It is often said that the economy is to blame for so many bankruptcies and foreclosures, but most think of the economy as an unseen monster; and they really don’t understand how it affects them directly.
This is one couples story of how it affected them and how they are now quite familiar with the economy and Corporate America.
He is a big guy, and she is petite. She does most of the talking, while he sits quietly by and interjects an occasional comment on issues he feels strongly about, or something she may have forgotten.
She begins with, we believed we were doing well maintaining a ‘middle class’ lifestyle. He has worked for a major airline for thirty three years. She works in accounting for a global manufacturing company. She said the financial challenges began when the airline filed for bankruptcy and he was required to take a pay cut and give up raises for five years.
We were often told we would need to have credit (good) credit to get anywhere. So we established and maintained a very good credit rating.
That changed when we had need of a new vehicle, one that would be practical in our rural area. After the purchase of a new truck, it was clear that the expense was going to be too much to handle after the pay cut, so the best was to return the truck on a ‘voluntary repossession’. There was a difference in the amount that was still owed on the truck and the amount that they sold it for. Which we paid, so no one lost any money, he said. She nods and says that had a short-term negative impact on our credit. There were a lot of debts to be paid each month. We managed to make our monthly payments on time. He said late fees were like giving money away. So, she said we did our best to avoid them, even though finances were strained some months. We still found a way to make things work.
With every home we have purchased, we insisted on an escrow account, to avoid struggling to come up with a big tax and home insurance payment every year. Expecting the taxes paid when they were due, before the amount increased amount from a delayed payment. That’s like a late fee he said.
When we received a late notice on our tax and insurance bill, we called the mortgage company. They assured it would be paid right away. I told the bank we would not be liable for the increase in the amount. The following year, we again received notice of no payment, and again I called the mortgage company with the same situation. Six months later, the mortgage company increased our, already large monthly payment by 10%, saying that they had not collected enough money for the escrow account the previous year, and the difference needed to be collected. The following month the mortgage company increased the monthly payment again by 10% making the monthly payment very hard to pay.
This was soon followed by the time when credit card companies greatly increased the amount of the minimum payment. We may have been able to absorb the higher minimum payments were it not for the big increase in the mortgage payment, which stressed the budget beyond what it could handle.
It was a short time later that I was diagnosed with an uncommon illness, for which there is no cure. We have medical insurance so we thought we could get through it. We didn’t realize that the cost of seeing to see a specialist would double our co-payment. There were also co-payments for tests, treatments, rare medications and surgeries, all with a higher cost. This also interfered with my work schedule and my pay. He said, most people believe they are financially secure, and don’t realize they are one major illness away from financial ruin.
