Once we received the modification for our first mortgage, after the 18 month wait, it took a matter of days to modify our second mortgage. Yes, days. Why? Because if our house is foreclosed on, the bank that holds our second mortgage will get nothing, $0. They want to avoid that as much as possible so they made the process extremely easy.

By the way this is how our mortgage was modified. The first mortgage they took our back payments and added them onto the top (which doesn’t make much sense because we are in essence then paying the back portion twice as we catch up to where we should be and then again when we pay the portion they added on, but we didn’t have much of a choice.) They lowered our interest to 2% with a step up to 3% and then 4% after a certain number of years, and increased the loan to 34 years. Our payment went from almost $1600 to $912 a month. On our second mortgage they took $8k and spaced that out over 25 years I believe, and then there is a balloon payment of the other $65k. So, we are only paying $30 a month for our second mortgage (we are paying more so we don’t have the balloon even though it’s doubtful we’ll be here in 25 years.)

So, the really scary part was over, our house was safe. During those two years a credit card company got a judgment against me because I was unable to pay the debt as we struggled to keep both of the houses and take care of our children. (A little digression here, people always believe everyone just runs out and files bankruptcy at the drop of a hat when nothing could be further from the truth for most of us. We struggle to make things work, we want to pay our bills and avoid bankruptcy, but we learned along the way that creditors don’t want to be flexible.) I tried to negotiate with the creditor, but they would have none of it. The debt is for a little over $7k from business expenses, and their idea of settling was me paying $200 less than I owed. Helpful! Not.

So they filed for a judgment and received it. Unfortunately for them, I don’t own much. We own our house, but it’s in both of our names and worth less than the mortgage so they couldn’t touch it. There is nothing in my bank account, so they decided to go after the only thing they could – my car. Both of our cars are paid off, we worked hard to buy cars and not have car payments. We drive our cars until they die. They are both over 8 years old and have almost 200,000 miles each. Of course the credit company didn’t know that, so they thought they could get something out of my car.

The day the sheriff showed up on my door I knew the end had come, I would have to file bankruptcy. I had no choice. I have children I have to get to the bus stop each day that is 3 miles away, our grocery store is 20 miles away, we need our cars. Since my husband is often at the other house with his children, we must have 2 cars. I started filling out the bankruptcy petition, doing research to make sure I was doing everything right when I stumbled upon a form on our local court website that would save the day and put bankruptcy off for at least awhile.

In our state when someone puts a levy on your property there are state laws that grant exemptions (just like bankruptcy exemptions but without having to file bankruptcy) to certain property and all you have to do is request a hearing and prove that it’s exempt. I rushed down to the court house to file and the hearing was granted for a week later. When I arrived at the courthouse for the hearing I found out the creditor had the case dismissed because they knew I would win. I was so relieved, my car was safe and I hadn’t had to file bankruptcy to do it.

Now we wait to see what happens next. Hopefully we can keep everything going, but I know that bankruptcy is a great option, our last option, but it’s there if we need it.

Part 1 – Filing bankruptcy, a true story
Part 2 – Loan Modification
Part 3 – Foreclosure
Part 4 – Judgment