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And they said Bankruptcy would destroy my credit

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  • And they said Bankruptcy would destroy my credit

    We did not want to file for bankruptcy, we tried... and everybody told us it would be a mistake, would ruin our lives forever and we'd regret it. For awhile, I believed that.... then we decided, it couldn't hurt anymore that where we were at. We had over $200K in 15 year old medical bills, for which there were two judgments against us. My husband is disabled on SSDI. My job, in December, went part0time and my salary dropped 20%... so I've been on partial unemployment. Not a good position, and we had no idea what we were going to. Our credit was already horrible. We had never had a credit card with more than a $500 limit, and that was after a year of on-time payments. We got a car loan from Capital One over a year ago, and that was a miracle to us.

    Well, we made the tough decision to file. We were so broke we could not afford an attorney. We couldn't even afford to pay the filing fees up front. We had to petition to pay it in installments. So, with help here and from other sources, we filed pro-se. We had a few complicated issues, but we got through them easy enough.

    Now, here's the crazy thing. Our credit was so bad our credit scores JUMPED over 100 points 2 months after filing. We did not reaffirm out Capital One auto loan. We had another car that had been sitting inoperable for the last year in our driveway.We decided to fix that up and get the work done with the money we would have been putting toward the car payment. We assumed Capital One would eventually come for the other car. They never filed anything... and so far, we haven't even heard from them. While our case was active they wouldn't even talk to us.

    Well, our case discharge last week and closed a few days later. We're done. The only debt we have left are my student loans. My husband was able to obtain a discharge of his loans because of permanent disability. We planned on obtaining a secured card in the next month or so from our credit union so we could slowly start rebuilding.

    Now here's where it gets nutty. I was talking to a friend who actually works for the credit union. I wanted to get her advice about when to start applying for credit or rebuilding our credit. She looked at our credit and said that we don't qualify for their cards because of the bankruptcy (it's an automatic denial unless the BK is at least 3 years old, and then they have to review it. She said while we could get their secured card, she had a better idea. She called Capital One right there, from the branch and said that she had somebody who wanted to apply for a Quicksilver card. I said, "I do?" I didn't think they'd give me a card. I mean, we just had a $19,000 car loan from them discharged just 4 days prior. She handed me the phone and I talke dto them, gave them my information. I told them I'm probably only qualified for their secured card.

    The rep said, "Oh, Heavens no... you qualify for more than that. How about $1,000 on a Quicksilver card?"



    I said, "I just discharged a bankruptcy this week. BANKRUPTCY! And part of it was a huge chunk of change to Capital One. Are you sure?"

    She said, "Absolutely! Your credit score is actually pretty good for somebody coming out of bankruptcy. In fact, after 5 months we'll review your account again and if you keep i tin good standing it's likely your credit limit will go much higher. Besides, most of the debts showing on your credit that were included in the bankruptcy are for medical bills and student loans. You had very little credit card debt."

    Yeah... because we never could get credit from anyone!

    I'm still completely flummoxed over this, but in reading other threads here, it seems that this isn't all that unusual. We've been living on cash for so long, it will be great to be able to use this card as our "cash" for the month and just send that money to the bank to pay off the balance each month.

    Obviously, everyone's circumstances are different post-discharge. $1,000 limit obviously isn't terribly huge, even though is more than I've ever had in my whole life. In a way, it's great, because we know we'll always have the cash it fully pay it off, because we decided just before filing that we were going to take the car payment money and keep it in a separate account. At first, we did that in case we did end up reaffirming and could just turn it over when the time came. Since we didn't reaffirm, we now have just over $2,000 cash in our emergency fund.

    So back to the topic of the post... so many people told us bankruptcy was a terrible idea and would ruin us. If anything, it's been the total opposite of that for us so far. Yes, there are challenges involved... but I guess we were already living with those challenges way before we filed. I've heard of people's credit improving a tad after discharge, but ours jumped like crazy.

  • #2
    Congratulations on the Quicksilver card. Just be careful and don't overdo.
    Last edited by AngelinaCat; 06-29-2014, 10:48 PM.
    "To go bravely forward is to invite a miracle."

    "Worry is the darkroom where negatives are formed."

    Comment


    • #3
      An excellent post that challenges the common myth that BK will ruin you forever. It really is a tool to rescue your financial life. Most people's credit scores are already ruined before they file BK. They have a lot of unsecured debt and are delinquent on payments. Even if they aren't delinquent, they look like a huge risk because they are over their head in debt. They look like a bankruptcy waiting to happen. After a BK discharge, you have no unsecured debt and can't get another BK discharge for several years. Many lenders won't lend to somebody fresh out of BK. But, if you have a stable income fresh out of BK, you are probably a much better risk and many more creditors are happy to take that risk by extending a small line of credit and seeing how you do with it.

      Use that card wisely!
      LadyInTheRed is in the black!
      Filed Chap 13 April 2010. Discharged May 2015.
      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

      Comment


      • #4
        The only thing I regret in regards to filing BK is that I didn't do it earlier.
        Filed CH7 9/24/2010, 341 on 10/28/2010, Disch.&Closed: 1/6/2011. FICO EX: 9/2: 672.
        FICO EQ: pre-filing: 573, After BK Public Record: 568, 10/3: 673.
        FICO TU: pre-filing: 589, After BK Public Record: 563, 9/2: 706.

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        • #5
          Originally posted by IBroke View Post
          The only thing I regret in regards to filing BK is that I didn't do it earlier.
          Me to

          Comment


          • #6
            Yes, we fully intend to be smart about it. In our case, we didn't have much credit card debt anyway because we never really were able to get one for more than a coupl ehundred dollars.

            We've already decided that this new card will be a tool to help us build and not relied upon for emergencies. We will only put something on the card that we already have the cash on hand to cover it. Not sure if anyone is familir with the "You Need a Budget" model, but we've been following that lately... and any money we spend any given month was already there the month prior. In other words, any money we have coming in will not be spent for at least a month. We're hoping to extend that to 3 months by the end of the year.

            What interesting to me is that CapitalOne won't talk to us about our vehicle. We haven't made a payment in 8 months now, and we were told they come after the car at 6 months or about 2 months after filing for BK if there's no reaffirmation. at first we were going to reaffirm, but decided against it. It's now been 4 months since we filed and a week or more since discharge... radio silence on their end. Even their bankruptcy department is, well.... not full of terribly bright people. When we call they tell us they can only talk to our attorney. We keep telling them we don't have an attorney, and that's where their ability to speak short-circuits. It's odd to me that they haven't come for it, yet. The car is still worth a good $12,000, so you'd think they'd want it back.

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            • #7
              Originally posted by turtle19 View Post
              Yes, we fully intend to be smart about it. In our case, we didn't have much credit card debt anyway because we never really were able to get one for more than a coupl ehundred dollars.

              We've already decided that this new card will be a tool to help us build and not relied upon for emergencies. We will only put something on the card that we already have the cash on hand to cover it. Not sure if anyone is familir with the "You Need a Budget" model, but we've been following that lately... and any money we spend any given month was already there the month prior. In other words, any money we have coming in will not be spent for at least a month. We're hoping to extend that to 3 months by the end of the year.

              What interesting to me is that CapitalOne won't talk to us about our vehicle. We haven't made a payment in 8 months now, and we were told they come after the car at 6 months or about 2 months after filing for BK if there's no reaffirmation. at first we were going to reaffirm, but decided against it. It's now been 4 months since we filed and a week or more since discharge... radio silence on their end. Even their bankruptcy department is, well.... not full of terribly bright people. When we call they tell us they can only talk to our attorney. We keep telling them we don't have an attorney, and that's where their ability to speak short-circuits. It's odd to me that they haven't come for it, yet. The car is still worth a good $12,000, so you'd think they'd want it back.
              Why call Capital One? Just use the car until they come and get it.

              Comment


              • #8
                Well, that's what we decided to do, but had no idea what they wanted from us initially. When we ate first wanted to reaffirm, we couldn't even get them to talk to us. They kept saying they would only talk to our attorney. Apparently the concept of no attorney is foreign to them. I realize it's not nearly as common, but I don't believe that haven't seen other pro se cases. They wouldn't talk to us or send us anything... they even closed out the account completely and we couldn't even access it online. On our credit reports, it reads as a balance of $0 and that it was closed.

                They could have come for the car quite some time ago and we are kind of wondering why they haven't yet. We haven't given them a payment in 8 months, and now that it's discharged...hey, no big deal to us if they want it. We told the court we wanted to surrender it. It's not like the car is a junker... it's only 2 years old and quite nice. I'm sad to let it go, but I've made peace with it. It's just a car, we can always get another one. Only next time, we're going to save up and pay cash. No more auto loans for us.

                Comment


                • #9
                  Congrats! Yes, the banking world has made sure society looks at bankruptcy as the plague of freeloaders and deadbeats that just want to escape their responsibilities. I have heard conversations of friends and relatives just spewing out what the banks have told them (us as consumers) yet these same banks protect big businesses/corporate America that have used the same bankruptcy system to start over. You see big business/corporate America are the banking system so it will always be a double standard. Then things turned around in 2008 when the banks were in big trouble and blackmailed the country into bailing them out, that is when the light bulb came on for many of us. The rouse is over and we look at bankruptcy much more like a business (think Trump and how many times he has filed bankruptcy on behalf of one of his businesses), it is truly a business decision and that business is YOU!

                  You did the right thing, life happens and the average person is just expected to jeopardize the roof over their heads and food on the table to pay the banks or whomever your creditor is. You learn real quick to make adjustments in your life to protect your family, its a learning experience and the knowledge is powerful. Congratulations and you have come out on the other side in tact.

                  Comment


                  • #10
                    turtle19,

                    Thanks for your post. As a person awaiting chapter 7 discharge it was great to hear of your success. Congrats!.

                    Drazil65,

                    Great post.

                    Oddly I felt guilty filing chapter 7 even though over the years I have seen on the news many famous people filing bankruptcy especially Donald Trump. Thanks to BK forum I have gotten over my guilt.

                    Comment


                    • #11
                      There's so much misinformation about bankruptcy, and because it's still spoken of in hushed tones most people don't know the truth.

                      I hope that everyone here with a similar happy ending tells at least one person about their experiences and that bankruptcy isn't the end of the world.
                      I am a lawyer licensed to practice in NY and CA, but I'm not your lawyer unless we have a signed agreement that says so. Nothing in this post should be considered legal advice.

                      Comment


                      • #12
                        In my case, I did not file right away, I delayed it and let some credit cards go over 90 days then into collections, big mistake. Also my BK is still not closed and will soon be reaching one year since discharge. I had excellent credit prior to letting things go so long, and due to that I have been unsuccessful in getting any credit post discharge, not that I even wanted another credit card which was only desired for my job and travel. All I get in the mail is the typical high interest, fee and etc credit card offers, Credit One, First Premier and etc., those go into the trash and they come at least once a month.

                        That's the issue with BK, not everyone has the same results after filing, that is a magical restart that happens quick. It will take me time, but to be honest I have a brand new car that I financed pre BK, APR isn't bad at all and I reaffirmed it with less than 4 years to go, the best thing is I have more funds to pay it off sooner and save even more $.

                        Comment


                        • #13
                          @ccmisery, I certainly appreciate what you're saying. I think that, in our case, we'd already lived through the effect of years and years of living on cash rather than credit because of the two judgements for medical bills. For 15 years now, we haven't been able to obtain any kind of decent credit aside from the ones you noted. My husband is disabled and cannot work. So really, we've lived the post-bankruptcy life for nearly twice what most ever have to live with. It's not because of poor spending habits, either. In our case, we've learned excellent spending habits because we had to live within our means. When we got our car loan over a year ago, we just applied on a whim resigned to the fact that we'd be declined... but our other car was in need of repairs we could not afford all at once. At the time, it was easier for us to make a car payment that we could afford than be without a car for 6 months while we saved enough to get it repaired. We live in a pretty remote area (because it's what we can afford on our income) and not having a car for 6 months is pretty much not an option. Even though it's a town of more than 12K people, the nearest real grocery store is 20 miles away, but any real shopping as well as our doctors in a larger town is 45 miles away. Shoot, just to file our BK papers, we had to drive THREE HOURS to Fresno since we didn't have an attorney. Our situation required us to file in person. Ultimately, we filed because my salary was slashed and hours cut and we just could not carry on, and we really needed to get those judgments cleaned up if I were to try to find a better job -- since they always show up on background checks and even though they are 15 years old, I have been turned away from several great jobs I'm otherwise qualified for because of my credit. Clearly, it was pretty bad if just filing for bankruptcy increased our scores by 100 points.

                          So now, because of the BK, we haven't made a car payment on the newer car in 8 months. We were keeping that money stashed away to become current on payments if needed, and if we ended of reaffirming. If we reaffirmed, we knew that our judge would not approve it unless the terms were renegotiated. Different lawyers warned us of that, and I looked at that judge's history via PACER... and it was true, the only agreements he approved were ones where the creditor made drastic changes in the terms. Ultimately, we decided against that and decided to take that money we'd saved and get the other car repaired. That work is nearly done and we're hoping to pick it up sometime next week. And, so far, they haven't come for the other car, either... so that's fine by me. I really like our newer car, but it's just a car... and I'm at peace knowing we're going to lose it. I won't lie, though... it sure would be nice if they didn't bother me until after we got the other car back. I have several faml ymembers and friends who have offered to lend us a vehicle if it comes to that, but it would be nice if they just kind of forgot about us for a good long time.

                          Ultimately, we didn't really want to get credit cards anyway. We're so used to living without them that we didn't see the point. However, we are going to be moving out of state in the coming years and we may end up buying some property, so before that happened we wanted to build up a stellar post-bk credit profile. So, we've decided that we are still going to live on a cash-only budget, only we are going to put certain expenses on the credit card instead, then pay off the card each month. We do not want to finance anything if we can avoid it... though we may need to eventually because of some extensive dental work. But, we don't know how much will be covered by medical insurance first, as the work needed is one of those gray areas. We're hoping that my medical insurance will cover it as it is a medical problem that requires a medical doctor,,, but the reconstruction afterward will require dental expertise. Fun stuff.

                          Comment


                          • #14
                            Originally posted by ccmisery View Post
                            In my case, I did not file right away, I delayed it and let some credit cards go over 90 days then into collections, big mistake. Also my BK is still not closed and will soon be reaching one year since discharge. I had excellent credit prior to letting things go so long, and due to that I have been unsuccessful in getting any credit post discharge, not that I even wanted another credit card which was only desired for my job and travel. All I get in the mail is the typical high interest, fee and etc credit card offers, Credit One, First Premier and etc., those go into the trash and they come at least once a month.

                            That's the issue with BK, not everyone has the same results after filing, that is a magical restart that happens quick. It will take me time, but to be honest I have a brand new car that I financed pre BK, APR isn't bad at all and I reaffirmed it with less than 4 years to go, the best thing is I have more funds to pay it off sooner and save even more $.
                            I was advised by my lawyer and many posters on this board to stop making payments as soon as you've made the decision to file BK. Not bad advice but I decided to make my payments right up to when i filed and when it came time to rebuild my credit it wasn't too difficult. Back when I was in the mortgage business I remember a credit score of a women in the mid 700's just 2 years after her and her husband had declared BK. She had no debt when they filed so other than the BK there wasn't a single bad mark on her report. In fact, now that I passed the 7 year you could easily miss that I have a BK because the report looks good until you reach the bottom under public records.
                            Logan
                            Logan

                            Comment


                            • #15
                              Originally posted by Logan View Post
                              I was advised by my lawyer and many posters on this board to stop making payments as soon as you've made the decision to file BK. Not bad advice but I decided to make my payments right up to when i filed and when it came time to rebuild my credit it wasn't too difficult. Back when I was in the mortgage business I remember a credit score of a women in the mid 700's just 2 years after her and her husband had declared BK. She had no debt when they filed so other than the BK there wasn't a single bad mark on her report. In fact, now that I passed the 7 year you could easily miss that I have a BK because the report looks good until you reach the bottom under public records.
                              Logan
                              Logan
                              I stopped paying once I knew I was going to file BK. Waited about 6 months to file, so my credit report was wrecked with negatives.

                              Immediately post discharge, I was approved for a $1500 card. I built on that success, used my credit cards responsibly and always paid in full, and now (10 months post discharge) I was just approved for a 10K limit on a card with no annual fee and 2% cashback.

                              Paying credit cards when you know you're going to file BK in an attempt to "save" your credit report is misguided in my opinion. That money would be better spent on a secured credit card with a local credit union, if nothing else.
                              Chapter 7, above median, no asset. Discharged with no UST involvement.

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