topic Re: Still confused how chapter 7 hurts you when I see people getting new credit in Rebuilding Your Credit

Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Sat, 08 Jun 2013 14:00:02 GMT

I avoided the bankruptcy route and paid by debts through a DMP and also working more hours to make more money. The DMP ends in 2015 and I cannot get new credit till then.

Please explain how people who declare a chapter 7 are getting new credit?

I want to understand how a chapter 7 actually "punishes" the individual because for some reason I feel like I am being punished more by paying the debt and also not being able to get any new credit till I do pay the debts off.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

DaBears — Sat, 08 Jun 2013 14:48:44 GMT

I will have a mod move this to the bankruptcy thread, you can get more responses there.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

Countingpennies — Sat, 08 Jun 2013 15:07:22 GMT

A chapter 7 PR remains on a CR for 10 years, you will be paid off in 2, and will have the same negatives on your report as someone in a 7, but you won't have the PR for another 8 yrs. After a 7 discharge, some creditors are willing to extend credit because a 7 can only be filed once every 8 yrs.
I think the word 'punish' is not quite the appropriate word. However a person acquires the debts, and in what manner the debt is managed, it's never an instant fix. It is important to research and get all info, pros and cons of a 7 or a repayment plan, when making the decision on which road to take.

I know you are in a discouraging place right now, but in 2 years you can be in the same place as "most" people who are 2 years post-BK, but you won't have the PR for many years after. I commend you for taking control of your finances and working hard to do it. Please be happy that you have two decent jobs and are able fund your debts, there are so many who still can't find one job.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Sat, 08 Jun 2013 16:09:44 GMT

So what you are saying is that the DMP was the better path to take because the Chapter 7 still remains on your file for the 10 years?

Re: Still confused how chapter 7 hurts you when I see people getting new credit

Countingpennies — Sat, 08 Jun 2013 16:40:34 GMT

No. I'm saying rebuilding is hard work and takes time, whichever path you choose. Only you can decide which is best for you. Many people who have lost their jobs, for example, simply have no other choice but C7. Then there are some people who would rather have a BK on their report than a DMP. A BK7 appears to be a faster road out, but for many it took years of trying other options before getting to that point.

A Chapter 13 is an option for those deep in debt but have a decent income.

I'm generalizing and somewhat repeating myself, but if anyone is considering BK, research all your options, and get a few free legal consults for advice, and research, research, research, before deciding what option is best for you.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Sat, 08 Jun 2013 16:45:39 GMT

Hi,

I'm just confused by what you mean that "you won't have the PR for the next 8 years"

I always thought that bankruptcy meant "10 years" for whatever negative information gets reported on your file.

In other words I thought bankruptcy, chapter 7 or 13, meant a 10 year "financial prison" sentence.

Is my thinking wrong?

Re: Still confused how chapter 7 hurts you when I see people getting new credit

Countingpennies — Sat, 08 Jun 2013 18:19:15 GMT

Yes, it's 10 yrs. total, 8 yrs. beyond your 2 yrs. of debt management. C13 remains on a report for 7 yrs. This is for the public record.

Negative BK'd accounts remain on a CR for 7 yrs. from the original DOFD, just like any negative accounts that were not BK'd. Since the debts have been discharged, there are no open collections, so usually the collection accounts are gone from the report. Judgements, liens and student loans are another matter. SLs are usually not dischargeable.

BK is not a financial prison. Being burdened by debt one has no hopes of ever repaying, the harassment, embarrassment and all that goes with it is a financial prison.

Are you still considering BK?

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Sun, 09 Jun 2013 03:37:57 GMT

No I did the DMP. I will be debt free in 2015. I was told to only declare a bankruptcy if I had debt in the six figure range. I had about 30000 in unsecured debt and 5000 in medical collecitons.

My decision came down to 4 years vs. 10 years. I entered the DMP in 2011 and I was told I would be debt free in 2015. If I declared BK, I assumed I wouldn't be able to have any credit for a whole 10 years.

I'm still confused how someone who declares a BK gets "rewarded" with new credit wheras I don't.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

MoreCowbell — Sun, 09 Jun 2013 04:30:15 GMT

I filed BK7 in 2012 to get rid of $220k in medical debt. At the time I had several high-limit B of A credit cards, all timely paid, that were required to be included in the bankruptcy.

I now have one Capital One card with a $2k limit and I'm paying $23% interest (not that I'm carrying a balance. It's for emergencies). If you take a look on these forums you can see all of the cards that are not "bankruptcy friendly," including B of A, Chase (and all its rewards cards like airline cards, and Amazon) and others.

I don't feel "hurt" by my BK7, but I also don't feel like I was rewarded. I got sick when I was unemployed and uninsured, and there was no way I could pay the high settlements that I was offered. The BK7 got me out from under that debt, but it also has destroyed my credit for the foreseeable future.

I'm living with the choice I made. I think you should, too, just for your own peace of mind.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Sun, 09 Jun 2013 13:40:55 GMT

Hi,

I'm not trying to compare who gets it worse with DMP's vs. bankruptcies. I just want to be able to understand when choosing one is better than the other.

I can see how choosing bankruptcy for six figure debt is the right choice because paying that type of debt off within five years through a DMP will be hard if not impossible.

With the DMP, any record of it will be removed once I make my final payment in August 2015. With the bankruptcy, are you in a sense blacklisted for the whole ten years? Can you buy a car, house, or finance a big purchase with the BK on your file?

Re: Still confused how chapter 7 hurts you when I see people getting new credit

FocusedAndDetermined — Sun, 09 Jun 2013 14:09:04 GMT

Every situation is different, and how card issuers view credit profiles varies, even for those without many blemishes.

I believe you are focusing on people getting credit w/BK on record, and not looking at the big picture. Yes, it is possible to obtain credit after BK, but what kind and how much varies. I declared BK7 in 07; I have had a spotless record ever since. I bought a car this year, and yes, I was given a pretty good rate, but it wasn't the lowest. Had the BK not been on my file, I could have saved 2 percentage points.

I have prime cards, but again, the APRs are high, which doesn't matter, since I always PIF. If an emergency arises, and I have to use the card and carry a balance it will cost me big time. I also have been turned down for cards that without the BK on record, I almost certainly would have been approved.

So, what I'm saying is whereas your credit file will be free of tarnish in 2yrs, and you will have the ability to obtain the credit you want at excellent rates. Those who have declared BK will continue to feel the effects for years to come. Over time the impact of the BK does diminish, but it still hurts.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Sun, 09 Jun 2013 16:38:15 GMT

Thanks you helped clear my confusion up.

So what you are saying is that even with the BK, you can get a credit card but the BK is still on file for the whole 10 years and that may or may not be a big problem depending on what kind of future credit you are looking for.

And you are saying that in my situation, I will struggle with the DMP on file for the next two years, but the DMP won't haunt me after that time.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

FocusedAndDetermined — Sun, 09 Jun 2013 17:03:26 GMT

I'm not that familiar with DMPs, but from what I've read, yes - you will be in a better position once you make your final payments. You need to speak with some one who is well versed in DMPs to be certain, but what is certain is BK7s stay on file for 10 yrs. It's the price to be paid for filing.

I wish you well, once you clear the hurdle of your final payments. Struggling through financial difficulties is never easy, but it's also not all there is to life, and with hard work, and lessons learned, things do get better.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

Anonymous — Sun, 09 Jun 2013 17:31:58 GMT

I am pretty sure FICO does not score the comment about being in a DMP so it shouldn't impact your score in the least.

Where the problem lies is, number one, while in a DMP, many of them will not allow you to apply for new credit and if you do it could cost you by them discontinuing the program. Second, most creditors will not extend credit to you while on a DMP, whether your particular program allows for applying or not. A new creditor will see you are in a DMP and think you have enough on your plate.

Once the debts are repaid, the DMP comment should be removed.

FIling BK removes all your debt. The BK will stay on your report for up to 10 years but each individual account that is IIB will still be excluded based on the original DoFD. Also, everything IIB will be wiped out showing a 0 balance. There are many creditors that are BK friendly and some that are not.

A DMP doesn't work like that. The debt is still on your report and shows it is being paid through a DMP. All balances will show what they currently are. All accounts will be closed and this affects your AAoA and possibly mix of credit.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

Anonymous — Mon, 10 Jun 2013 11:36:13 GMT

Another thing you have to take into consideration.

Certain lenders will blacklist you whenever they're included in the bankruptcy. American Express, Chase and Citi are known holding their "grudges" for a long long time. It's going to be a YMMV situation for how long it'll take for the individual to get off the blacklist, if ever. Some continue to be blacklisted even after 2+ decades.

If you value your accounts with them, don't burn those bridges down.

Some banks on the other hand, such as GE, are BK friendly, even if they were included in the BK.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

CreditCardDiva — Mon, 10 Jun 2013 12:22:40 GMT

@Anonymous wrote:
Another thing you have to take into consideration.

Certain lenders will blacklist you whenever they're included in the bankruptcy. American Express, Chase and Citi are known holding their "grudges" for a long long time. It's going to be a YMMV situation for how long it'll take for the individual to get off the blacklist, if ever. Some continue to be blacklisted even after 2+ decades.

If you value your accounts with them, don't burn those bridges down.
Some banks on the other hand, such as GE, are BK friendly, even if they were included in the BK.

This. This is why a BK should never be viewed by anyone as an "easy way out" of financial responsibility. Yeah, a person can get credit again, but sometimes they never reach their former glory.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

fishbjc — Mon, 10 Jun 2013 13:10:22 GMT

I can 'touch' on this as I'm enrolled in a dmp. While paying the dmp, you're 'rewarded' with lower interest while you're paying them off. The payments are all being paid ON-TIME. So for five years, you have positive payments. After the completion of the payments, your credit is good and the 'managed by dmp' should be removed from the notes.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Tue, 11 Jun 2013 02:18:06 GMT

This is good info. I am learning so much.

I think now I am seeing how a BK does affect you. The blacklisted part makes sense and that is pretty scary. I wonder if creditors in a DMP blacklist you too.

Two more years doesn't seem too bad and I guess I can do without anymore credit till that time. I wanted to know if you have a BK on file, can you still buy a car or a house?

Re: Still confused how chapter 7 hurts you when I see people getting new credit

Anonymous — Tue, 11 Jun 2013 02:28:21 GMT

When it is a BK it all depends on whether the creditor is BK friendly or not.

You can buy a house or car while on a DMP, it is just a good idea to have the company doing the DMP help you get it.

As far as blacklisting, when you are finished with the DMP, the remark is removed from your CR. A BK isn't until it is excluded in 7 to 10 years.

Re: Still confused how chapter 7 hurts you when I see people getting new credit

danny4l — Tue, 11 Jun 2013 02:55:41 GMT

Can you just give a general idea when to go the DMP route or BK?

I had 30000 in unsecured debt and I could easily afford that even working part time. That is why I chose the DMP.

Do you need to have six figure debt to choose BK?