As a family, the past year has been a real roller coaster ride. In the year since returning to Muncie, we opened and closed an Irish pub, went bankrupt, totally obliterated all of our savings, lost our house and car, and moved into a rental owned by my mother-in-law (next door to my mother-in-law).

Things couldn’t be better.

Okay, they could be a little better. The point is, though, that all of this adversity has really been an enlightening experience. Before we moved back up here, we were living the “American Dream,” which is exactly that – a dream.

Like too many Americans, we bought a house and cars, not on the basis of whether we could afford them or not, but rather on the basis of whether or not we could afford the financing. The monthly payment became our benchmark. And when the monthly payments became too high, we simply consolidated and refinanced our debt to lower our payments, while at the same time incurring more debt.

When we tried unsuccessfully to sell our house in Orlando, it all hit home.

We bought our house in 2005, near the peak of Orlando’s real estate boom. It was really more than we could afford, but there wasn’t much available and prices were skyrocketing, so we were afraid if we didn’t buy when we did, we would never be able to. We were smart enough to avoid the sub-prime garbage mortgages, and went with a straightforward fixed conventional loan, for which we easily qualified. A year later, we used the equity that resulted from continued price increases to consolidate our credit card debt. 

We did everything we were supposed to. 

Our property taxes and insurance increased dramatically (also the result of continued price increases), and before we knew it, our $1,100/month house payment became a $2,000/month house payment. That was okay, though, because we had decided by then to head back north to Muncie. So we stuck a “For Sale” sign in the yard, and waited for an offer.

Us and 38,000 other people in Orlando.

As the calendar approached June, we became increasingly anxious. We had no activity at all on the house. None. Zip. Zilch. So we decided to rent it out, and wait out the market. We rented to this nice gay male couple that seemed conscientious and responsible – for less than our mortgage payment. Much less, it turned out. 

We were about as successful as landlords as we were as restrauters. 

The rent never came on time; and often when it did, the check was no good. If the planets were aligned properly, we would get the full rent on the first try; but then it would be accompanied by a list of issues to be resolved. 

Meanwhile, the mortgage payments were eating us alive. 

By January, we had exhausted our savings and retirement. All of it. Gone, baby gone. So we decided to file Chapter 13 Bankruptcy. We wanted to pay everyone what we owed them, we just need the wheels of the machine to stop turning for a bit. In the process of filing, we were forced to really examine exactly how many people we owed money to, and how much. 

It was astounding. We were living what we thought to be a reasonably conservative lifestyle. After all, we didn’t go out and buy boats, motorcycles, Hummers or take extravagant vacations. But still it turned out that it was all a sham. We couldn’t afford our house or car, or anything else we had financed. 

The way Chapter 13 works, all of your creditors get a chance to claim what you owe them. That all goes into a pool called the “bankruptcy estate.” You then make monthly payments into the estate over 36 or 60 months, depending on your income, and the creditors are paid off over that time period.

Some creditors will just want their collateral back, others will settle for a lesser amount and still others will sell their claim to a third party for pennies on the dollar (similar to selling a debt portfolio to a collection agency). Some don’t make claims at all.

So we give back the house, the Passat and some furniture; and then we pay down the rest. At first, we felt like big losers, but then I realized something: In less than three years’ time, we’ll be completely debt-free, and living a truly sustainable lifestyle.

Only thirty months to go until financial freedom. That’s worth more than gold.