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Eliminating Debt in a New Economy
By Larry Burkett, Pam Pugh
Moody PublishersCopyright © 2010 Crown Financial Ministries
All rights reserved.
BEN and NAOMI: WHATTheyDIDN'T KNOW
Ben and Naomi were both from middle-income families. They grew up in the suburban area of Chicago and did their share of chores around the house.
Naomi's father was a practical person who kept the household records and distributed the money. He budgeted an amount for Naomi's mother to manage the household. He paid all the other bills and gave Naomi a modest allowance. Naomi was required to work for a portion of her clothing and entertainment money.
In Ben's family the distribution of tasks was different. His mother handled the checkbook and paid the bills. His father never got involved with family finances, except when he wanted to buy something. Then he simply wrote a check for the amount he needed. That habit caused some terrible fights, since he never bothered to record his check amounts. Ben could almost always go to his dad and get money when he needed it. When he did this, Ben's father usually told him not to tell his mother, because she would have a fit. Ben's father worked hard on his job, even picking up overtime whenever he could, and believed that the money he earned was his to spend as he wished.
Ben held several part-time jobs while he was growing up but rarely stayed at any for longer than a few weeks. Like his father, he believed that the money he made was his to spend as he desired. When he was in the twelfth grade, his father bought him a nice car, and his mother blew up about it because she hadn't been consulted.
When Ben started college, he was encouraged to apply for student aid and government loans. He completed two years of college while living at home but never really decided on a field of study. He took a summer job as an equipment operator with a local power district and received an offer to stay on permanently, which he accepted, rather than finishing his college degree.
He and Naomi dated for nearly a year after they met in college. When Ben took his permanent job, he asked Naomi to marry him, with the understanding that she would finish college and go into advertising and marketing.
Neither Ben nor Naomi received any detailed instructions from their parents about marriage. It was assumed that the pastor of Naomi's church would provide the counseling they needed. Indeed, the pastor did require several sessions in which they discussed sex, communication, and spiritual values. Once he asked Ben if he would be able to support a family, to which Ben replied, "Yes, sir, I make a good living at the Evanston Power District. We'll be all right."
The pastor never pursued the subject further. So having completed what they thought were the requirements for marriage, Ben and Naomi were married.
* * *
The seeds of financial collapse were planted early in Ben and Naomi Wister's marriage. When they were married, she was twenty-one and he was twenty-two, and neither one knew much about financial matters. Their plans were simple—they would delay having children for five years. Naomi would use that time to finish college and get established in her career. After that, they would begin a family. There was some thought that Ben might go back to college someday to finish up his degree, but that was only a vague idea.
But after living in an apartment for five months, Ben decided that it didn't make any sense to keep throwing money away on rent. Some of the guys at work had told him he was losing all the tax breaks the government allowed homeowners. "Get yourself a house and start building some equity," was their advice.
Ben and Naomi began to look for a house they could buy. They found one that was near their price range, but the bank wouldn't finance it on the basis of his income alone. So during the summer college break Naomi took a job with a local product design company, part-time so she could return to college. Based on their combined incomes, they signed to buy the home. With their credit card and store credit, they were able to furnish it and buy the appliances they needed. There was enough available credit on their card to enjoy nice dinners, evenings at the movies, and sporting events.
They didn't have the down payment, so Ben's dad cosigned for a loan through his credit union. The couple did not include this amount as a loan on their mortgage application. The monthly house payments required more than half of Ben's take-home pay at the time. Almost immediately they were in financial trouble from the payments alone. With the insurance, taxes, and utilities added, Ben and Naomi were on the road to debt without realizing it.
After the first month, Ben was unable to make the payment on the credit union loan. When it was sixty days delinquent, the credit union had the payments deducted automatically, according to their written agreement. Ben's father, the cosigner, was sent a written notice of collection proceedings against him for the two months in arrears. When he received the notice, he hit the roof and stormed over to Ben and Naomi's to confront the issue.
By that point, Naomi had gone back to school. Since Ben took care of paying the bills, she hadn't realized they were behind. When she found out, she was devastated. Ben's dad demanded that they pay the past-due bill. When Ben told him they couldn't, his dad suggested that Naomi get a fulltime job.
"Ben, I can't see any way that we can keep this house," Naomi said. "Maybe we should try to sell it. I really don't want to have to drop out of school now."
"We won't have to sell the house," Ben replied emphatically. "I can get a loan on the car to catch up the payments. I'm due for a raise pretty soon; then we'll have enough to make it."
"What if the raise doesn't come through?" Naomi asked.
"You don't need to worry. Trust me; everything's going to work out."
So Naomi put the subject of finances out of her mind. But she couldn't shake the nagging feeling of impending disaster.
Ben negotiated a loan on his car for enough to catch up the credit union payment with some left over. He used that to buy a Blu-Ray disc player, reasoning they could have home entertainment instead of going out.
When Ben received his next check with the loan payment taken out, he was shocked. His net pay for the first pay period of the month was far less than he was counting on. He had already mailed the house payment, anticipating his pay, and he realized that the check probably wouldn't clear. Sure enough, the bank alerted him by e-mail and also mailed a statement that the check to the mortgage company had been paid, but their checking account was being charged for insufficient funds. Ben and Naomi were appalled at the daily fee for being in the red.
Not knowing what else to do, Ben called a local loan company that advertised immediate second mortgage loans for homeowners.
"Ben, I absolutely will not sign to get a second mortgage on this house," Naomi stated.
"We can't pay the bills we have now!"
"There's nothing else we can do," Ben said, raising his voice. "We have to pay the mortgage. We don't want to foreclose."
"I don't care if we do," Naomi said, beginning to cry. "I don't think I can take much more of this." Then she added, "I'm going out for a while. I just need to get away and think."
With that, Naomi went walking and wound up at her parents' house. When Naomi's dad came home that evening, he said, "Hi—I didn't expect to see you. You don't look happy. What's the problem?"
"Oh, Daddy, we're in such a financial mess, and I can't get Ben to be honest with me. We seem to get into more trouble every month."
Naomi's father was wise enough to call Ben and ask him to come over and talk. Ben explained the problem of the credit union payment being taken out of the first of the month's paycheck, when he thought it would be taken out of the second check. Ben assured Naomi's father it was all a misunderstanding and that he would be able to make the adjustment the next month.
Rather than allow them to take out a second mortgage, Naomi's dad decided to lend them the money himself. He just asked that Ben pay back the loan as soon as he could. Ben assured him that he would do so and that it would be no longer than two months.
Even a casual observer could see at this point that giving Ben and Naomi more money was not the answer. But it's often much easier to see the truth in someone else's life than it is in your own. Certainly Ben wasn't trying to deceive anyone. He just didn't have enough information about the way finances worked to make an intelligent decision.
The loan from Naomi's father didn't solve any problems. It merely delayed the inevitable. Within a couple of months, bills were backing up again. Creditors were calling day and night. It was almost impossible for Naomi to concentrate on her schoolwork. For the first time in her life she began to let her grades slip. That put additional pressure on her, especially when her father called her cell to chide her about her midterm grades. "Naomi, we're glad to help out and pay your college tuition and buy your books, but we expect you to do your part," her father said. "If you don't keep your grades up, we'll stop helping. What's the matter? You're capable of doing better work."
Naomi was shattered. She had always had the approval of her parents, and now they were putting pressure on her too. An event that very evening became the final straw. She came home at about 6:00 p.m. from classes, almost on the verge of tears because of the earlier discussion with her father. She opened the door, flipped on the light switch and—nothing happened. She made her way to the dining room and tried that switch. Still nothing. Finally she realized that their power had been turned off.
She found a flashlight and began to look through the desk in their bedroom, where she found two delinquent notices that warned that their electricity would be turned off if the bill wasn't paid immediately. She also found similar notices from the gas and water companies. She sat there in the dark, shaking, until Ben came home.
When Ben came in she heard, "Naomi, what's the matter with the lights?"
"I'll tell you what's the matter! You haven't paid the bill, and they've turned our power off. That's what's the matter! And ... I found notices from the other utilities too. Ben, what's going on? Can't we even keep up with the utility bills?"
"I'm sorry. I meant to pay them, but there wasn't enough money in the last paycheck. I'll try to get caught up next paycheck."
"It's always the next paycheck with you. But we never seem to have enough money to catch up. I'm going to quit school and get a full-time job. I just can't live like this anymore."
"I'm really sorry ... but I think you're right. If you could just work for a while until we get caught up, it really would help. You should be able to go back next fall. I've got another raise coming that will help a lot then."
Naomi quit school and was able to move up to full-time hours with Wagner Design. She had been accustomed to tithing her income, as she had done before she got married, but Ben said they couldn't afford to do it. He was supported in that decision by both sets of parents, who felt it would be better to pay off some of the debts first.
For several months things seemed to get better financially, and her relationship with Ben even improved. They had some extra money to go out periodically, and Naomi was able to buy a used car so she would not be dependent on Ben to get back and forth to work.
Then Naomi began to feel nauseated in the mornings. When she missed her period, she wondered if she could be pregnant. She hadn't been disciplined about taking the birth control pills her doctor had prescribed. A home pregnancy test confirmed her suspicion: she was pregnant.
She thought about Ben's reaction and the fact that not only would a baby curtail her education, but would also greatly reduce her ability to work. She felt like she was in a box with no way out. The thought of an abortion briefly flitted through her mind, but she discarded it. Her strong Christian background would not allow her to do such a thing. But now she understood the terrible temptation that money pressures created for others who found themselves in the same situation.
"Pregnant? No!" Ben exclaimed when Naomi told him. "How could you be so stupid, Naomi? All you had to do was take your pills and you wouldn't have gotten pregnant."
"Do you think I got pregnant on purpose?" Naomi yelled back. "I don't like this any more than you do, but there is nothing I can do about it now."
Ben stormed out of their bedroom. Naomi collapsed on the bed in tears. She had always thought she'd be excited to become a mother, but this wasn't the right time. She felt guilty about getting pregnant and anxious about the future.
How will we ever be able to pay for a baby? she wondered. If I stop working, we won't even be able to pay the bills we have now.
The rest of that evening Naomi stayed in the bedroom and Ben stayed downstairs. He began to feel guilty about his reaction to Naomi and decided to apologize. But by the time he went upstairs she was asleep.
Naomi tried to continue to work, but morning sickness forced her to miss more and more days. Finally, her supervisor called her in to confront the issue.
"Naomi, I know you've had a tough time with this pregnancy, but you've missed six days in the last two weeks. We need someone who can do the work. Why don't you take a month's leave of absence and stay home? I'd like to keep you, but maybe I can hire a temp for a few weeks. If you're doing better, then come back and see me, and we'll try to bring you back."
"Oh, Melanie, that's thoughtful, but I can't afford to stay home," Naomi replied. "We're—I can't really talk about it, but things are pretty tight financially. I have to work, or we can't keep up with our bills. Sometimes I don't see how we'll ever get caught up."
Melanie Moore grew thoughtful, then said, "If you're that strapped, maybe you and Ben ought to see about filing for bankruptcy. You're not going to be able to work while you're so sick. And if you continue the way you're going, you will ruin your health and the baby's too."
"Bankruptcy?" Naomi said. "I never envisioned us having to do anything like that."
"My husband's an attorney," Melanie replied. "I can assure you, it's no stigma to file for bankruptcy. Here's his card. At least talk it over with Ben and give my husband, Joe, a call if you'd like to look into it."
That evening Naomi was quiet through dinner. Ben sensed something new was on her mind, but he dreaded asking what it was. Their relationship had been so tense since Naomi told him she was pregnant that they rarely spoke to each other without getting into some kind of argument. Finally, he spoke up. "What's wrong now, Naomi? You have barely said two words since I got home."
"I lost my job today," she replied matter-of-factly. "Well, I was put on leave for a month. Unpaid."
"Why? What happened?"
"Melanie Moore said I was taking too much time off, and they needed someone who is more consistent."
"They can't do that. It's illegal, isn't it?" Ben's reaction was from fear, as much as anger.
"Well, they did it," Naomi replied. "They're willing to try to bring me back when I can work again. But Melanie is right: if I keep up this pace, it may hurt the baby."
"But what are we going to do?" Ben said in despair. "We just bought your car, and we can barely make ends meet even when you work."
"Melanie suggested that we file for bankruptcy protection," Naomi replied. "She said her husband is an attorney who handles bankruptcies for couples like us all the time. But I'm not sure I want that kind of thing on my record."
"It's my record, too," Ben asserted. "We've got a lot of credit card debt along with the house and cars. We can't keep going like we are. Something's got to give."
"My mom and dad never would have had to do anything like this," Naomi answered, handing Ben the business card her supervisor had given her. "It's embarrassing."
"In a situation like ours, you do what you have to do, Naomi. It boils down to one thing: survival."
Under provisions of the 2005 bankruptcy law, Ben and Naomi were required to meet for ninety minutes with a credit counselor in their judicial district. They also had to attend classes on managing money—at their expense. In addition, the law required them to take a two-part means test, which evaluated their ability to repay their unsecured debt and compared their income to their state's median income.
In a meeting with Melanie's husband, Joe Moore, they learned that the amount of debt they hoped to eliminate through bankruptcy would not be as great as they initially thought. "Based on the results of your means test, you don't qualify for a Chapter 7 bankruptcy, which eliminates the greatest level of debt," Joe said as he looked at Ben and Naomi's paperwork. "It looks like you'll have to apply for Chapter 13."
"What does that mean?" Ben asked.
"Chapter 13 involves a repayment plan that can last up to five years," Joe replied. "Debts that the court includes in the plan will have to be repaid. The good news is, you don't have to repay the debts that aren't included."
Excerpted from Debt-Free Living by Larry Burkett, Pam Pugh. Copyright © 2010 Crown Financial Ministries. Excerpted by permission of Moody Publishers.
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