The trouble started with the inheritance.
Eight years ago, the economy was booming and Jane Osick was on solid ground. She had manageable student loans, a stable job and excellent credit.
Then, in less than two years, she racked up $120,000 in credit card debt.
How did a sensible schoolteacher dig such a hole? Blame it on the inheritance — a house she helped refinance when her mother was ailing and then remodeled after her mother died.
"Looking back, what I should have done was stay out of it," said Osick, 48. "We should have let her lose the house, because what difference would it have made? She could have come live with me."
Instead, with her mother's health and finances failing, she and her sister refinanced the San Diego County house and put the mortgage under their names. After her mother died in 2006, Osick and her sister remodeled the house to sell. Everything needed replacing: the 1980s kitchen and 1960s bathrooms; the 25-year-old carpet, windows and doors; the rotted deck.
Osick juggled nearly a dozen low-interest cards to finance the project, but the rates ballooned along with the balances. Panicked but hoping to hang on, she gave up her Pasadena apartment, shed her stuff and moved in with a friend for a time.
Just as the remodel was finished, the market tanked and buyers disappeared. Osick found renters, but soon they stopped paying. The house ended up in a short sale and she in Bankruptcy Court.
It's often an illness or extraordinary event that pushes people into bankruptcy, said certified financial planner Jennifer Hartman of Greenleaf Financial Group in Los Angeles. "Everyone thinks, 'Oh, they just went out and spent too much,' but that's really not the majority of people in bankruptcy."
Three years into a five-year debt repayment plan, Osick is looking to the future with new financial purpose. Before, she lived within her means but never found extra for savings; now, even with a bankruptcy obligation of $525 a month, she has built up a six-month emergency fund.
This is the bankruptcy system working as it should. Not only has Chapter 13 made her debt repayment manageable, but it also has snapped her to financial attention.
But where to go from here?
Feeling vulnerable and adrift, Osick craves the stability of owning a condo. She also would like to replace her 2000 Camry that was destroyed in a 2011 windstorm.
Then there's the matter of retirement.
"I usually say if you can't afford to save for retirement, you can't afford to buy a home," Hartman said.
Osick earns $69,000 a year teaching English and French full time at a private high school and grading standardized tests on the side; last year, she read more than 10,000 essays. In her previous life, Osick didn't think she had extra for retirement savings, but her experience in bankruptcy has taught her otherwise.
The first thing Osick should do, Hartman said, is sign up for her school's 403(b) plan, which offers a matching amount for the first 5.25% of her salary that she contributes.
"You've got free money you're not taking," Hartman said. "At the minimum, take the free money."
Next, Osick should start building up her Roth IRA, currently in a Merrill Lynch account she opened with little thought; she doesn't even know how the money is invested.
Hartman recommended Osick roll over the $900 balance to a Vanguard account and set up automatic contributions.
"Vanguard's nice because they're low-fee. If you do what's called a target-date fund … they grow more conservative as you get older. They're taking all the investment decisions out of it," Hartman said.
Any amount Osick sets aside will be a great help in retirement. She has a pension that promises $2,052 a month if she continues working until age 65. In addition, at age 67, she can start collecting about $2,089 a month in Social Security; if she waits until age 70, that amount jumps to about $2,618.
Because Osick already lives rather frugally, Hartman warns that her expenses probably won't go down in retirement; in fact, they're likely to go up as healthcare costs rise. So Osick should aim to have 100% to 120% income replacement in retirement.
"My general rule is that if you start in your 20s and you save 10% [of your salary each year], you're fine. Problem is, how many people do?" Hartman said.
Most people start saving much later, in which case they need to set aside more. "Everybody thinks life's going to get easier. It doesn't. It just gets more expensive."
Osick's desire to buy a condo is a case in point.
"Your expenses would go up dramatically," Hartman said.
Osick doesn't hanker for the trappings (and headaches) of owning a house, but a condo would give her a sense of security.
"If I had family that I could rely on … I would probably just continue to rent," she said. "But it really is down to just me, and that's scary."
Under one possible scenario, Osick could buy a $300,000 condo with a 20% down payment of $60,000. That's a large amount, but it would cut her borrowing costs. Assuming 5% interest on a 30-year loan, her monthly payment (principal and interest) would be $1,288; property tax and homeowner association fees would add about $600 a month, maybe more. So the total monthly cost of condo ownership would be about double the $1,000 rent she currently pays.
Can she afford it? And is it a smart move? There's time to think it over, because she'll need several more years to build her savings.
"You've never said that you're doing this as an investment, so that's good," Hartman said, because "as a general rule, [on an] overall diversified [stock] portfolio you get a better return than you do on a house, and you're not paying property tax and everything else."
Homeownership can be a safety net, though, because "it is a nice form of forced savings for some people who wouldn't save otherwise," Hartman said.
While she's saving for a down payment, Osick will also be rebuilding her credit. She uses a secured credit card for car rentals, which helps. Hartman suggested she also make small purchases on department store cards, if those companies report to the credit bureaus.
Osick wondered whether getting a car loan would further boost her score. It probably would, Hartman said, but not enough to justify the cost. She urged Osick to continue with public transit as long as possible.
Being carless hasn't been easy, but Osick is resolved to stick with it. She can't be late for work, so she leaves the house at 6:15 a.m., nearly two hours before class begins. Winter mornings are dark and frigid at the bus stop. Summer afternoons can be sweltering, and the bus comes only once an hour.
Getting a haircut or going to Target requires planning and extra time. "I have to think about how much to carry," she said.
An avid runner, she's given up half-marathons and other recreation because transportation is such a hassle.
"The other person that I used to be" wouldn't have put up with the inconvenience, Osick said.
Although she's willing to live without a car, Osick does want a better violin. In bankruptcy, she found comfort in making music. The $120 a month she spends on lessons is her only significant indulgence.
Hartman approves: "Take the goals one step at a time, and then pat yourself on the back," she said. "I am a fan of the reward system, and I think the violin could be" part of that.
If Osick sets aside $100 a month, she could buy the violin in two years. It would be a nice interim goal as she works toward a condo, car and retirement.
One thing Osick doesn't have to work toward is paying off her student debt.
"Generally, bankruptcy doesn't do anything for student loans," said Roland Kedikian, a Glendale-based bankruptcy attorney. These debts can stay with people their whole lives.
But as luck would have it, Osick had accepted a loan consolidation offer when she took over her mother's mortgage, combining her nearly $20,000 in student loans with the home loan. That casual decision removed a major liability that would not have been wiped out in bankruptcy.
And the bankruptcy itself may have been a blessing, Hartman said, because it forced Osick to confront her financial future.
In 1985, Osick's then-employer was bought out and she was paid $10,000 in severance. The new, financially focused Jane is vexed that she can't remember how the old Jane spent it.
"I look back and think, what did I do with it?" she said, exasperated. "You'd think I would remember."
Had she locked that windfall in a Standard & Poor's 500 index fund, with dividends reinvested, it would be worth a memorable $150,000 today, more or less.