12 Hair-Raising Money Tales

Welcome to Bankrate's annual house of financial horrors. No one will be shocked by the terrifying tales our readers e-mailed to us this year. Housing woes, job loss, credit card surprises, lost savings in failed banks -- they're the truths we've been living with.

What's frightening is that any of these dreadful events could have happened to any of us. So read through these chilling stories and take care not to fall into the traps.

Muahahahahaha!

Co-Signing Evils

It was a dark and stormy night. The phone rang; I picked it up. "Hello?" I answered tentatively. A faraway voice responded, "Hey, it's me, what's going on?" It was my sister. The evil Department of Education in collaboration with the unpredictable Sallie Mae had denied her enough funds to live for the coming semester. "Help!" she begged.

She'd been offered a private loan from the magical land of Wells Fargo. They promised her treasures beyond her wildest dreams. She just needed one thing: a co-signer. "Oh," I replied, "I don't know. What happens if you don't pay it back?"

An impossibility, she said. Of course she would pay it back with interest and on time. Hesitantly, I inked the application and sent it off to the land of plenty.

Years later, the phone rang. "Hello?" I answered. "Hell-o" was the recorded response. "This is Wells Fargo and you are 90 days past due on your loan repayment."

I telephoned my sister. My credit was melting, melting before my very eyes. There was no way to redeem my good credit. I sat on the floor muttering, "Never co-sign a loan!"
-- Kim B., Florida

Housing Horrors

In 1995, my husband's employer in Pensacola, Fla., sold to a company in Bowling Green, Ky. The economy was strong, and we were enjoying our Florida home and thinking about retirement. But my husband took a consulting position with the Kentucky company.

We took equity from our residence in Florida and bought a small home on a large lake in Kentucky. We planned to downsize, sell the Florida home and travel after my husband completed his work.

Then, two hurricanes hit our Florida area, causing rental losses for months. Next, the company we thought was stable and friendly had an unfriendly takeover. My husband took a huge pay cut and my hours as a nurse could not replace our losses.

It is now 2009. Our Florida house finally sold, but there was a substantial prepayment penalty. We also could not pay off our credit cards, throwing us into default.

If we had the chance to do it over, we would rent instead of using the equity to buy in Kentucky. Eventually, we would have returned to Florida to manage the first property. Instead, we have to file Chapter 7. Perhaps your readers can learn from our mistakes.
-- Kentucky transplants

Credit Card Shock

We all have been lured by the "low interest for the life of the loan" credit cards. They were great for short-term loans -- no hassle, no fuss, just fill out the check and you are set. Oh, but don't forget the fine print!

I am very good about paying my bills on time via the Internet. However, by accident I once transposed the $243 amount due to $234. I was hit with a $36 late fee, but the real big hit was watching my 2.9 percent interest rate zoom to 27 percent. My heart dropped to my stomach.

I called the credit card company and was told that if I was good about future payments, they would drop it 1 percent (to 26 percent). Now what to do? I scrambled to find the money needed to pay the total amount due on the card from every nook, savings and friend I knew. Eventually, I paid it off. I paid everyone back and got my credit card back on track. I signed up for payment alerts and I double check my math to make sure I don't do this again.
-- Carla, California

FDIC Fright

I made a deposit of $141,000 with IndyMac. Even though the limit for insurability was $100,000, I felt comfortable. No huge bank had been closed for many years. Three weeks later, IndyMac bank went belly-up.

I found out the day of closing (a Friday in July) that the bank would return $100,000 and would pay back another $20,000 as a "dividend" at the direction of Federal Deposit Insurance Corp. The following week, an FDIC agent told me an IOU would be issued to me; as the bank's assets were sold, I would be first in line to receive the rest of my money.

A month later, I spoke to an FDIC agent in Dallas who told me it was very "unlikely" that I would receive any more money. She said the FDIC had already decided how much it would invest in that bank's closure and all but said the IOU was worthless.

I see IndyMac's assets being sold now, and the bank continues to conduct business as usual. But I have had no communication and it's looking grim. The government keeps throwing money at financial institutions, but obviously nothing is coming my way.
-- Jackie, Dallas

Opt-Out Alarm

I had a credit card with a high balance. The company informed me that I had two options. I could continue to use the card while the interest rate increased. Or, I could stop using the card and the rate would stay the same until I paid off the balance. I opted out -- stopped using the card and kept the old rate.

It seemed easy in principle. But I forgot that more than two years ago, I had used that card to register at Blockbuster; when I forgot to return a movie, they charged the card! My rate went up instantly and now I'm stuck.
--Emily

Appraisal Atrocity

Our mortgage company agreed to give us a furlough on our home mortgage payments to help us pay the hospital and doctor bills for my wife's cancer treatment. Then, within a matter of days, the company filed a foreclosure action against us. Our case is now before the Oklahoma Supreme Court.

As part of the previously mentioned foreclosure effort, they arranged for a false/fabricated real estate appraisal to increase the alleged fair market value some $40,000 above the actual value. This was part of an effort to justify the foreclosure action, as well as a refusal by the bank to accept a full (cash) settlement for actual fair market value (for our home).

All told, we have filed three fraud complaints with the Oklahoma attorney general.
-- David, Oklahoma

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