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To BK or not to BK?!

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To BK or not to BK?!

Hi Everyone - I am considering Chp7 BK because my credit card debt has become unmanageable. I currently have a 675 fico with no late payments on any of my revolving, installment or housing debts. Is it possible to BK with no late payments on any of the accounts? I know it may come as a shock to my creditors but I'd rather BK preemptively instead of having dergos on the accounts and then BKing anyway. Also I believe if I do not have any lates on the BK’d accounts it will help me to restore my fico faster after the discharge. Is this the case?


Any input is appreciated.

Message 1 of 5
Valued Contributor

Re: To BK or not to BK?!

From a legal standpoint, yes, you can file without any late accounts.  Ethically, are the debts truly unmanageable or just "inconvenient"?  What's changed since you ran up the debts that makes them no longer affordable?  I'm not trying to be judgemental, but to play devil's advocate - if you ran up these debts and discharge them in BK, how will you avoid getting into trouble again?


There are other factors - what have you run up in the last 90 days and six months?  A consultation with a BK lawyer is really important to understanding all the rules and traps.


If you decide filing is the right course for you, you're correct, your post-discharge score will be better if you have no "lates" or other derogs.

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
Take the FICO Fitness Challenge
Message 2 of 5
Established Member

Re: To BK or not to BK?!

Yes, but give a good long hard look at your debt and understand jow you can solve it.


If unmanigable, think about balance transfers and just paying off the minimum of each card and try to pay off the cards with the lowest balance and work your way up.


Honestly, having  utilization rate of 100% and even a late payment or two is way better than filing for bk. A late payment becomes irrelevant in a few years for almost all lenders (including picky ones like Amex) and such high utilization will only affect your score short term. Bk will stay there for a LONG 10 years (yes late payments stay there long but if you talk it out with a lender, it can be removed).


I would look at your lifestyle and work to live below your means just to pay everything off. If you've lost your job then this is a different story atlogether. 


Call all your lenders and work out a plan, you'll be surprised how likely they will work with you (especially since you've been on time with all your payments). I would also suggest to stop using your credit cards completely and look around for way to get some of that money back (selling stuff, returing it, etc).


Bk isn't something you want to do at all and should be viewed as a last resort.

Message 3 of 5
Moderator Emeritus

Re: To BK or not to BK?!

As has been mentioned, your best bet is to sit down for a free consultation with a BK attorney (or two or three) and go over your options with them.  Also consider other options i.e. taking a second job and using the snowball approach to pay debt down.  Another good viewpoint can be had by sitting down with any good (you'll have to do your homework on who the good guys are) non-profit credit counseling service.  Then you'll know your options, your eligibility (not everyone is eligible to file BK), and the pros and cons.  At that point, you'll probably have a pretty good feel about what will work best for you.


Best wishes!

Just puttin' syrup on something, don't make it pancakes.
Message 4 of 5

Re: To BK or not to BK?!

I concur. If you can avoid BK, do so.


I found out after BK that how many accounts you includle in BK affects your credit score. If you have any small accounts, it may be worth it to pay them off, based on what I've learned.


I also found out after BK that keeping bills paid on time doesn't help your credit score when you file BK. Like you, I struggled but kept my bills paid up to BK. Six months after BK, I had a 599 FICO Transunion score and a 623 FICO Equifax score.  FICO's anaylsis said I had the low scores because of a bad payment history, which was not at all true. I had an excellent payment history. But Transunion and Equifax does not show my excellent payment history for the accounts that were included in BK., just that they were IIB. That in itself is degrogatory, resulting in the low score and assessment of bad payment history.


I intend to challenge FICO on this assessment of late payments, which is inaccurate. I have zeor late payments showing on my credit report. And my credit report 10 days after BK also did not have late payments. Only one of my 11 accounts went late with BK (30 days). All my other accouts were paid on time up to BK, but it still didn't help my credit following BK. My BK attorney told me not to pay my accounts if I was going to file and that it wouldn't help me, but I didn't listen to him.  I could have taken the $2k I used to pay my credit cards for a couple of months and used it to pay for the BK,  and it appears my credit score would have been the same.


Message 5 of 5