may not have needed to take either of the two medical loans we now have.

We talked to a lawyer about bankruptcy. That’s when we got our third piece of financial bad news in a month. It costs $700 to file for bankruptcy! I understand the need for making bankruptcy a decision not to be taken lightly. But it seems to me that it is odd to require such a large payment of people who are, by the very definition of the word, unable to pay.

Knowing that bankruptcy was going to have a much bigger impact on her credit score than missing payments, my wife stopped paying her debt payments. The garnishment was still happening, but at least we didn’t have to worry about making the rent payment. After we finished off all the food in the house, we turned to ramen noodles and peanut butter. We actually got to a point of spending only $10/week on food. By the time the bankruptcy paperwork was filed, I lost 10 pounds.

We canceled our cable and internet and turned to piggybacking off a neighbor’s unsecured WiFi. We didn’t buy anyone Christmas presents that year. I called up all of my creditors and started hardship periods that lowered my debt payments by $150.

It took us a month, but we finally came up with the cash for the bankruptcy filing.

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28 thoughts on “When there isn’t enough money at the end of the month

  1. Wow, what a rough journey. I’m sorry to hear you and your wife had to go through that. It sounds very stressful (perhaps too stressful). I had a similar experience minus the extreme hardships of wage garnishment and bankruptcy. I moved across country without a job thinking I’d find one, oh boy was that a mistake… On a brink of depression I decided enough was enough and began carving my own path through this mountain of unemployment we have now.
    Veronica @ Pelican on Money recently posted..Powerful Lessons Learned in Starting an Online Store (Part 1)My Profile

  2. What a journey! It is great that you guys at least had each other to rely on, I imagine it gets tough on the relationship. What I don’t understand is why you can sign a loan without knowing how much your installments will be? Anywhere I have borrowed, by law, they have to provide you with a repayment schedule, and calculation of total interest repaid. In your case it looks like it would have been easier to sell the car, albeit at a loss and make the remaining payments on it in order to spare your credit, but with the urgency and stress it is hard to consider other options than stopping payments.
    Pauline recently posted..What to do if there isn’t enough money?My Profile

    • I thought that law was rather recent. I know that when my wife applied for her medical loan, all of that information was included. But when I got mine only a year earlier, I was only told the payment amount and the term. I never saw any of the paperwork for that car loan, but it was 2007 before the credit collapse when a lot of things were still fast and loose.

  3. Wow, thanks for sharing that personal story with us Edward. I know when I married Mrs.CBB and moved to Canada I thought with my experiences and University degree I would get a job quickly, WRONG, so wrong! We didn’t own a home for a few years and I had to return to school. Life has a funny way of turning the tables on us. That’s why we always have an emergency savings now no matter what anyone thinks of them. It helps us sleep better at night. Mr.CBB
    Canadian Budget Binder recently posted..Too Many Bills Not Enough Money Each Month-$100 CASH GIVEAWAYMy Profile

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  5. Wow, that really is quite a story. I can’t believe they really charge $700 to file bankruptcy! That’s insane. It says a lot about you guys that you were able to get through that together and make it out the other side to get your lives back on track. Situations like that would have torn a lot of couples apart!

    • I can remember filing bankruptcy some 20 years ago or so now. I paid about $900, even though I had no true assets in my name (aside from a car that had a lien on it that was larger than the value of the vehicle).
      I can remember that it was unsettling because I did NOT want to declare bankruptcy. I can remember that my lawyer told me not to talk to the creditors at all, or simply tell them only to talk to my lawyer. I had to pay that $800 or so in 2 payments: 1/2 up front, and the other half BEFORE the final settlement date. That was very difficults, but I no longer was paying any of the bills aside from rent/utilities/food, which made it much easier. It was more an emotional time for me.
      My suggestion would be to ONLY pay for things that you can pay for in cash. I did that for almost 2 years after I filed bankruptcy, and then started applying for credit to build up a credit score. In hindsight, I should NOT have worried about that either. You can get a mortgage without a credit score (it just requires slightly higher costs paid to the mortgage processor to examine your income/payment information). You can and should pay cash for your next vehicle.
      And think of it this way Edward … now is when you and your DW will begin anew!
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      • Actually, we got another car loan 3 weeks after the bankruptcy finalized. Our landlord decided that the bankruptcy made us a high risk to not pay the rent, even though she hadn’t been late on it in 3 years. So they refused to renew the lease and we found a private landlord who wasn’t doing a credit check, but they were across town from my wife’s job with no public transportation routes.
        I tried to convince her to get a $1000 beater, but she was convinced it would break down and get her stranded. Found one of those “everyone gets approved” dealerships and I personally ran the numbers three times to make sure we would afford the payments!

  6. Thanks for sharing. I have two recurrent dreams. One is about losing my teeth, which someone said means you are worried about money, and the other is about graduating from school and not being able to find a job. I still have this dream 3 o 4 times a year even though I’ve had the same job for almost 13 years. It’s bad enough to dream it. I can’t imaging having to live it.
    Kim@Eyesonthedollar recently posted..Hosting a Frugal, Rocking Holiday PartyMy Profile

  7. What a story. I like to think that adversity can make us stronger, and I’ll bet you’re stronger and wiser for that experience. Not to say it’s worth going through, but you get what I’m saying.

    What also jumped out at me is the fee to file for bankruptcy. $700! That’s really convoluted, going to show that there is often no mercy and things can truly be illogical.
    Digital Personal Finance recently posted..Showrooming When BuyingMy Profile

  8. Oh wow what a stressful time that must have been. That is really rough what happened with your wife’s car situation. I didn’t realize it costs that much to file for bankruptcy too, that just seems wrong. I’m glad you were able to survive through that time and that things are better for you now.

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  10. Definitely been there. Unfortunately, I feel that many people hear about stories like this and think that it’s just a matter of pulling oneself up and trudging forward, while paying no mind to the intense emotional struggle it is every day. Not knowing how the future will pan out can be detrimental to personal health, relationships, jobs, etc.

    No money at the end of the month would mean doing exactly as you did – bare bones of living, and borrowing from friends and/or family for the time being.

    Glad you made it through! Happy holidays.

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