For those of you considering bankruptcy as an option to relieve your financial distress - please read this. I know that there is a negative stigma that generally goes along side of filing for bankruptcy, especially all of those debt settlement and debt management commercials you see on TV. I love how they always have someone say in the most condescending tone possible "I didn't want to file for BANKRUPTCY" as if it's the worst thing on earth...
It really is NOT all that bad. Let me explain..
I was 23 years old when I filed for chapter 7. This was a little over a year ago in November 2010. Yes, it was due to living beyond my means. I was young, credit was WAY too easy to get and I made my fair of stupid decisions. I don't need anymore people passing judgement on me for the fact that I racked up credit card debt and went bankrupt - yeah, I'm well aware of that. At the time I had just under 40,000 dollars in credit card debt, 1 car lease with Honda, 1 car loan with 5/3rd bank (yes, I was stupid and helped a significant other at the time...) Anyways, aside from that debt I owed around 70,000 in student loans. Mind you, I just finished school and was in my 6 month grace period at the time I filed. I was current on all of my bills up until the time I signed the bankruptcy petition. Knowing that my student loans HAVE to be paid no matter what and also knowing that I was already living paycheck to paycheck I had to do SOMETHING and FAST.
So, I went ahead and filed. I thought my life was over. I thought I would never get credit again. I thought I was a loser.
Well, here I am over a year later and I can honestly say that if you need to file just DO IT. It's not as bad as everyone says. The meeting of creditors was kind of stressful until they called my name, then it was a quick and painless 3-5 minutes and you're done. You wait 60 days or so and then you get your discharge. Now, If you own a lot of stuff then you might want to reconsider. But, for someone who owns nothing and has a lot of unpaid bills with little income - I would definitely say bankruptcy is a very good option. Sure, you can go through debt management and end up paying debt back for years and years in the meanwhile your credit is tarnished and you're unable to borrow for anything that might come up....or you can do even worse than that and try debt settlement which destroys your fico probably just as bad a bankruptcy does. You'll have paid out a whole lot of money and still have bad credit when you could have just paid a bankruptcy attorney and filed to wipe out every old debt you have out there aside from student loans and taxes/child support.
Yes, it DESTROYS your credit at first. yes, you will pay to rebuild your credit. You'll pay in annual fees, account setup fees, "monthly maintenance" fees- and pretty much any FEE they can think of at first. But, you have to keep in mind that you just wiped out a LOT of debt so to me paying those fees wasn't so bad because 1. it was a tool to rebuild my credit and 2. it sure beat paying all the fees over all the DEBT that I owed prior! What I did was opened a credit card with CreditOne bank - they are bankruptcy friendly and the fees aren't SO bad. I would avoid FirstPremier if at all possible - they're expensive.
So, I built my credit back up for a few months with that card and then I bought a used car with a loan through Santander. The interest rate was high but I had a plan, I put as much as possible down on the car with a plan to trade it in after 6 months for a better interest rate. In November (exactly 1 year post BK7) I purchased a brand new corolla through Toyota Financial Services with a nice, low APR of 4.25% - not bad considering where I was at a year before! Of course, YMMV but I guess the message here is that you CAN rebuild and bankruptcy is NOT the worst thing in the world. If you're considering bankruptcy keep that in mind. Take the negative things people say about it with a grain of salt. Most people that talked negatively about bankruptcy to me had never even filed themselves! I'm willing to bet that they're the ones who keep the debt settlement and debt management companies in business.
Thanks for sharing. I have the same sentiments. I was foolish and made poor credit choices but bankruptcy gave me a fresh start.
All the best to you on your credit journey!
I absolutely agree with you. Bankruptcy was a last resort for me, but it became my only option and turned out to be the best thing for me. I didn't have a lot of cc debt and always lived within my means, but when my kids mom and I split up I went through a long custody dispute and I chose a horrible attorney. I ended up winning, but It left me with tens of thousands of dollars of debt. I cut every expense I could to try and pay it back but I eventually couldn't keep up with that and all of my other bills. I eventually ended up dropping my auto insurance and sure enough I got in a wreck a few months later. Luckily no one was injured but I was responsible for almost $10k in damage that I had to pay or my driver's license would be suspended until I paid it off. Ch 7 became my only option. I fought it until the very end and tried my best to pay all of my debt, but in the end I finally realized that my credit scores were continually declining and I new I would never catch up. Oh, did I mention I had almost 70k in student loans? Lol
I can now say that I am 2 years discharged from bk, all of my credit scores are close to the 700 mark, I have received 2 unsecured cc's, an auto loan at a very good interest rate through my credit union and I continue to make my ridiculously high student loan payments every month. My bills are paid, I've got money in the bank, I have access to credit if I need it and my fico scores are slowly rising. I still don't "feel good" about having to file bankruptcy, but I can honestly say it was the best decision possible and is definitely not the end of the world as some would say!
I am 2 years (Feb/2012) from Ch-7 Discharge, and my Scores range from 650-709, ha. Fico TU 674, Fico EQ 685.
I had to start out with a Fingerhut Credit program for like $150, where I had to put 20% down, or something like that, ughh. I finally got a Walmart CC for $150! (now at $1,500 13 months later)
Got a rebuilder loan from Credit Union (borrowed my own money for like 1%) for my 3rd good TL, and that's how I got started
Finally a partially secured Capital One (maybe it was unscured, but just $300 CL) Thta has recently, <2 years upgraded to Quicksilver $5000
I'd buy a package of socks from Walmart for $10-15, then pay it off as soon as the statement hit. Never letting My Utilization get over 30%
Then, finally cracked the Barclays CC for NFL card for $500, which they raised to $2000 after 6 months, now at year $3000
** As to Auto financing, the Offers will FLOOD in as SOON as you file (keeping in mind, that in most states if not all, you really can't consider a auto purchase UNTIL Discharge 2-3 months later. But the DAY of Discharge, you can be in a car, which gives you those 2-3 months to prepare and keep getting better financlially.
Those first offers, will likely be 18% and higher.
Many Banks and Credit Unions won't loan until Discharge is a couple of years old, so keep that in mind. a GOOD F&I guy will know which ones can be worked with
Capital One Auto and others can offer some decent Alternative rateds/funding for someone fresh out of bankruptcy.
** Finally, don't despair. Concentrate (if you are going to NEED a car) on getting a RELIABLE car, not from the shaddiest dealers. Get SOME sort of warranty
---- The rate is going to be high, but you can always get it re-financed after a year, or perhaps 6 months like I did.
**PS KEEP track of your Credit situation!!. CreditKarma (Transunion) & CreditSesame (Experian) are totally free and I've used them for over 2 years
Credit Karma is now weekly updates, and Credit Sesame updates monthly and will send a notice. They also include monitoring, with alerts for inquiries,etc. FREE
It's a LONG term change of life , and when you look at the big picture 6 months, 1 year down the road, those products help you see your progress
Thanks for sharing.
I feel as if the school systems nation wide should be educating our kids about the responsibility of credit. Too many Americans have had to result to Bankruptcy it is a savior once we've been backed into a corner, but shouldn't we prevent it?
This is an old thread but I'll chime in and say that I think it shouldn't be easy as it is to file Ch 7.
Yeah I filed BK... But mine was a 13... Due to the fact my whopping $14 an hour at the time (Low COL south) had me not qualifying.
So... How do these people with their minimum wage jobs and $50k in CC debt manage to get that much credit in the first place?
Maybe lenders need to be educated. My credit line across the board is about 30% of my annual income... And that's all I need.
The people with lines equal to or greater than their income are who I am talking about... One job loss or other financial implosion could leave them maxed out with no means to pay it back...