Despite fending off foreclosure and filing for bankruptcy about 8 months ago, the single father this year expects to lose his home. His bank told him so.
The tough times started in 2003 with a divorce, which led to a steady barrage of court and lawyer fees, custody battles and child-support payments.
Through it all, the 42-year-old webmaster refused to sell so that his two young daughters could stay in the home and community they've grown up in.
"I wanted to keep them there. I wanted to keep the stability," Gordon said recently. "I could have sold the house and moved in with my parents. How does that help your kids?"
Rather than leave the house that he and his wife purchased 12 years ago for roughly $168,000 and split the proceeds - his ex-wife wanted to sell, he didn't - Gordon struggled to keep up the $1,800 monthly mortgage payments.
Gordon got rid of many expenses: he sold his car, got rid of his television, went without hot water during summers and cashed in his retirement fund.
"For me, I'm living with nothing. No cable, no TV," he said. "You basically live with nothing for no reason. I wiped out my 401(k)."
Gordon even refinanced his mortgage to buy out his ex-wife's $80,000 share. That's when things got worse.
At roughly 10 percent, the new loan's interest rate was a few points higher than his previous loan, meaning his monthly payments were much larger.
"They convince you that there's a good reason to take a lousy loan," he said of the mortgage company's sales pitch. "You're talking at least $800 to $1,000 more."
Still, he did it, thinking it was the best option for his children. When he had trouble keeping up with the payments, he filed for bankruptcy. Despite that, his home is being foreclosed and Gordon has moved out.
Unfortunately, Gordon's story isn't all that uncommon. Anyone facing hard times - say a divorce, illness, job loss or a change in finances - could find themselves drowning in a seemingly endless pool of payments.
Throw in the higher interest rates that go along with questionable credit, and people can find themselves in an ocean of debt.
For some, bankruptcy is a way to stop the clock and get control - it can be like being thrown a life preserver in rough waters.
For others, it is a bad decision, one that leaves them feeling ashamed, alienated and left with bad credit.
Bankruptcy is a process, administered by a federal court, intended to help consumers and businesses settle debts under the protection of the court.
There are many forms, and the most common for individuals are Chapter 7 and Chapter 13.
In Chapter 7, one liquidates or wipes out the debt owed. Under Chapter 13, for which Gordon filed, a debtor sets up a repayment plan and the Bankruptcy Court proposes how the debtor will repay creditors. It is managed by a court trustee.
Mark Scarberry, a professor of law at Pepperdine University in Malibu, Calif., and scholar-in-residence at the American Bankruptcy Institute in Alexandria, Va., said Chapter 7 gives no protection against foreclosure, while Chapter 13 does allow a person to pay down a mortgage.
"It's helpful because it allows you to take up to five years to make payments or catch up on missed payments," he said. "You get time to make up on missed payments."
Bankruptcy does not, however, allow you to change the interest rate on a mortgage, he said. Not yet, anyway.
Once a dirty word, bankruptcy filings are creeping back up after a nearly 50 percent drop last year, according to federal statistics.
One factor is subprime mortgages that offer low "teaser rates" before resetting to higher rates a few years into the loan. Many loans are scheduled to reset in the coming years.
"There are a lot of people having trouble with mortgages or are going to have trouble with their mortgages," Scarberry said of subprime loans.
The American Bankruptcy Institute projects that filings will rise 40 percent this year. Filings for the first two quarters of this year were at just over 400,000, or about 130,000 more than the same period in 2006, according to the institute.
To help combat this phenomenon, and to possibly mitigate its ripple effects on the housing market and economy, Congress is discussing several bankruptcy bills that may help people facing foreclosure.
"There is a feeling that a lot of those loans shouldn't have been made," Scarberry said. "There is a sense that some of this is not the fault of borrowers."
Some key provisions being discussed include:
- Having owners pay only what their homes are worth, or a "stripping down" of the mortgages.
- Changing the terms of the mortgages and extending payment length beyond what is currently allowed.
- Allowing the courts to determine the interest rates or allowing a Chapter 13 plan to determine the interest rate.
Scarberry said there are pros and cons to the different plans being discussed, yet the overall goal is to help curb challenges in the real estate market and perhaps allow more people to hang onto their homes.
"There is also a sense that if we have massive foreclosures, it further depresses home prices," he said.
As for Gordon, he knows he'll have financial challenges for some time, yet he is hanging onto a slight chance that new laws will help him.
"I'm still hoping for a Hail Mary," Gordon said. "I'm hoping something bizarre will come out of nowhere."
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