Sunday, September 1, 2013

How To Change Your Deadbeat Status

Deadbeat:  A person who tries to evade paying debts.

"I'm not a deadbeat," I told the creditor on the phone.

"When can I expect a payment?" he retorted.  This question was repeated daily for 90 consecutive days.   "My situation hasn't changed since we spoke yesterday," I often told my new friends.  "Can you at least wait thirty days before you contact me again?"

"Sorry.  These are robocalls.  The calls are made automatically every day until you pay."

In order to protect my sanity, I changed tactics.  I referred all my unpaid creditors to my home phone line and left the answering machine on.  I told them I wasn't allowed to receive calls at work.  One creditor left this message... I've attempted to reach you 168 times without a response.  It's imperative that you call me immediately about a very important matter.

My wife and I struggled with our downfall.  We watched our 800+ credit score fade away into the sunset.  In our efforts to save our home, we ignored the creditors who were lower on our priority list.  We called our bank before we missed our first payment to ask for help.

"Sorry.   You aren't late and you've never missed a payment.  We can't help you."

The system was broken.  The banks were afraid our credit lines were too large.  They closed down our available credit lines to protect themselves before we suffered our first delinquency.  The house of cards was primed for a painful fall.  In the midst of our challenges, I insisted "I'm not a deadbeat."

The most powerful weapon in my arsenal was the threat of bankruptcy.  My mortgage company realized I had nothing to lose.  They changed their tune and finally agreed to a short sale as the foreclosure date grew closer.  One of my creditors offered a lump-sum settlement for less than the amount owed and we agreed.  Other creditors argued we were selective about who we paid.  They were right.   We didn't have the income to repay everyone at the same time.  Here is the plan we put in place to change our deadbeat status:
  1. We found the perfect realtors to represent us in our California short sale.  Our realtor became our liaison with our mortgage company.  We put together financial statements and letters documenting our loss of income to strengthen our case for a short sale.
  2. We sold most of our furniture to our new buyers and used the money to pay for our relocation to the Midwest.
  3. We made a plan to repay our creditors, one at a time.  
  4. We pay cash for everything.
  5. We found a seller willing to take a chance on us with seller financing.  In order to decrease his risk position, we cashed out a retirement fund and offered it as a down payment.  We added a provision to the contract that allows him to take the house back and keep the down payment if we are ever late.
  6. We found great full-time jobs.  My wife took on a second part-time job.  Our kids all got jobs.
  7. We keep our attitudes positive.
  8. We cut out all unnecessary spending.
  9. We reached out to a new lender who does in-house financing for people in circumstances like ours and formed a relationship.  He provided us with a checklist we can work on so we can eventually refinance our seller-financed mortgage.
  10. We never labeled ourselves as deadbeats.
We have peace in our home.  We have a plan to pay off our home in 7.5 years.  Once our creditors are paid off, we will accelerate our payments to our retirement accounts.   This is our plan to rid ourselves of the deadbeat label forever.

What status in your life are you changing?  What specific plans are you making to change your status?  Please share your answers in the comments section below.

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