How did we get here?

Good question, I'm glad you asked!! It all goes back about four years ago, in a galaxy far, far away...

OK, not really. In November of 2004, my family (husband, one daughter, another daughter on the way) and I moved to Northern Virginia to be closer to family. We knew there was a higher cost of living here (as compared to upstate NY) but figured salaries rise to meet that, so it would be fine.

We rented for a year, and as the year was drawing to a close, we realized we needed to think about buying. The real estate market at the time was crazy - no exaggeration, about 20-25% gains every year since 2001ish. We knew that if we didn't buy soon, we would be priced out of the market and would never be able to buy. At the time, my husband made about 56K (I stay home with the kiddos). We contacted a realtor and started looking. We could only afford condos - single family homes, and even townhouses, were way out of our price range. We ended up with a 2-bedroom, 1-bathroom condo, about 950 square feet. We knew that we wouldn't be able to stay here forever, but we thought 5-7 years until the kids get bigger, and then we'll move up to something more. The price for our little piece of paradise? $272,000.

Luckily, we were smart enough to know to stay away from those exotic mortgages (ARMs and such) and just got a plain-old, 30-year fixed-rate mortgage. It was financed 100% through a state program designed to help low- and moderate-income families. Because of this program, we didn't have to pay PMI, and the payments were interest-only for the first 7 years.

So let's stop here for today. You might have some good questions, like:

1. If you were priced out of the market, so what? Maybe that means you picked the wrong place to live or have the wrong job.
2. Why buy when you weren't prepared for it? You didn't have a down payment, so you should have just waited.
3. Why the HELL would you be approved for a $272,000 mortgage on a $56,000 income?

All excellent questions, I assure you. As to 1 and 2, blame that on financial inexperience. We were 26 (me) and 24 (husband) at the time. Just not much time in the "real world" yet. The answer to 3 was that these were the boom years! Anyone and everyone could get a mortgage. We could afford our payments, just barely. Our monthly payment, when you figured in mortgage, property tax, and 2 homeowner's association fees (one for the condo community, one for the HOA in our part of the town) came to $1,830. That means that we were approved for a mortgage payment totaling almost 40% of my husband's gross monthly income. However, I actually worked a small part-time job from home, which added about $1000 to our monthly income. The lender wouldn't consider that income when we applied for the loan because I hadn't worked this job for a full year, but we knew we had it and it gave us some breathing room. (In retrospect, thank goodness they didn't consider it, because we would have gotten a more expensive place, and I truly don't know that we would have been able to afford it.) Also, we figured our income would go up and it could only get easier.

That's it for today! Stay tuned for the next episode...

It Begins

All around the country bankruptcy rates are through the roof right now. According to the Administrative Office of the Courts, non-business bankruptcy filings increased 28.4% from June 30, 2007, to June 30, 2008, and I imagine that it will be even worse this year. People are really being hit hard by this economy and find themselves too far in debt to dig themselves out.

Unfortunately, my family has been one of them. Our story is a little different than most, I think, and I will share it with you later.

As we contemplated filing for bankruptcy, I searched online for personal experiences with how it works, how it affects your life, and how you try to recover from it. I could find little snippets here and there, but not much detail. A few weeks ago, I had the brilliant idea to start my own blog about it! I wish that I had thought of it in January when we were preparing to file so that I could have chronicled that part of the journey, but such is life.

We filed for bankruptcy on January 29th. The whole month was spent in a haze of gathering paperwork and culminated with 2.5 hours in our lawyer's office on the evening of the 29th trying to get all the paperwork done correctly. (We needed to file that day because my husband would receive his monthly paycheck the next day and that would have messed up everything.) It was all completed successfully though, and now we are about one week away from our 341 hearing.

I look forward to sharing with you how we got into this situation in the first place, things I learned as we prepared to file, and what comes next! (I wish someone could tell ME what comes next!)