Part 1, 2, 3, 4

With the bankruptcy pending, Marion continued to look for a job. She hoped she'd pick up work as a bankruptcy attorney. She figured there were lots of people in financial trouble. But her ad in the Yellow Pages didn't lead to a single client. A few months later, another blow came:

She recorded an entry in her audio diary: "I had to give up my law license, too. I didn't have $350 to pay for it, so I no longer can practice law in New York, or anywhere else for that matter. So my life is changing and it's not great at the moment."

Two months later, Marion got some better news. Her partner had landed a new job, and his health insurance would cover her. Bankruptcy had ended most of the calls from creditors.

"There were some people there that really I felt never deserved to get paid anyway," says Marion. "There was one credit card company - they were just awful. And I was glad to write them off. Other people I didn't feel that good about. I wished I'd been able to pay them, and maybe someday I will. I don't know. But it's good just to have them off my back. "

Still, the bankruptcy didn't clear up all of Marion's debt problems. By law, bankruptcy can't get rid of her student loans, which total $100,000 for herself and her kids. Marion has decided even with a bad back she can teach. She'd like to work with kids in the Bronx.

"The thing is, you know, I am a perfectly capable person. I am a very good teacher. I was a very good lawyer. There's so many things that I'm good at. And yet, nobody around here really cares. You know, it's really hard finding a job, and I've got to find a job that makes enough money so that I can pay back my student loans. And I can't physically work at Burger King. I just can't be on my feet. I can't work a stand-up job like at Wal-Mart, or something. I just can't do those kind of jobs, and I know that. But the other kind of jobs, I guess I'm just not the right age."

Now 57 years old, Marion is a substitute teacher. She has no retirement savings. She calculates it will take her until she's 90 years old to pay back her student loans. Not much of a fresh start.

Bankruptcy was only a partial solution to Marion Chase Pacheco's problems and a painful one for her. But not everyone shares her sense of shame.

Heather Fordham returns from her first day back at work after maternity leave. Tom Fordham holds daughter Alexandra.
Photo by Chris Farrell

Tom Fordham lives in rural Vermont, about an hour outside Burlington, near a place called "Smuggler's Notch." A stream winds along the roadside.

"The way I look at it, it's one of the last nice places left in the country. Maybe I'm just particular to this particular spot," says Fordham.

The area's mountain passages and caves were once popular with smugglers. Now, it's hikers and skiers that ply its picture-postcard trails. Tom rents a modest townhouse nearby with his wife and her 12-year old son. They left Long Island for Vermont following 9/11. An information technology worker and self-confessed computer geek, he felt at home here.

"I liked the individuality, the appreciation of individuality that seems to be up here, the spirit of rebellion."

Tom says he's always been something of an outsider, a rebel against authority. Take the name of his Yahoo group Web site: "Smash the state." But even a rebel needs a job. Tom moved up here without one, and had a hard time finding high-tech work in Vermont.

Tom explains, "I pretty much went about a year, year and a half without any work at all, maybe ten days worth of working at a hotel and that didn't work out too good."

To make ends meet, he cashed out his pension and relied on credit cards.

"So a lot of that debt that had built up had been cash advances and then they were transferred between cards to take advantage of the special rates. That made it affordable," says Fordham.

Tom ended up with $40,000 on four cards. The debt went for nothing extravagant: groceries, gasoline, and other living expenses. Even after finding part-time work at a nearby college, he continued to make just the monthly minimum payments. The house of credit cards tumbled down when he missed one payment. A week later, he paid over the phone, but it was too late.

"Then that rate jumped to the default rate," says Tom.

A credit card's default interest rate is around 30 percent. Worse, about half of all issuers now impose a universal default policy hidden in the fine print of a credit card agreement. Late on any payment to any creditor, and the rate on the card could automatically jump to the default rate. That happened to Tom. Suddenly, he owed $30,000 at 30 percent on two cards, plus another $10,000 at a lower rate. The default rate outraged him.

"You just pushed me over the edge, and I can't keep up with this. Even if I tried to keep up with this, I couldn't keep up with this," Fordham remembers. "I could run on a treadmill and eventually I'm going to fall off."

Continue to part 4

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