History of a Bad Spender, Part 4 of 5

At the beginning of 2007, my mother allowed me to transfer some of my direct sales debt to a credit card in her name. It was an incredible help, since not paying on those particular cards was costing me 30% in APRs, and it afforded a little bit of breathing room necessary to begin preparing for the birth of our second son.

In May of 2007 I was put on bed rest. I was not worried about income, since the company I had worked for offered “gap” insurance, which meant that they would pay the difference between my salary and what disability paid. Not many employers do that. I was quite lucky. (Although, I did connect with a woman near me who was in a bankruptcy situation, and the company she used to work for also offered it. Probably because the company was connected to health care.)

While the mortgage payment was getting more difficult to pay with every passing month, so were the credit card payments. Several accounts had gone to collections (with the exception of my mother’s card), and I had taken measures to hide the collection efforts by forwarding all calls that went to the house to my cell phone. Then, once I had identified who a caller was, I saved the number into my contacts list and applied a custom ring tone of “Silence” to the contact, so when they called, my phone would not make noise.

At this point, we were so far in debt, and I had ruined our credit so severely, that obtaining credit anywhere in the future would not be possible. In fact, by June of 2007, I had not used a credit card in nearly 8 months because they were either all maxed out or in collections.

Our son arrived in July of 2007 with no complications. However, I did almost have a heart attack upon seeing my husband walking to the mailbox one afternoon after I had returned home from an errand. Our postal carrier was at the box, and he was talking with her, carrying on an animated conversation. Upon walking back, he’d stop, review something in the pile, then walk again, then stop . . .

I had gotten quite skillful at hiding mail (among other things) from my husband. So, seeing him carrying an armload of it was enough to trigger a massive coronary, since I had not made the June house payment.

Luck, however, was on my side that day. What he had stopped to read was a company newsletter and one of my disability checks. Christ, this was going to have to stop someday.

Meanwhile, the time I took off from work gave me some room to re-evaluate my direct sales business. I had tried earlier in the year to get back into the game after my first trimester had ended (I was horribly sick nearly every day), but then had to stop again because I was borderline preeclamptic. After much thought, careful deliberation, and a confrontation with a direct sales zealot, I decided to retire. (Much to the delight of my husband.)

I was able to short-sale some of my inventory and used the proceeds to pay the June, July and August house payments.

Then the day came that shot my anxiety into overdrive: We received a notice from the IRS regarding our 2005 tax filing – the year that I cashed out my pension and took a $50,000 disbursement from my retirement account. The unpaid taxes totaled $8,200.

I waited until the final day possible to call the IRS and ask them to arrange a payment plan, which was in November 2007. My first payment due would be in January 2008.

In the mean time, since I had not made a house payment since September, our mortgage was officially in default.

In December of 2007, we eeked through Christmas using a small company bonus I had received. There was hardly any money in our checking account, we had two kids in out-of-home care, and 2008 was looking really, really bleak. It was the first time, ever, that I had considered coming clean to my husband so that we could get the help that we needed. But I just couldn't do it.

History of a Bad Spender, Part 3 of 5

In March of 2006, I used the last of our tax return money to buy more inventory, pay our mortgage, take a trip to southern California for a “direct sales leadership summit,” and used what was left to pay what I could of the credit card bills. I’d borrow from one debt to pay another, just to get by. And, by then, there was nothing left to pay the B of A loan.

The stress of it all was beginning to take a toll on my nerves and my marriage. In addition to working full-time, I was also gone twice a week to do shows, constantly on the phone trying to book more business, and leaving much of the parenting of our son to my husband. Another activity that I had added to my calendar was coming home at lunch time to erase collection messages off of our answering machine and to check the mailbox in case a credit card or bank statement inadvertently made its way to our home address.

In the mean time, I hadn’t phoned any of the creditors back and tried to ignore the issue. What I didn’t know was that, if the callers were ignored long enough, they would track down any other person associated with the debt and begin to do searches for their phone numbers. Which is how my husband began to find out about some of the debt that I was hiding.

He’d call me at work and say he’d received a call from “XYZ” card, informing him that not only did we have a high balance, but our payment was also late. I would say something like, “Oh, yeah, something happened with the online billing and it didn’t get there in time . . .,” or make up some other excuse. Then, we’d fight about having debt, he’d threaten to take over bill-paying, not speak to each other for a couple of days, and after a while, everything would go back to normal.

Things were different, though, when he discovered the B of A loan.

“Thirty THOUSAND dollars?,” he asked.

I was busted.

So, I came clean about that one particular debt, leaving the others unmentioned because he never asked the question, “Is this the last one?” But I knew I needed to do something to get some of them paid and keep our mortgage current, or else things were going to get really bad. (As if they weren’t already bad enough.)

Then, I got an idea so sinister in nature that I couldn’t sleep for three days. But I was desperate, which may explain why I could ever do something so immoral and unthinkable: I obtained the login and password for my husband’s retirement account and withdrew it. All of $43,000 of it.

He never accessed the account – it was left over from a prior job and he kept putting off rolling it into his new 401(k) plan. He also kept forgetting to find the paperwork to log on, which is how I knew I could skirt the issue if it ever came up. And I knew, eventually, it was going to come up, since I had also planned to not report the early withdraw to the IRS.

I used the money to pay mortgage arrears, another set of credit card payments (but never really paid anything off). I also continued to buy unnecessary inventory for my business. And, by the end of 2006, the money was gone, I was pregnant, and wondering how we would keep up on the house payments.

History of a Bad Spender Part 2 of 5

In the summer of 2004, I owed so much in credit card debt that we had to refinance our house and liquidate equity to gain control of it. THAT was supposed to be the LAST time I made any financial mistakes. But because the credit card balances were so high, not everything was paid off. A few cards still remained that still needed to get paid. My husband, however, thought that all of our debt was gone. Yet, at the time, I still owed about $28,000.

Later that year, I applied (and was approved) for a consolidation loan through Bank of America (B of A) for a grand total of $30,000. The payments were to be around $600 per month, which was manageable. Overtime was common at the company where I worked, so I used that money to make the payments and hid the account from my husband.

Shortly after that, we bought our first new vehicle: A shiny, full-size truck complete with a tow package and DVD player for our son. That purchase resulted in a $500 per month auto loan payment (which almost didn’t get approved after taking out that $30K B of A loan).

Feeling the burden of both the B of A loan and the truck payment, I kept my charging and other spending to a minimum. There were actually credit cards in our possession with zero balances, and for once I was feeling like a responsible adult.

Then, in the spring of 2005, something happened to me that would change my financial life forever: I was introduced into the big bad world of direct sales.

Without discussing a word of it with my husband, I became a consultant with a direct sales company. I eventually told him that it would only be for fun, but that soon gave way to a full-on desire to quit my job and become a consultant full time. It’s a mantra that is preached in nearly EVERY direct sales company: Work hard, and you can make as much (or even more) than you do at your regular job, and set your own hours to boot!

So, I began to use some of our “zero balance” cards to fund my new business venture. Then, I obtained an American Express Gold Card (AmEx) for business purposes, which I used almost daily to buy inventory, tools, props, and anything else that resembled a business expense.

When I couldn’t make my first AmEx payment of $1,800, I transferred the balance to one of our personal bank cards. The following month, the balance was $2,300. I was able to make that payment, though, since I was selling inventory like crazy. But I never gained control of my spending, and soon found myself using our personal cards to fund bad spending habits, unnecessary inventory purchases, and a direct sales business that wasn’t really going anywhere.

In August of 2005, my husband granted me permission to quit my job for six months and try to make a full-time go of my direct sales business. I attended conventions, meetings, recruited women, bought inventory, and did everything I could to make it work. With that, though, came a dependency on credit cards, since the money I was making didn’t even come close to what I was spending.

When I left my job, I cashed out a pension that provided some much-needed padding to our checking account. I used the money to make the house payment and take care of other household bills while on a quest to be the next direct sales queen.

In November 2005, just as the money began to run out and the credit card balances were getting higher and higher, I took a one-time payment of $50,000 out of my retirement fund (which, after taxes, was more like $32,000.) After all, I wasn’t really employed, direct sales wasn’t working, and we needed the money.

Two weeks later I conceded defeat and began to look for a full-time job. My business was not going to provide my household with the income and security of a regular paycheck, but it did give me something to do until I found another job. It also provided justification for the continued use of credit cards.

In the mean time, my husband was beginning to get suspicious of my financial activity. He’d ask questions about signing up for a credit monitoring service or pulling our credit score to see if we could qualify for a lower mortgage interest rate. I always encouraged him to move forward with his inquiries, but I always knew he was doing it just to see how I’d react.

I eventually returned to the ranks of the full-time employed in February 2006. And, while the job was fantastic and the benefits amazing, my mind was focused on the insurmountable debt that I had accumulated and how I was going to hide it all from my husband. I’d broken the $80,000 threshold, which included that $30K loan that never seemed to reduce in size. (What happened to the retirement money? I used it to pay the mortgage, household bills, paid down some of the credit card debt, purchased more unnecessary inventory, and pretended that the rest was income from my direct sales business and used it for Christmas.)

Note: When I say that I used money to “buy inventory,” I was mostly doing it to maintain a badge title, not because I had shows to do or product to sell. While I did have business to conduct, it was not sufficient to warrant the inventory purchases that I’d accumulated. I had become addicted to spending.

Suffice it to say that the money was gone. I had gotten us into thousands upon thousands of dollars in debt, and was now having a hard time paying it back. Credit card payments were going to be late, but the mortgage, for the time, was safe.

In the mean time, I knew that my husband knew that something was wrong, but I was always able to say that “things were fine” and he would leave me alone. Sometimes he would press the issue, and I’d fudge an excel spreadsheet for him to get him off my back. Plus, I always felt that I was going to finally make my direct sales business successful and pay everything off.

When it came time to file our taxes, I maximized every business deduction that I could, and “conveniently” forgot to report the pension and retirement withdraws so that our return would be in the high thousands. THAT, was part of the beginning of the end.

History of a Bad Spender, Part 1 of 5

In order to share my story effectively, I need to prepare a good foundation. Which means we need to dig deep into my life’s credit history.

I got my first credit card in 1990, shortly after I turned 18. The credit limit was $500, and I remember maxing it out almost instantly. I bought a leather jacket, boots, gas, and lunches & dinners for my friends.

I had a good job at the time, but I was not well-versed in personal finance. My checking account was frequently overdrawn and I repeatedly wrote bad checks. I also rarely made my credit card payments on time, if ever. I wanted to party, not pay bills.

In a three-year period, I had collected and maxed out a cornucopia of department store cards, and bank cards, then tried to consolidate them all into one payment by putting my car up as collateral for a loan. When I didn’t keep up with the loan payment, my car (which was no longer operational) was repossessed.

Due to a fluke at a local Indian casino (I hit a $5,000 jackpot), I was able to come up with money for a down payment on a nicer, more reliable car. My parents co-signed on the loan, and for the first time, I’d begun to consistently pay back debt. But, my dependency on credit was unshakable. As soon as my score would recover from a bad mark, I’d apply for, and usually receive, more credit. I was no match for pre-approval offers from the likes of Macy’s, Nordstrom, JC Penney, and even Neiman Marcus.

In 1996, I began the upward climb toward my downward spiral by opening a bank card in my mother’s name to (again) consolidate the debt that I’d racked up. But, I did so without her permission.

I took responsibility for the lapse in judgment and paid back every penny. I swore I’d never do something like that again, but as most can claim: history has proven to repeat itself.

My husband and I enjoyed a short period of credit bliss after we bought our first house in 2002. I still had some debt, but at the time, it was only around $8,000, and we were working diligently on paying it off.

But my desire to have nice shoes, clothes, and other “things” overpowered my desire to be debt-free. And, shortly after my first son was born, I began using credit cards again.

The most money my husband ever made was in 2003, when he earned a $24,000 year-end bonus. Unfortunately, we had to apply most of it to credit card debt. I’d told him that we had “paid it all off,” but it was not true. There were still other cards out there that I was hiding from him. I even opened up a PO Box near the office where I worked and had the statements sent there to avoid being caught.

I had a pretty bad eBay habit at the time, and not only did the PO Box serve as a refuge for hidden credit card statements, but it also provided me with a place to send items that I’d purchased online without him knowing. (I would later find out that this is a condition called, “Financial Infidelity.”)

And with that, the art and science of hiding debt from my husband was born.

I've Been There

Part of my journey back from financial ruin included a stint in “UnemploymentLand.” (You’ll learn more about this later.)

I was so obsessed with finding a job that I literally ignored all other household responsibilities until I was finally employed again. During that time, I sent out more than 100 applications and resumes, all at my own expense.

I would have embraced the opportunity to take my resume to a copy house and get them professionally reproduced for free, but there were no programs available at the time.

Today, however, FedEx is offering to “help individuals affected by downturn of the economy” by making copies of their resume for free. The press release states: “This offer is good for 25 black-and-white resume copies per customer and is only valid for orders placed and picked up in-store. Customers may place orders by submitting their resume in printed format or as a digital file, and the copies will be printed single-sided on resume-quality paper.”

While the gesture seems small, it is not insignificant. With over 1,000 offices spread across the United States, it’s possible that they could distribute more than 3 million free copies of resumes by the day’s end.

Way to go, FedEx.

How I Got Here

How is it that social media can be so inherently popular and abundantly influential, yet it is widely unused by the bankrupt individual? Wouldn’t you think that, with so many people filing (or preparing to file, or thinking about filing) for bankruptcy, at least a few would start a blog and begin to write about it?

Unfortunately not.

While in pursuit to find other individuals who are (or were) in a situation similar to mine, I did manage to find my fair share of bankruptcy lawyer blogs, “build-your-credit” blogs, and even a fantastic forum for those experiencing bankruptcy. Yet a search for “personal bankruptcy blogs” yielded almost nothing.

So, I decided to do something about it.

I am here today to declare that I have declared Chapter 13 bankruptcy. The world didn’t stop, mountains didn’t crumble, and my life did not end. In fact, it ultimately got better.

I will be straightforward about the journey, pulling no punches and telling truths that were buried so deep, it almost took therapy to dig them up. Nothing will be held back. Not even the numbers, which I will share openly.

I guarantee you will be shocked by my behavior as a person. I lied to my husband almost daily to hide our financial messes. I took money when it wasn’t mine to take. And I even tried to fudge my way out of paying taxes, which almost resulted in an IRS levy of our bank accounts.

I am not among the ranks of the “bad things happen to good people” group. I never met a credit card offer that I couldn’t refuse. I loved to shop. I got into a direct sales inventory mess. And ultimately racked up over $100,000 in credit card debt alone (there was also mortgage arrears, a truck loan, and federal and state taxes.) And all that happened before I lost my job, so I can’t use being unemployed as an excuse. The only innocent people in my story are my husband and my children. The fact that he has chosen to still be married to me is something I will continue to evaluate for as long as I live.