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Please help : Am I doing the right thing.

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Regular Contributor

Please help : Am I doing the right thing.

So just a quick background.  Me and the wife filed Chapter 13 about a year an a half ago.  Got a 3 year plan with a modest payment.  We are half over at this point.  And I have had experience with BK several years ago, and I know that most if not all banks want to see re-establishment of good credit post discharge before they will let you back into the game.

 

So with this 13, I decided to be proactive since I will be in this for a long period of time.  Right now we only have one very old car, and it will be a miracle if it lasts to the end of the BK with no major issues.  My end goal is to be able to buy two new cars almost immediately after the 13 discharge next year.  So heres what I have been up to.

 

About a month in, I decided to try and get a secured CC.  The only place I could find was a company out of NJ called First Choice.  Its a private bank that offers a secured visa with NO CREDIT CHECK.  I had been denied for the BOA and my local CU's secured cards because of the open 13.  So this was my only option.  I put $300 towards it, and got the card no problem.  Its been over a year now with completely perfect paymets.  Every month we put something on it like a bill or gas, and pay it off almost right away.  My 3 scores from Credit Karma have went up considerably(Havent checked my fico yet lol), so I know its doing something.  SO this is all good I think.

 

Next, I was in need of some cash and decided to try and get one of those unsecured personal loans.  Im completely embarassed to tell the dollar amounts and intrest rate, but lets just say it will also be paid perfect for 24 months leading up to the discharge of the 13.  Its expensive credit, but I see it as worth it in the long run.

 

So by the end date and discharge, I will have had 3 total years of perfect CC payments and 2 total years of perfect personal loan payments.  Both balances will be at zero.  

 

Now heres my question.  WIll this be enough to get me past the default (You will need to re-establish) before I can get a couple decent, dare I say good rate car loans??  I have awesome income(well above the national average), and very long term job history.  I can only assume that places will still be scared of the recent discharge, but Im hoping the scores will be good enough to qualify for a Tier 1 Credit Union auto loan rate.

 

After the cars have been secured, then the next year we plan on getting a house.  

Does this sound like a good plan, and will it be enough?  Im not looking at cheap cars either.  Probably $45k for me and $35k for the wife.

Message 1 of 29
28 REPLIES 28
Senior Contributor

Re: Please help : Am I doing the right thing.

My experiences tell me you are really overthinking it.

 

I was in Ch 13 from April 2009 till May 2013... and I didn't apply for ANY credit, because my attorney told me I couldn't without trustee permission.  Applying for credit without permission could make the trustee angry enough to push for a dismissal of your case... after all, the trustee isn't your friend and is only out for the best interests of your creditors.

 

That being said, my scores were in the 640's when I was discharged... and the same day I got a CapOne unsecured card for $1000.  A couple days after that, I bought a new used car... a 2012 Dodge Charger for about $22k @ 8.9%.  (My previous high auto loan had been 10k which I maintained outside of the Ch 13)  Over the next few months I opened more accounts... mouseover the cards in my sig for the info.

 

Scores started to rise... I got better cards... and in Jan 2015 I traded the Charger and bought my dream car... a $40k 2015 Dodge Challenger R/T @4.49%.  My auto FICO score was 703 at that time.  I'll probably refi soon... but am gardening at the moment.

 

12592627_253762351625231_5929385108087345149_n.jpg

 

Here we are 15 months later... everything related to the BK has fallen off my reports... and I'm golden.

 

I got here without doing a thing prior to discharge... just like my attorney told me.  The biggest thing is patience... and I have a lot of it.

 

Regarding your car loan... I dunno.  I doubt I could have bought my Challenger right after discharge... and I'd wager you might have difficulty buying expensive cars right after discharge without a prior history.  As you said, banks like to see history... and auto loans aren't the same thing as credit cards/personal loans.

 

 

Gardening since: 3-25-15
Message 2 of 29
Regular Contributor

Re: Please help : Am I doing the right thing.

Thanks for the reply.  And the funny thing is that car you got is the almost exact car Im looking to get.  2016 challenger RT SCAT pack.  Yeah its alot, but I got good income ($75k) and no debt.  I just want to be prepared for the first auto loan out of the gate.  Im not waiting another month after discharge to get what I want.  I had to give up lots of luxuries to do the right thing here.  I have worked very hard and would like to reap the rewards.  If they are going to hit me with some stupid rate, I would pass obviously.  But Im looking for the low single digits like you.  Im going to keep working and hopefully it will work.

 

Message 3 of 29
Senior Contributor

Re: Please help : Am I doing the right thing.

My rate I got at discharge was better than most of the rates I've seen... and obviously the rate I got 18 months after that was even better.  I know I could refi right now probably at 1.99% with my CU but the loan is currently with another big CU here and I want to keep that door open for the time being.

 

You'll get there... I don't know about low single digits right away but who knows.  I'm not an expert on car financing.

 

As far as the car goes... you'll love it.  I passed on the Scat Pack... 5.7L is plenty for me and it's plenty fast... 0-60 in 5.3 is my best time which is insane quick for a boat like this.  I've done a lot of customization to mine... I ditched the red mini spoiler and added the Scat Pack black spoiler with backup camera.  I added the black decals on the hood and fenders... black gas cap... mud guards... Hellcat rims... Hellcat airbox with true ram air through the interior headlights.

 

The car didn't look right with chrome rims and gas cap... now the Matte black really sets off the red.  It was on Dodge's main page and FB page a month or so ago...  and all the compliments I get from random strangers makes the payment a lot easier. 

 

Good luck.  Smiley Wink

Gardening since: 3-25-15
Message 4 of 29
Regular Contributor

Re: Please help : Am I doing the right thing.

I cant wait.  Im a car guy and had to give back my 2014 mustang GT before I started this 13.  Before that I had a laundry list of fast cars.  Going on two years now, I have been sharing with my wife a 8 year old 100k mile minivan.  Its on its last legs, and we need two cars.  We have small school aged kids and most days I have to car pool to work.  Its miserable.  But I know it will get better.  My wife is going to need an SUV too of some sort.  Probably lease her something.  But Im really hoping what Ive been doing will count for alot at the end of this 13.  I'd be heart broken to get denied or worse yet APPROVED for a car loan with some stupid interest rate.  I wont marry myself to a 4-5 year loan at double digit interest with the "promise" that dealers will always give you that you can refi out of it in the future.  Yeah thats a huge stretch unless you put alot down or got a car thats going to hold its value well.  I wouldnt buy a car hoping to refi it in a year or more.  But I still have time.

 

I have yet to buy my scores from myfico.  I have used Credit Karma for the reports, but I know their scores are not widely used.  Im sure just about everyone uses the Fico 08 auto score for car loans these days.  Does anyone know if I can get ahold of that one from this site?  Or is it just the standard fico 08?  

Message 5 of 29
Senior Contributor

Re: Please help : Am I doing the right thing.

Buying the monitoring package here gets you the various FICO 8 scores.... one of which is the auto version.

 

Mustang?  Ack.  They are so ugly... but not as ugly as the box on wheels... eh, I mean Camaro.

 

I was at the mall last summer and this guy tried parking his 2015 Mustang next to my Challenger...

 

11745477_139541629713971_2371755150010269493_n.jpg

 

It didn't help him much though... he's still got a Mustang.

 

 

Gardening since: 3-25-15
Message 6 of 29
Frequent Contributor

Re: Please help : Am I doing the right thing.

Before I comment, I also filed BK 13 back in 2005, so don't think I'm a BK snob........

 

that being said, your post kinda concerns me. Obtaining new credit while in a Chapt 13 (without trustee approval) is a no no! A BIG one, with serious consequences should your trustee find out.....dismissal.......legally becoming responsible for all of that debt again, and then on top of that, a BK which will report for the next 10 years rather than 7.

 

It sounds like you may have filed in the past and then again in the last couple of years, yet your focus seems to be on spending big $ on a couple of new cars as soon as you are discharged. You mention you have a "reasonable payment" for your 13, yet you took out an unsecured loan high interest loan, as you needed cash.........

 

I'm currently driving a 2007 year old vehicle (which I bought in 2008), which I plan to keep at least another 1 1/2 years. My husband and I have decided to alternate trading vehicles, so we only have 1 car payment at a time for the most part. He's got a 2008 truck....

 

Fearing you are so intent on rebuilding, and doing what you can as fast as you can, that you are overlooking the risks you are taking to get there........

 

sorry.......just hate to see others in BK read your post and assume this is a great path to follow.........

 

K


You can't have your cake and eat it too. But you can dip your finger in the bowl and lick the icing!
Message 7 of 29
Regular Contributor

Re: Please help : Am I doing the right thing.

I can see your concern.  And I assure you that I consulted our attorney prior to getting the secured credit card and loan.  Both are under the limit of new credit or debt you can attain during the 13.  Maybe the laws are different from where you are, but its not so cut and dry.  Also similarly our trustee allows us to keep up to $2000 of a tax return.  Anything more needs to get paid to the plan.  

 

As for the expensive cars, like I said I dont want to do this again for a long time.  I'd rather get the cars we want now and just own them when they are finally paid off.  Like I said too, my income is fine and the payments will be a very small percentage of what I have left.  We are not being reckless here, we are following recomended practices that our attorney said work well to get us back into the game so to speak.  Im not getting any younger, and my family needs these things.  The cars and the house are a must.  Granted I dont need a challenger, but I do work very hard and once this BK is over I will have one.

 

As for the BK in the past, I was a small business owner that was destroyed by the economy and a new home purchase in 2006.  A BK 7 was all we had at the time to survive.  Since then, business has been ok, but I decided to fold and go back to work for a company.  Again there were lots of busniess expenses that I had to protect myself and my family from.  We have been trying to do the right thing with the 13, and its been hard.  And come next year, we will be free and clear.  

Im willing to wait and be patient, but Im not going to sit idle and do nothing.  Especially if I dont have to.  Setting the stage for good credit history if I have the opportunity to do so during the 13, seems like a no brainer.  I'd really hate to spend all this time (36 months), just to have to wait another 12 months or more just to get a normal car loan.  As I said, we may have no choice.  And again I will not buy some old out of warranty car for 12% interest and be locked to that for 4-5 years.  Thats where Im at now.  Not going to happen again.  My future vehicles will either be leased or bought new with warranties.  Im just so sick of not having control of my own financial future, and being proactive gives me something to do and look forward to.  

 

Sorry if my attitude in this bothers you, but I assure you we are doing nothing illegal or against the BK rules - according to the licensed attorney we paid alot of money to that handles these types of things.  

Simply I wanted to know from experienced people if by gainning perfect payment history on a CC and a personal loan during the life of the 13 will help more or less or not at all at the end.  As for the cash from the personal loan, its being used to pay that personal loan back.  Not because we really needed it. lol

Message 8 of 29
Frequent Contributor

Re: Please help : Am I doing the right thing.

thanks for your response. You're very fortunate that you are allowed to do this during your 13. Glad to hear you're not jeopardizing your plan. Didn't mean to come off so harsh, but just was concerned others might read and get the impression this was an "ok" way to proceed....

 

Know all about the business issues......My husband was self employed back when we filed our 13 in 2005. He went back to work for someone else in 2006, and after a long long 5 year 13, things are sooooooooooooo much better.

 

On the car front, we went into our plan with 2 vehicles which were pretty old. We did manage to get court permission to trade my car during our 13, and even got our plan payment reduced to cover the additional payment......I'd read on a BK forum where others had successfully done so, so I figured there was no harm in trying. Our Attorney was skeptical, but the motion was filed and granted.

 

Obviously you won't be able to purchase a luxury vehicle during your plan, but it may be an option if your van takes a turn for the worse, and you don't think it's likely to make it through to discharge.......it would get you through until after discharge, and perhaps until the point you can get decent rates.

 

best of luck!


You can't have your cake and eat it too. But you can dip your finger in the bowl and lick the icing!
Message 9 of 29
Senior Contributor

Re: Please help : Am I doing the right thing.


@krielly wrote:

Before I comment, I also filed BK 13 back in 2005, so don't think I'm a BK snob........

 

that being said, your post kinda concerns me. Obtaining new credit while in a Chapt 13 (without trustee approval) is a no no! A BIG one, with serious consequences should your trustee find out.....dismissal.......legally becoming responsible for all of that debt again, and then on top of that, a BK which will report for the next 10 years rather than 7.

 


Yep... every time I see posts about people in Ch 13 obtaining credit prior to discharge I always stress exactly what you've said here.  I just replied to a thread less than an hour ago who said "Since I had a really good trustee for my CH13 who gave me a lot of good advice and started rebuilding credit just days after plan confirmation, my scores were high when I was discharged and now I have all of my scores aroud the 660-700+ range. "

 

http://ficoforums.myfico.com/t5/Bankruptcy/Auto-refi-or-not/td-p/4512256

 

After seeing quite a few threads over the last couple years making similar comments... I have to say... So you can get a confirmation and start opening new credit before you've made your first payment? I never knew that trustees (who aren't your friend) were so friendly.

 

My attorney told me no new credit without trustee approval... and that's what I did over the life of my 13 that just fell off my credit reports this month.  I never asked... because needing a car to go to work is one thing, but I just assumed that a credit card for rebuilding purposes would be the last thing a trustee would approve.

 

Some people choose to roll the dice and open accounts anyway... but I wasn't going to take that risk.

 

 

 

 

Gardening since: 3-25-15
Message 10 of 29
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