Debt: A Love Story
In exchange for anonymity, one couple told us the brutal details of their life in the grip of an epic cycle of debt.
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Kate: I’m Kate. I’m 46. I have a law degree. I don’t practice law though. When I got pregnant with our first, I took the highest-paying job I could find that still allowed me to stay home and be close to my kids when they were growing up. So I work for an insurance company, paying claims. I make about $70,000 a year. We live in the suburbs of a city in the northeast of the U.S. We have three kids: ages 11, 14, and 18.
Tom: My name is Tom. I have a graduate degree in advertising. I’m 48 and I’m an insurance claims manager. I earn about $90,000 a year doing that, but I also work a second job as a bartender a couple times a week catering in private homes. I make between $100 and $250 a night doing that.
Kate: We have an insurmountable amount of debt. I’m not even exactly sure how much it is anymore. We have $60,000 in credit cards, $18,000 in a loan, and then there’s our mortgage and the second mortgage we took out, which is about $360,000 all together. And that’s not even counting our student loans. How much are those, Tom? Are you at home? Can you look it up?
Tom: Yeah, I’m at home, but I have no idea how to even look it up. The only time I go on the site is to ask them to push back when we have to start paying it. I know that’s irresponsible and horrible, but that’s really, truly what I do. I think it started at about $90,000.
Kate: Now, with interest, the law school debt is at a hundred and something. It’s either around $120,000 or $140,000, somewhere in there. We’ve almost never paid my law school loans — every year we ask them to put us in a financial hardship status so we don’t have to pay. But the interest keeps building.
Tom: I think education loans probably started us on this path. But credit cards got us in trouble.
Kate: It all dates back 20 years. Tom and I were living together in Boston, where I was in college and he was in grad school. We started to get into a little bit of credit card debt at that point. We got married in 1997. Initially we put my loans in forbearance thinking that we would buy a house and then earn more money. But we just keep putting off the loan. I actually read something about how Betsy DeVos has been saying that she wants to collect all the student debt that is in forbearance, and I said to Tom, well, here we go.
Tom: We bought our first house in 1997 for $195,000. It was fine, but then we tried to go big on the house we live in now. We bought a house that we probably couldn’t afford.
Kate: Our first house was perfectly fine, but I was pregnant with our third child, and we had three bedrooms in that house and wanted a fourth. And that house didn’t have a garage or a yard.
Tom: We built the house we’re in now in 2007. It’s a great house. But I knew from the beginning it was a stretch. It was the freewheeling times, and so they would do anything to get you into a house. They gave us a second mortgage that I’m paying right along with the original mortgage. We’ve refinanced the first mortgage a little bit, but we can never refinance it all together into one because it’s way too much. The house cost $360,000, and we have mortgages for just about $360,000.
I hate even knowing how much we owe altogether. I think the only reason we know it is because we have two of our kids in private school, so we have to fill out the financial aid forms. We had every intention of sending them to public school, but we weren’t very satisfied with the schools.
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Kate: We kept my youngest daughter, Elise, who was in sixth grade last year, in public school. We thought, well, she’s fine there. But last year, she got to a place where she wasn’t learning, she was afraid to go to school, and she got punched at one point. So we were like, that’s it. So she’s now going into private school next year; we’re going to have three at the school. What we probably should’ve done is moved.
Tom: The sticker price on the school is $32,000 a year, so it would be $96,000 if we paid full price. But we have a good deal — we’ll pay $15,000 for the three of them. But, of course, it’s all going back on credit. There’s a company that offers educational loans for private school.
Kate: You don’t actually have to even walk into a bank. You do it all online. So we have school loans on me and school loans on the kids now. I don’t even know how many credit cards we have now. I mean, honestly, about 15? We make a lot more than either of our parents ever did, but we pay it all out in credit card debt constantly.
Tom: It’s 10 or 11. Eight of them are maxed out.
Kate: We’re always broke. We shop at Goodwill. We have a garden so that we can have fresh vegetables instead of going out and having a decent meal somewhere. We don’t have fancy things in our house at all. But we do spend a lot of money on food. Like a huge amount. Organic and vegan this and that. Insane amounts on fresh produce. It would not kill our kids to eat a sleeve of ramen noodles every once in a while. Our kids are used to sushi. On a Friday night, we’ll go to Whole Foods, and my son Luke will get a $15 thing of sushi and a smoothie. It’s kind of crazy that we haven’t reeled this in. And the only reason we have nice clothes is because we have...
Tom: Credit cards. Yeah.
Kate: Like, when my son went to prom, we didn’t rent a tux because we didn’t have the cash, but we bought a suit because we have a Nordstrom card. You can’t believe how many credit card and loan solicitations we get in the mail. When they come, we research them and make sure it’s not something really crazy. Obviously they’d have to be slightly crazy to approach us with a loan. But then we ask them for it, and they give us money. It’s ridiculous.
Tom: I do all the bills. I don’t know how I ended up with it, but I’m pretty good at it. It sounds so wrong coming out of my mouth, but I make it into a game. Like, Oh, I’m going to get this money here so I can pay it here, and I know my mortgage has 30 days to pay. It’s like a puzzle.
Kate: I think the situation has probably contributed to my depression.
Tom: I don’t let it get to me that way. But I was pretty upset about the 401(k) situation. I think it was our demise. Two years ago I thought the answer to all our problems was cashing out my 401(k). It came out to be around $70,000, and I paid off three cards with it, and I also paid off the $12,000 loan I’d taken using the 401(k) as collateral. I thought, This is great. We had money for a brief period of time, so we had a pretty good Christmas that year. I knew there would be tax penalties, but unfortunately the penalties were more than I thought, and we ended up owing $18,000 to the IRS and $2,000 to the state.
Kate: Around that time I got an unsolicited credit card offer in the mail, with a $7,000 limit. It was impossible to make a payment plan with the state, so I paid $2,000 of it to the state and the rest went to medical bills because I had surgery last year. So that card was full within, like, two months, and we cut it up.
Tom: I’ve learned to compartmentalize it. I’m better at it than Kate. It’s always there in the back of my head, but I just try not to let myself go there. I fall asleep to podcasts at night, because if I don’t have the Adam Carolla Show playing in my headphones while I fall asleep, I’ll start thinking about money and worrying.
Kate: I don’t think we ever really have fun though. There is no real true joy, because even if we were to do a family trip or if we go out to dinner, we’re eventually going to pull out a credit card. Ten years ago or so, we went through consumer credit counselling. And they negotiated down our credit card debt to five years’ worth of lower payments and then it would be gone. But it turned into a really stressful situation, because when we sent our payments, they weren’t good at sending our payments off to the credit card companies. So we’d either be getting notices from the consumer credit counseling program saying they were kicking us out of the program, or the credit card companies would tell us they were no longer working with the consumer credit counseling program because the company didn’t get our payment on time. So I finally went to my parents, and they gave us $40,000 to just pay off the five years’ worth of whatever was left. We still had school loans, but we erased $80,000 worth of credit card debt with that $40,000.
Tom: We were in a good place. But then we did it all over again. We’re in exactly the same place now. That’s what bothers me the most.
Kate: It’s not even like my parents are rich. They are just really good with what they make. My mother was a secretary for her whole life and just went down to part-time. I mean, she shops at Goodwill, she buys things at the dollar store. So she gave me $20,000 of her savings after making maybe $30,000 a year for her whole life, and here we are right back in the same situation.
Tom: I feel really guilty. It’s embarrassing.
Kate: My parents have no idea that we’re back in this situation. They would absolutely kill us. I anticipated what my life would look like and it wasn’t this. I pictured being like a crunchy legal services lawyer kind of girl who lived very minimally. And now I live in the suburbs, and there are people who live around me who have seven cars and fly off to Italy for three weeks. It’s weird.
What I imagine is one of us will die from stress, and the life insurance will pay out
Tom: We definitely don’t belong here. I mean we have an NBA ref on one side of us, and on the other is a guy who built half the town. I don’t think there’s anyone like us here. I want to get out of here.
Kate: The guy next to us, who has built our whole neighbourhood, has probably filed for bankruptcy 20 times!
Tom: Yeah, but that’s different. That’s his business. He does it business-wise, not personal-wise.
Kate: Tom won’t consider bankruptcy, even though we see our neighbour in his 700,000-or-whatever-square-foot house and his Jaguars. I mean, why should he file for bankruptcy over and over and over, and you can’t? Anybody in their right mind would tell us that that’s our only option.
Tom: Yeah, I know. That’s why I don’t want to go to a financial advisor, because I don’t want to do it.
Kate: OK, but that’s not how you can live your life. You know? You can’t just ignore this.
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Tom: I can, and I have! What if I needed to get another job, Kate? They ask about it in any application. “Have you ever filed for bankruptcy?” That’s one of the questions.
Kate: Frankly, what I imagine is one of us will die from stress, and the life insurance will pay things off.
Tom: Yeah, we have good life insurance. We’re better off dead.
Kate: Right. [Laughter.] Things have gotten really hard, but I don’t think we could even afford to get a divorce. We certainly can’t afford to live apart. I mean, it’s cheaper for us to stay married. We don’t have a divorce option. The only time I have actually considered divorce, I’ve thought, Tom is not going to let me file for bankruptcy, and I can’t live like this. So we may need to get a divorce so I can help myself. [Crying.] That’s why I left the house before this phone call, because I did not want to be at home with the kids and with him, because I just didn’t know if I could keep it together. The kids don’t know anything about this stuff.
Tom: To be fair, we do try to save money where we can. We had a lease on a minivan that was costing us $405 a month that we just downsized to a $208 car.
Kate: We always lease cars. Honestly, we can’t afford repairs. If our car broke down, we wouldn’t have the $3,000 to fix it. We need to have that high car payment because, frankly, we are not good enough with money to have savings.
Tom: To put the dog down, for example.
Kate: The dog’s a whole other article.
Tom: We got two rescue dogs, and everything was fine for a couple years, and then we had to put one down. We didn’t have the money for it. So it ended up going on a card. But I don’t drive a new car. I have a 2012 Toyota Corolla. I leased it new. It had some minor damage on it — just a broken mirror — and I’m not sure what they would have charged for that. So, instead, I just kept it after the lease. I pay a huge interest rate on it, but...
Kate: I didn’t know that, Tom.
Tom: This is the kind of thing that poor people do. And I’d consider myself that.
As told to Andrew Goldman exclusively for Wealthsimple; transcript edited and condensed for clarity, and a few identifying details altered. Illustration by Dafi Tamir.
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