Life After Foreclosure & Bankruptcy

I’m going to present you with two words. Just a bunch of letters arranged on a page. Nothing inherently harmful in them. But because of the meaning we attach to them, they’re powerful enough to send an arrow of fear straight into most people’s hearts.

Foreclosure.

Bankruptcy.

Yeah. Scary stuff. These two words are what brought me back to YNAB in 2012 with a big old *snap*.

Foreclosure. The first time I heard the word from my credit counsellor’s mouth, I cried. It felt like the ultimate failure. I envisioned our furniture on the lawn and a red-lettered sign on our door for all the neighborhood to see.

We had separated. We owned a four-bedroom house (well, the bank owned it), and even though it had a legal suite, the mortgage was enormous. Neither of us could manage it alone. Neither of us could manage the house’s upkeep. And neither of us had the heart to stay in what had until then been our family home.

But the Victoria market had softened in the four years since we’d bought. No matter what we did, the loss was going to be crippling.

We ended up foreclosing. It took us a long time to make the decision, but once it was made, I was surprised at the relief I felt. I still give thanks that we live in Canada, where you can swallow your pride, press a button marked RESET, and start all over again. There are no armed thugs waiting to exact full payment. Nobody’s going to shoot your family or sell your children for unpaid debts.

In the end, the loss was crippling. By the time the process was finished – post-inspection, post-cleaning, post-sale, post-legal fees – the shortfall on the house was $92,000.

By this time, I had bought myself version 4 of YNAB and was back on track, monitoring my income and expenditures and living on what I earned. It gave me a feeling of control during a time when so much was out of control.

I looked at that $92K, as well as the other debt (including a whole whack of federal tax – a result of the previously alluded to communication breakdown), and realized I was looking at packing around a lifetime of red ink.

As a newly single parent (and a freelance writer at that), it was a devastating load. Even if I could pay it all back over the course of fifteen or twenty years, I would be shorting my children as a result of my and my ex-spouse’s fiscal choices. Their entire upbringing would be a story of their mother being too broke to support school trips, camping, music or swimming lessons.

I agonized. Should I declare bankruptcy, file a consumer proposal, or slug it out? My ego was very much afraid: What would people think if I declared? And how would I feel about what people think?

There’s something so terminally scary about losing your credit. People speak of it in whispers. Had I not been living the YNAB way, I would likely have gone along with the pressure from my (traditional…and very much in debt) parents to do everything possible to avoid damaging my credit rating.

But my desire to provide for my kids trumped my need to look like I had it all together. I’m not a fan of sweeping it all under the rug to look like things are fine, just fine.

And, I reasoned, if I’m living the YNAB way, my credit rating shouldn’t have to be my number one concern because, well, I’m not supposed to be buying things on credit anyway.

And so I threw it in. Declared bankruptcy in mid-2012. YNAB supported me every step of the way. Even when the thumbscrews were down tight as I repaid a portion of the debt (and yes, even if you declare bankruptcy, you still pay some back), I knew how much I could spend in each and every category. I stretched every possible thing, à la Amy Dacyzyn’s Tightwad Gazette. Bars of soap down to slivers. Robes and slippers instead of heat. Noodles.

I was discharged in early 2013, and I haven’t looked back. I don’t eat out – even at Denny’s – and when I’m in the vicinity of Linens & Things I just keep driving. The new 4Runner was out-reasoned by a ten-year-old Escape (4cyl). And my entire apartment is a sunroom now, because it faces west. All one bedroom of it.

I got myself a Capital One MasterCard – it’s funny how fast they come knocking – and you bet I’m paying it in full every month. But I paid cash for my truck. For the kids’ bikes. For the Apple TV. For the dining room table. And when my poor old laptop wheezes her final stalling breath sometime this summer, I’ll have $1300 set aside in my MacBook Air category.

I love giving each dollar a job. Because damn, they work hard when a few of them get together. And I love YNAB. Because it makes this kind of little-by-little saving possible.

So now you know. I’m living proof. There is life after debt.