$175,000 Debt Wiped out!

“And my God shall supply all your need according to His riches in glory by Christ Jesus. Now to our God and Father be glory forever and ever.” Philippians 4:19-20

You know, God is really amazing. We get ourselves into situations by doing things our own way and not His way. But, when we ask Him for help, and totally give over control, our Father will always come through. This my personal story of an incredible breakthrough.

From 1995 through 2005, I was a painting contractor. The early years were successful, although the business was small and I was wearing all the “hats” in the company. In early 2000, we had the opportunity to grow, and did so very quickly. I went from 1 crew to 5 crews in one year. We added major advertising, vehicles, equipment, and a building. Of course, we had to borrow on credit to do all of this quickly, and then hope the work would come in to support the much bigger overhead.

The sales did come in for awhile. However this type of work was very seasonal, so there were great fluctuations in cash flow. After 9/11 happened, we saw a decrease in volume as the overall economy dipped. But we still had these huge bills. Being young and dumb (I will admit that now!), I paid the operating expenses, although barely, but eventually missed a quarterly payment of payroll taxes. Then I missed another quarter, and 3 more after that. A year later, I was still struggling to hang on, but now owed five (5) quarters worth of taxes, totaling almost $100,000 to the IRS, and $25,000 to the State.

I was very scared, and rightfully so … but not enough to shut down the business. I figured sales would pick up again and I could catch up before either agency started coming after me. My wife didn’t know any of this was going on – I know, another not-so-bright choice. Everything was fine as far as she was concerned. But it wasn’t.

I tried to dig out for the next few years. Too embarrassed to ask anyone for help, so my only choice (as I saw it) was to work very hard and try to pay off the taxes before they came to collect. I did have faith in God, but looking back now, I kept the control and tried to fix the problem myself.

The business lasted another 3 years, and during those years, I paid all the current bills and taxes on time. But I didn’t make any headway on the prior debt. Every year I would receive a notice from the IRS with the balance showing, but that’s all. Eventually, the State of Oregon became more aggressive and obtained a judgment against me for the $25,000 I owed them. We worked out a payment plan and paid that off over a two year period. But the big debt was still there, now with interest & penalties.

In 2005, I closed the contracting business and that same year, the IRS woke up. Since my business didn’t have any significant assets at the time, and the debt was from payroll taxes, they assessed the entire balance against me personally. So now I had a Civil Penalty on my personal record for $100k. This couldn’t be eliminated by filing bankruptcy, so I was stuck with it.

Fast-forward a few more years. I had a three-year season as a Realtor, and that transitioned to mortgage loans, which is what I’m doing now. From 2005 through early 2010, I didn’t hear anything from the IRS other than an annual statement. They had not filed any liens or taken any collection action against me during that five years, and I now attribute that mercy entirely to God. But I still had this major burden hanging over my head, which had been there for almost nine years.

I continued to try to find ways to get ahead of the game and pay this off. I tried buying and selling a couple homes in 2005-2006 to make more money, but those ventures didn’t accomplish anything more than put myself further in debt.

Now, I should mention that I was living a comfortable lifestyle. I lived in a home worth over $500k, had a Mercedes and brand new Tahoe, a boat, and kids in private school. I didn’t really own any of it. The bank owned the home and cars, and in exchange they gave me high monthly payments. What a deal! (not!) Even writing this, I have to say to myself … “how naive and foolish you were”. Between 2000 and 2010, counting the prior business, I had millions of dollars in revenue flow through my hands, but had nothing tangible to show for it. I managed to make all the payments on the cars and house on time each month, with little left over, and the tax debt remained untouched.

To make matters worse, out of fear, I didn’t even file personal income taxes for six years. I was deathly afraid of waking up the sleeping giant and lose everything I had. Fear of loss ruled my life. I hung onto stuff. Stuff I didn’t even really own, but was paying dearly for every month. I had an image and was determined to keep it. Again … what a fool I was!

In 2008, I made the complete transition from real estate sales to full-time work as a Mortgage Banker. With ’08 being my first full year in the mortgage industry, sales weren’t coming in fast enough. This was also the year that the financial markets began to collapse, which didn’t help my situation. I had to sell my boat and the Mercedes just to pay the bills. But it still wasn’t enough. If you have ever been under a huge financial burden of any kind for years on end, then you can understand the pressure. However my drive to sustain my lifestyle kept it going. I realize now that God had other plans and wanted to rid me of this unnecessary choke-hold on my life.

The final “nail in the coffin” came in August 2008. Nine months earlier, we had not been able to pay our $5500 property tax bill. So our mortgage lender sent us a letter saying they were going to make us pay those back taxes in our monthly payment. And we would have to pay up for the next year’s property taxes, due 3 months later. AND then start a reserve account for the year after that. Bottom line is that our monthly housing payment was going to increase by over $1500/month. We had an Adjustable Mortgage at that time, and the rate was set to increase at the end of 2008, raising the payment further. This wasn’t good.

Up until this point … I had not missed a single housing payment in my life. But I knew at the rate we were going, we wouldn’t be able to afford the new payment, or the future ARM adjustment. Refinancing wasn’t an option, as we had done that two years earlier, to pull out money to pay off the Oregon tax bill, business leases, and business debt owed when we had closed it down in 2005. At that time, it was easy to get a jumbo loan for 95% of the home’s value, and values were at their peak then. So now I owed over $570,000 on my house. With the market crash, as of late 2008 it was worth about $450k. No chance of refinancing it again.

For the first-time in my life, I finally hit bottom. For the first-time, I didn’t care about stuff anymore. All I wanted was for this burden to be lifted. Not just for myself, but for my family’s sake. I no longer cared what kind of home I lived in, or what car I drove. I didn’t want this stress about how to pay the bills any longer. We had monthly expenses of $10k PER MONTH, and that didn’t count the IRS bill that was still there lying dormant, for the time being.

My wife and I prayed for several days. And by the way, this was the first time I told her about the tax bill and not filing returns for several years. She was devastated, and rightfully so. We knew some major changes would have to be made, and after prayer, we decided to let the house go. We would also give back the $1000/month Tahoe (why did I ever “buy” that?)

It didn’t stop there. We met with a bankruptcy attorney about the other debt. I knew the IRS bill couldn’t be wiped out. But besides the home & car, by this time we had another $60k in unsecured credit cards and loans. Some of that originated from the prior business, and some from living expenses, when mortgage sales were slow earlier in 2008. All of it needed to go away. I was done … I mean really done! We planned the bankruptcy filing for early December ’08, and then we would go rent a much cheaper home and get on a payment plan with IRS.

This moment of decision was a life-changer for me. I knew I had gotten myself into the situation, and I knew I couldn’t get out by myself. I told God I was sorry for being so foolish, and I asked His help. I told Him that I was willing to do whatever He wanted us to do, even if it meant giving up everything. For the FIRST TIME in my life, I was no longer “controlled” by stuff. This was my breaking point.

The next few months were interesting. We stopped making payments on the house and car in September 2008. Since we only had one car at this point, we knew that we would have to replace it when the expensive one was repossessed. I couldn’t sell it due to being upside-down. It only took two missed payments for GMAC to show up and pick up the car, which they did in early November. How humiliating that was … right in front of our neighbors!

Fortunately, we had saved enough cash (from not making house or car payments for two months) to be able to go buy a decent used vehicle for cash. But it took almost all the money we had left. Things were very tight and we soon found ourselves with less than $100 in our pocket with two weeks until I got paid again. (I get paid monthly for doing mortgages.) I had used up my “draw” privileges at work, so couldn’t ask again. No credit available. With a family to support, I didn’t know what to do. I told God that HE had to help us, as there was nothing I could do.

Now for the Amazing Turn-around … I’ve really gone into detail on what troubles we had, and how I got us into them, but now we have reached the point where the miracles started to happen. You’re going to love this!

The very day our account went below $100, I received a call from a family member, who happened to be nearby (they live 45min away), and asked me to lunch. They had no clue what was going on, as we hadn’t told anyone. My wife was too upset, so I went alone. During lunch, I decided to confess what we were going through. Before I even finished, they slipped an envelope across the table. I opened it, and there was $1000 inside!! This family member said it must be God, since they “never carry cash”. They had just sold something near my home and were on their way home to put the cash in their safe. God’s timing is amazing!

The cash got us through the next two weeks until my paycheck. Also, our grand piano finally sold to a church for the full-price we asked for it. Finally we had a slight cushion, praise God. We still planned on filing bankruptcy a few weeks later in early December, as the remaining bills were still too much for my current income. I told God again that we would do whatever He wanted us to do, and sell anything else we could, if at all possible.

On November 25th, 2008, something amazing happened. Two days before Thanksgiving, I’ll never forget this date. The Federal Government announced that as part of the first Stimulus bill (which had just passed Congress), they would start buying Mortgage-Backed-Securities. This immediately had a positive effect on the markets, and mortgage rates dropped almost ½% in a matter of hours to a new low for the year.

God’s timing is so much bigger than ours. He knew a year earlier what was going to happen to us. For the entire previous year, I had been building a massive contact database (about 14,000) of realtors and others involved in the real estate industry. I had created a regular following through my marketing. So when the rates dropped, I sent out a blast message to the group. Let’s just say I didn’t have a lot of free time that Thanksgiving weekend … within one week from that time, my pipeline of active loans quadrupled and kept growing.

We were now in the first week of December, which was when we were planning to file bankruptcy. We talked to the attorney again. He asked how business was going. When I told him what had happened the previous week, he said “we have a problem”. He said I now had future income, and any bankruptcy judge would see that and put me in a long-term payment plan, and not the debt discharge we were seeking. I was now making too much for a discharge. That’s good in terms of potential future income, but the high monthly bills were still there.

After that meeting, I sat down with my wife and we prayed. We both felt God was providing His way out. So we abandoned the bankruptcy and never filed.

About two weeks later, on December 17, 2008 (another date I won’t forget), the Federal Government made another announcement, and mortgage rates fell another ½%. Now we were at the lowest levels on record. I sent out another blast message, and then the dam broke, and broke in a big way. I had over 200 calls in the next 72hrs and the calls didn’t stop there. I barely had time off for Christmas as my pipeline quadrupled again!! Now we knew God was delivering us!

2009 ended up as a very strong year. Although it was only my 2nd full year doing mortgages, God propelled me to the top-tier closings in my local area. I ended up with several months at the top of my company, closing more than people who have been in the business 10 years longer. I give God all the credit. He brought me the opportunities and opened doors, and I did my best with them.

Our home did eventually sell in May 2009 … for less than we originally paid for it six years earlier. It was a short-sale and the bank loss on it was almost $200k. Under the current tax laws, we were able to walk away from it with no other consequences beyond a knock on our credit. Again, thank you God for removing this burden!

During 2009, we were able to ELIMINATE all the unsecured credit cards and loans – $60k worth. We needed a second car and paid cash for it. We finished the year with some money in the bank for the first time. Only thing left was the IRS debt, and I was ready to tackle that full-force. I did catch up on filing the past personal tax returns (through 2007), and fortunately didn’t owe more to IRS.

Now we’re at 2010. I have one big debt remaining … the balance with interest is now $113,000. I was ready to finally deal with it. I had a tax guy monitoring IRS notices for me and he called on April 10th and said he just got an “action letter” from the IRS. This was the first one of these I had seen since it all started almost nine years earlier. (Praise God it took this long!) The IRS was going to seize my bank accounts and garnish me. They were going to levy my paychecks, thus getting my employer involved (not good). I wasn’t surprised, but now was really scared. I had until May 5th to get a payment plan worked out, or some kind of arrangement, or I was in big trouble. Keep in mind, they still had not filed any liens on me, but I suspected that was coming too.

That April 10th call was on the Saturday leading right into “tax week”. I was determined to get my 2009 return filed on April 15th on time. I also need to complete my 2008 return as well. I had a lot of tax withholding in both 08 and 09, so expected at least a partial refund. I’ve been a W2 employee since early 2008 – no longer self-employed – so they had been withholding federal and state taxes regularly. I knew any refund would just off-set the amount I owed to IRS.

2008 was a “just get by” year … so nothing significant on the tax returns, either in income or refund. However 2009 was incredible. I had a large amount of taxes withheld. I expected to end up with maybe around a $30k credit/refund towards the $113k tax debt. Now when I did the two returns, I was able to carry forward some past business losses, which I hadn’t written off yet. I also had a lot of charitable contributions to write off.

Now the real miracle … ARE YOU READY FOR THIS??

When I finished the returns (using very good tax software), it showed that I had ZERO TAX LIABILITY for either 2008 and 2009. That meant I was getting EVERY PENNY back that had been withheld those years. Know how much that is?

$96,000 … yes that’s almost $100,000 refund!!! I almost hit the floor and started crying. I went back through the returns to make sure there wasn’t an error, and then went through them again. There was no mistakes … all numbers were accurate. In fact, I still have $60k in write-off’s carrying forward to 2010 return!

Of that total, $68k is due from IRS, and they will keep that to apply to my bill. The other $28k is from State of Oregon, and they are sending a check. We have enough in savings now to pay the remaining $17k owed. So in other words …

THIS DEBT IS GONE!!!!!! PAID IN FULL!!!!! PRAISE JESUS!!!!!! WE ARE DEBT FREE!!!

As of the time of this writing, we’re only waiting for the state check to arrive and IRS to credit my account with the returns I submitted. A 9 year burden is gone for good!! $175,000 eliminated in just 18 months!

All of this aside … you need to hear an important key we figured out. When I finished the tax returns and saw all the final figures … I noticed something interesting about our charitable contributions since 2003.

• The amount we GAVE in the past THREE years (2007-2008-2009) was almost EQUAL to the IRS debt.
• The amount we GAVE in the past SEVEN years (2003-2009) totaled up was NEARLY EQUAL to our entire $175,000 debt (taxes plus unsecured).

So in other words … we LITERALLY gave our way out of debt!!!!!

No matter all the struggles that we faced, which were all my doing, we still continued to tithe before paying any bills. And tithe in full. We gave beyond our tithes as God directed in every single year. This isn’t meant to brag, but to show that God’s principles of sowing and reaping really do work, even despite the not-so-smart decisions we sometimes make with our mortal minds.

I honestly believe God had our number the entire time. He led us through our valley and conquered our mountain. And he can do that for ANYONE else who is willing to give up control to God, and God alone.

Even though I exercised the sowing and reaping principle for years before, I truly believe my “reaping” part was delayed due to my unwillingness to totally submit to God’s will. As an entrepreneur, it is my job to make decisions, sometimes hastily. I also enjoyed my stuff a bit too much. In other words, I did what I wanted, and didn’t always listen to Him.

My wife and I have hosted our church’s worship team in our home every week for years, and also some other Care Groups. We always had the nice house, and so it became the gathering place for events, BBQ’s, and small meetings. When we made the decision to let our house go, and give up everything, it would have been VERY EASY to withdraw and not participate in anything for a season. But that’s not what happened.

We knew God was testing us and we knew that we had to continue and press forward THROUGH our valley, no matter what was happening around us. We continued to open our home every week, knowing we would lose it soon. We kept tithing, even when income was small. Even when we had under $100 to our name. I believe to this day that God honored us for not backing down or hiding … or more importantly, letting our dire situation control us.

There were many other smaller miracles along the way, as God was taking care of us every step of the way and never left us alone. One time, I needed $30k to pay a business bill by Wednesday, or face big consequences. The Sunday before, my wife and I felt led by God to give (or “seed”) $3000 towards that debt. We did so, and had $37,000 come into the business within 48 hours! And I have numerous other stories just like that.

The biggest key about this process was finding out for myself that God really IS in a good mood. He enjoys blessing us. I just wasn’t ready to receive it until my “breaking point” in 2008. All we need to do is LISTEN and be willing to give up control to Him.

Just to prove the “good mood” point, I have to tell you this example. My wife and I met almost 17 years ago in a “Street of Dreams” home. In case you don’t know what that is … the local builders have a luxury home show each summer in which 5-8 very high-end homes are built. It’s a big deal in Portland. Last year’s homes sold for around $2million each. In 1993, I was a realtor working in a particular home during the show, and my wife worked for a carpet company in the same home. We were married the next year.

The funny part is that when we let our previous home go last year (through short-sale), we knew we would be renting for a couple years. We searched around and fully expected a major down-grade from what we had lived in. Our goal was to cut our housing bill in half. Well … we are now renting (with option to buy) a “Street of Dreams” home from 1997. And it’s costing us close to half of what our previous mortgage payment was. There were several people willing to pay more for this house, but the owners chose us. We were even able to write our own lease terms, and it absolutely had God’s favor all over the place. The story with getting this home (and furnishings) is another major miracle!

Another incredible story last week … my wife and I were led by God to give a young evangelist in our church $1000 and really bless him. Within one hour of him leaving our home (9pm at night), I had 3 new contracts signed in my email inbox with commission to me worth 10 times what I had just given. By the next morning, there were 4 more, and the day after two more. All those are worth almost 30-fold on what we had just given! God is amazing!!

I could go on and on. My entire purpose for writing all of this out is in hopes that this testimony touches your life somehow. If you are in debt, I pray this encourages you and helps build your faith. ANYTHING is possible with God.

ERIC & JOY NEWMAN