Please help me understand this issue...bankruptcy vs. credit counseling.

[StartingOver10]

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@danny4l wrote:

I really need a solid answer on this issue as I can't seem to find a definitive answer.

I keep hearing about people who declare a Chapter 7 and then I hear that they either bought a car or got a credit card almost immediately.  Isn't declaring bankruptcy supposed to be a bad thing? ...like an absolute last resort?

I, on the other hand, had about $25000 in unsecured debt and $6000 in medical bills and I chose to negotiate the medical bills and enroll in a credit counseling program to pay off my debt.  Nobody is offering me a credit card, and my credit counseling program will end in June, 2015. 

Some people tell me I did the right thing but what I don't get is how people who declare a bankruptcy are being "rewarded" while I'm trying to do the right thing and I feel like I am being "punished."

Am is missing something with bankruptcy vs. credit counseling?

I would love to know your thoughts.

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Now I understand your original question. I didn't get that you are seeking new credit and getting turned down while others have been approved dispite their discharged BK's.

1) No one is going to approve you for an unsecured credit card while you are in a DMP program. You enrolled yourself into a DMP program to assist you with making your payments since you could not afford the payments on the existing credit you have now. Your program offers special lower repayment terms to your creditors that participate in the program with you.

Most people resort to a DMP program only if they are having extreme debt issues, but do not want to file BK 13 or BK 7 for other reasons. However, it is not unusual for people in a DMP program to eventually file for BK. So anyone issuing credit to a person actively in a DMP program is takng a huge risk of default on the newly issued credit. That's the main reason why creditors want to wait to issue you new credit until you complete the program. Once you are finished you will get offers for credit!

2) If you do obtain other debt while you are in your existing DMP program - doesn't that violate the contract that you have in place with that program? Usually one of the conditions is that you won't obtain any new credit until the program is completed.

3) Those that have filed for BK and have been successfully discharged are much less risk than you are right now. They can't file for BK for another 8 years. In some circumstances they can file again after 4 years (I think its 4) but they can't get a discharge on the second filing. So right after they are discharged they have no debt and represent a better risk to the lender.

If you are looking for new credit, see if you can acclerate the payoff of your current debt to be successfully released from the current DMP. When you are released after having made it through, you will end up with a very good start to get new credit at that time.

[A86]

I agree. It's sad that your trying to do the right thing and pay off our debt and are being punished when mr.justfilechapter7 and you can drive a fancy car like me acts like its just what happens in life. Hey if you get a bunch of cc's and max them out and can't pay them back just file and start over again. It's mind sets like that that have gotten America where it is today. Ya when someone loans you $ it's not secured and its a risk for them- so ya why not max it all out and then file bankruptcy. Or hey lets buy this house that we OBVIOUSLY can't afford then stop paying our mortgage live mortgage free in the house until evicted save absolutely no money during that time wait a couple years as do it again. It's that mindset that has made getting a mortgage almost impossible for some. Especially self employed. Took us years to actually get a lender to take us on an work for it but after a lot of documenting and documenting and copy's of this and proof of that we got it and closed in July. But everytime I spoke with a lender they would say have you had a bankrupsy or foreclosure in the last 3 years? Like really that's all?!?! There is something seriously wrong with this country. And there are numerous "credit scores" fico, experian, equifax, transition, fico auto enhanced score etc etc yet there are no exact ways to really raise your credit or a list of how your scored. It's all a mistery. Pay your bills on time and keep you cc balance below %20. And don't pay your medical bills. I've have 3 lenders tell me not to pay my medical bills because once you pay them tell report as paid in full but will hit your credit again.... Like how is NOT paying these a good thing and paying them will hurt your score. So confusing and frustrating.

[GypsyGal]

ezdriver...

I am confused.

You wrote ".. I dispensed with a huge tax liability to the IRS and now they are off my back .."

I thought taxes were not effected by bankruptcy... Would you please tell me more about this?

Thanks,

[Scupra]

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@A86 wrote:
I agree. It's sad that your trying to do the right thing and pay off our debt and are being punished when mr.justfilechapter7 and you can drive a fancy car like me acts like its just what happens in life. Hey if you get a bunch of cc's and max them out and can't pay them back just file and start over again. It's mind sets like that that have gotten America where it is today. Ya when someone loans you $ it's not secured and its a risk for them- so ya why not max it all out and then file bankruptcy. Or hey lets buy this house that we OBVIOUSLY can't afford then stop paying our mortgage live mortgage free in the house until evicted save absolutely no money during that time wait a couple years as do it again. It's that mindset that has made getting a mortgage almost impossible for some. Especially self employed. Took us years to actually get a lender to take us on an work for it but after a lot of documenting and documenting and copy's of this and proof of that we got it and closed in July. But everytime I spoke with a lender they would say have you had a bankrupsy or foreclosure in the last 3 years? Like really that's all?!?! There is something seriously wrong with this country. And there are numerous "credit scores" fico, experian, equifax, transition, fico auto enhanced score etc etc yet there are no exact ways to really raise your credit or a list of how your scored. It's all a mistery. Pay your bills on time and keep you cc balance below %20. And don't pay your medical bills. I've have 3 lenders tell me not to pay my medical bills because once you pay them tell report as paid in full but will hit your credit again.... Like how is NOT paying these a good thing and paying them will hurt your score. So confusing and frustrating.

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Seeing as this is your first post I will give you a chance to apologize, at that point I will give you a response to this absurd, rude posting. Not a great way to start out on a new forum.

[Scupra]

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@GypsyGal wrote:

ezdriver...

I am confused.

You wrote ".. I dispensed with a huge tax liability to the IRS and now they are off my back .."

I thought taxes were not effected by bankruptcy... Would you please tell me more about this?

Thanks,

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I think the tax debt has to be so many years old and have some other qualifications. Wait for someone more versed to reply

[GypsyGal]

Thanks, Scupra.

[Scupra]

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@GypsyGal wrote:

Thanks, Scupra.

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1. The due date for filing a tax return is at least three years ago.
2. The tax return was filed at least two years ago.
3. The tax assessment is at least 240 days old.
4. The tax return was not fraudulent.
5. The taxpayer is not guilty of tax evasion.

I googled it and got these quick rules! No problem

[guiness56]

Before this thread goes in the wrong direction, may I remind EVERYONE, old and new, to remember to be friendly, supportive and respectful! 

Being judgmental or attacking another will not be condoned.

Thank you, guiness56, myFICO Moderator

[ezdriver]

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@GypsyGal wrote:

ezdriver...

I am confused.

You wrote ".. I dispensed with a huge tax liability to the IRS and now they are off my back .."

I thought taxes were not effected by bankruptcy... Would you please tell me more about this?

Thanks,

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Google is your friend. Why guess when the facts are at your fingertips?

[matafied]

In what way will it be an issue? And to whom?

Credit reports and credit files are important for credit seekers primarily. Auto, home, and credit cards.
Getting those is not a problem after bankruptcy.
So the next issue would be housing rentals. Not a huge deal, if you have the first and last months rent. you'll get a lease.
The next issue would be potential job seekers , but I don't know anyone that that has caused an issue for.
And the last issue would be for auto insurance and home insurance.
That may cause you to have higher rates.
That's it

I filed bankruptcy with $108,000 in debt. I own two homes. I kept both.
I got the second mortgages stripped off both and don't owe them now.
I stopped paying $2300 a month in monthly payments to credit cards with $600 in interest and no reduction in principal as the payments were eating all my cash for good gas and utilities.
So now I have money to save and no financial burden anymore.
Paying the money back does not make sense if you can file chapter 7
There is no downside FOR ME for filing chapter 7
I still own two homes and 3 cars. And I don't even need credit at this point as my job provides enough money to live and save.