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My Chap 7 Story and Advice for Others Considering BK

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  • My Chap 7 Story and Advice for Others Considering BK

    I would like to share our story of a chapter 7 Bankruptcy with you.

    Remember that, “one is only poor, only if they choose to be”, that saying took us making it completely through to financial freedom, before we fully understood its true concept. It’s simple, it’s called foolish spending! So anyways, to move on as we have eight wasted years to cover here.

    So, my wife and I both have pretty good jobs at this point and not a huge load of debt. Some, but not huge. I am a truck driver making pretty good money around $50,000 per year but that money comes with the cost of being gone all of the time, and my wife is a first year teacher making around $33,000 per year and loves her job. So anyways, $83,000 gross yearly income, not to bad for the two average Joes.

    Life is pretty good at this point. Yet, in the back of my mind I keep telling myself, “I sure would like to be home every night and have more time to spend with my family”. However, I failed to listen to my inner monologue because the money was too good to find elsewhere. So we decided to continue on with things as they were. We kept a budget sheet where we knew exactly what we had to spend each month and what we had to pay each month. But we were not saving anything.

    I remember a man that I worked for when I was a child. He always told me to always save some of my money “for that rainy day” as he put it, and those were his exact words. I never did. Maybe, I wasn’t quite aware of what a “Rainy Day” actually was. We always spent almost all that we made and never saved for that “Rainy Day”. Now that I look back, most of what we spent was just spent on foolish stuff that we really didn’t need.

    So let’s talk about some of our foolish spending. Well we bought a $23,000 pickup truck at 17% interest for starters. 17%, because our credit was not too great at the time and we purchased it and we were pressured into the sale buy the salesman as well. But we had to have the truck anyway, I guess. Being pressured by a salesman is not a fun thing. It gets me all nervous and I can’t even think straight. I will nevr allow such a thing to happen again, I will walk before it does. Having a pressuring salesman is not a good situation to be in at all.

    Furthermore, we took a nice week long vacation out to California and Catalina Island because we had gotten approved for a Travelocity credit card so it was so very easy to pay for the airfare and vacation expenses. We hadn’t saves any money for this so we maxed out our Travelocity credit card at $3600.00 in less than a week’s time. Yes, the vacation was nice at the time, but paying for it was another story because the payments almost all but killed us financially. All this time we were on vacation, we kept saying to ourselves, “well get it paid off when were done but we deserve to have this vacation”.

    We then got and used a capital one credit card for a bunch of unnecessary items, dinners, furniture, air conditioner, tools, household items, and more. And it was soon maxed out as well at $2500.00.

    With all of this said I then I started buying coins for my huge collection with the spare money from my paychecks, a few, just a few every week. I figured a few here and there wouldn’t hurt anything and we always had to spend the last dime no matter what.

    We also would dine out for dinner almost every night. Yes, almost every night. We would also go to the Red Lobster or some other great place to eat every weekend and before we knew it, our paycheck was gone again and again. Easy come, easy go. Once again broke for the week.

    So, we continued on this same road for the next three more years or so. Three more years of money in and money out, paycheck in paycheck gone. It traveled right through our hands like water though a strainer. Some of it stays for a bit but just a bit, but then always seems to find a way to leak through the gaps in our hands. Just too many bad decisions or something unexpected always showed up.

    In three years we had blown nearly $90,000 in just plain foolish spending! $90,000 Gone, and nothing to show but a couple more credit cards that were maxed out. Here today gone tomorrow with nothing to show for any of it, period! Not one darn thing! All of the hard work was just wasted. Wasted-Wasted-Wasted! Something has got to change we thought, we are getting nowhere but further into this huge sinkhole. Things were getting so tight and depressing watching the money just come and go.

    So, we started to widdle down on the small stuff. We started with the bills that had the smaller balances. The credit cards, the doctor bills, then the truck and then we had a small gap of progress. The progress was over almost as soon as it started. My fiancé had now just graduated from college so now we decided that it was time to buy a house right in the midst of gaining a little bit of breathing room. Terrible idea.

    Still owing about half the ballance on the pickup truck, we went from a $475 a month rent payment to a $750 a month house payment. And added an additional two Menards Big cards that are now maxed out at $5000 total to fix up the new home. We then bought a boat and then another car with the cash for clunkers program. The car was the only good investment that would later come out of all this mess.

    This is where things really started to turn for the worst. I mean get really really tight, “Strapped” as you could put it. I remember paying out a little over $3600.00 each month in bills, Just mandatory bills. Month in month out. This included only the minimums on ALL of the credit cards, the house payment, car payments, boat, utilities, doctor bills, cable TV, internet, phone bill, student loans, insurance, and everything else. It was a so realistic nightmare. I recall of one credit card in particular being maxed out at almost $8600.00 at $204.00 a month minimum payment and only about $5 a month went toward the principal balance of that credit card. If that doesn’t depress you, I don’t know what will.

    I was so scared. Then my weekly run of 2600 miles started to get pretty skeletal. What I mean by skeletal is that my normal two round week of truck driving went to about one round per week as the freight slowed down during the winter months. This was slowly but surely taking us down and fast at that.

    With all of this going on, I was starting to have a real tightness in my chest from all of the worrying about bills or if we were going to fall behind. I had to see a doctor about the stress, he had me run a few tests (at the hospital) to make sure that I was not having a heart attack. To me, this only meant more bills and more stress. I didn’t need any more stress added to my plate. I was already missing work to go to the doctor on already short weeks. This is not good and I was at the breaking point.

    What are we going to do, I kept saying. Due to my health condition I had to quit trucking for a while and take a large pay cut that killed us. Large meaning about $20,000 annually. And then we flat out struggled on a few more months.

    I kept saying, “if we can just make it till tax time we will get all caught up”. So we cashed in my wife’s 401K to save us from temporarily loosing our home and a few other things. Once we get our tax refund well be all caught up. Bad idea! Terrible idea, do not ever do this. Never Again!

    So, we went out and filed our taxes. For the last few years we have always got between two to four thousand dollars back. Oh dear, the one year we really need a return we find out that we owe a little over $3300 to the IRS. $3300 that we didn’t have.

    I was so tied up and exhausted from worrying about how we were going to pay the bills I didn’t even take the time to see that the school was only withholding a minimal amount from my wife’s paycheck for taxes all year long. At this point I said to myself “what are we going to do”. We applied for a credit card and got one for $500 less than what we owed for taxes. Then I sold part of my coin collection to make up the rest. Just another bill to add and a little more stress. At this point we have started borrowing from Peter to pay Paul.

    I kept thinking “we are getting nowhere here, we are going down and this is going to get bad really really bad”. I felt as if we were on the Titanic after it had hit the iceburg knowing that it would eventually sink. I knew we were going to go down but yet, I asked my father in law if we could borrow $1000 for a house payment as we were very tight for money at the time. He gladly gave us the $1000 and said are you two ok? We said yes, as we were too proud and knew that it would take a fortune at this point to dig us out of the hole. We tried to keep it all secret for a while. The $1000 was just a band aide on a huge wound. I had no other choice at this point but to go back out on the road and start driving again. I did so, regardless of the health concerns.

    We then purchased a large life insurance policy on myself and a mid sized one on my wife should something happen. I knew that we couldn’t afford the extra $35 per month at the time but how could we not afford it? I wanted my wife to be ok if something would happen to me. I didn’t want her to be stuck with this huge burden on her shoulders and me not around to help her out with it.

    For the next few months it was a roller coaster ride, we got caught up a bit then something would happen and then we would start to fall behind again. And then the ultimate nose dive.

    My wife gets a letter from the school informing us that their budget had been cut by the state and that they were going to eliminate the program that she teaches at the school, and that it will no longer be available the following year. Just some more great news at the worst possible time.

    So here it is a month from school being out and her pay will stop in June, what a deal. She was not able to find a job paying anything close to what she was making at the school and now we would not have health insurance either. So, With all of our funds exhausted and now our credit record is starting to suffer, we could not get the house refinanced, or a home equity line of credit or any other help for that matter. My father in law offered to loan us $20,000 bless his heart. We would not take it from him. I knew at that time that the route we were on, that $20,000 would only buy more time and a new debt that we had to pay back.

    At this point to say the least, my wife and I felt absolutely helpless to put it mildly. We could now unfortunately see how all of this was going to end and could not prevent the inevitable from happening! Our credit was already being affected at this point and we were quickly moving month by month upside down on all of our payments.

    We would paid one bill without enough money but then someone else got shorted that month and so on. This continued until we were upside down on the house payment which was eventually unpreventable due to all of the collection notices.

    We decided at this point to go see a lawyer and file for chapter 7 Bankruptcy. We found a good lawyer and a cheep one at that. She charged us $1200 for the whole darn thing. A few of you are probably saying “ well how can you afford to pay a lawyer if you cant afford to pay your bills” Well, that’s the easy part, if you are filing for bankruptcy on your debts, then you just quit paying your bills and pay the lawyer off.

    We filed on about $150,000 worth of debts. This is not a proud moment in our lives but a sense of relief. We went down with a credit score near 725.

    I am not writing this manuscript because I am proud of the fact that we had to file for bankruptcy. A lot of people are just flying by the seat of their pants each day and are just one major medical bill away from it. Just like we were. I am writing this manuscript to help those that are going through this tough and difficult time in their lives find that there is hope and to know that there is light on the other side of the wall called debt. We have proved it.


    Though each individual’s journey to how they got to this point and how they will get out of it is different in may ways, but yet they are all somewhat the same, they are all up to their necks in debt and having a great difficulty paying or stopped paying their debts.

    The above story is just a brief explanation of how my wife and I got into this whole mess and how we got out of it. Most of which I will admit again was just plain foolish spending and living beyond our needs. People learn from their mistakes and there are some that will never learn.

    If you asked yourself “what would life be like, what could I do differently if I had a clean slate and be able to start all over?” Well, the good news is, is that you can. And more good news is, is that you can rebuild your credit history over some time. Yes, the first two years will be or can be a struggle if you want or need to get credit for something, you probably will not get a line of credit other than for a small credit card, small meaning $250-$500 limit for the first two years. But remember your credit and credit score is what got you into this situation in the first place.

    If I were you, I would not feel ashamed to say that you have filed for bankruptcy. Do not worry about what other people may think about you. Every individual has there reasons for what they have to do. And no one else is going to just pay your bills for you. Therefore I would only worry about what is in the best interest for my own situation and not what joe blow across the street thinks of me.

    Did you know that some of the most famous people in the world, and believe it or not, some of the most successful people have once filed for bankruptcy in their life?

    For example: Walt Disney, Larry King, Billionaire - Donald Trump, Henry Ford, Abraham Lincoln, and Wille Nelson just to name a few of them. I would look at bankruptcy more as a “learning curve” than I would as a black mark on my name.

    Once you have decided that bankruptcy is rite for you, the good news is , is that it is a relatively easy process and your lawyer will handle most of it for you. If you receive any collection calls or threats after you have seen a lawyer about your situation, just tell them that you are filing for bankruptcy and that they need to contact your lawyer for any further questions, make sure that you give them the information for them to contact your lawyer even if you have to talk over them while they are still talking and then just hang up the phone and do the same accordingly with anyone else that calls.

    You don’t need the increased stress of worrying about creditors and their threats as there is most likely nothing that they can do to you now anyway.

    It is a good idea to see a lawyer and file for bankruptcy before the wage garnishments actually start from the collection agency. I have heard that it is much more difficult if garnishments have already begun, but I can not vouch for it with my own experience.
    Here are the steps below that we took as we filed for chapter 7 bankruptcy.


    1. Gather up every debt or bill that you have or owe, yes everything. Then go and find a good lawyer, the first consultation is usually free. Talk with them and tell them your intentions or situation that you are in. They will more than likely ask for half of the payment to begin the bankruptcy process.

    2. Next, they will usually tell you to quit paying on anything that you are not going to try and keep. If you are caught up or can get caught up on your home payments and want to keep the home, get it all caught up and just keep paying on it on time like normal if you want to keep the house. Same with any cars. Do not keep unnecessary debts get rid of everything you can that is why you are filing bankruptcy.

    3. It is important to be 100% open and honest with your lawyer, they are there to help protect you.

    4. If you are going to keep something such as a home, and you are current just bring it current or keep paying the monthly payment like normal.

    5. You have to file on everything but you can keep whatever you continue to pay on as long as it is in somewhat good standing and you reaffirm the loan with the lender.

    6. Let your lawyer handle all of the legalities of it. And you need to follow your lawyer’s instructions to the letter.

    7. You will then visit with your lawyer in about a couple weeks or so to sign the papers and set up a court date.

    8. You will go to bankruptcy court. This is NOT a big deal, there is NOT a judge or jury or anything like that, that is going to be putting you “Johnny On The Spot” or anything like that.

    You literally walk into this waiting room with about 20-50 other people with their layers that are doing the exact same thing that you are doing. DO NOT BE LATE! Your lawyer will show up about 5 minutes before your appointment. Once your appointment time comes around, you will all, Everyone all parties will go into this room together and sit down, all 20-50 of you and wait.

    As the clerk calls your name, you will walk to the front of the room and sit down. The clerk will ask you these similar questions:


    A. Clerk calls your name “Joe Blow” you go to the front and sit down.

    B. Clerk asks you to please state your name and verify your social security number and address on the recorder. You do so.


    C. Clerk asks, is this the total debts that you are filing chapter 7 bankruptcy on? You review it and say yes.

    D. Clerk says are there any creditors here that want to testify against you?


    E. Usually none of them will show up, if one does they try and make a deal with you. You just say I can’t afford to pay it no matter what the deal is or how good they make it seem, and then they back off, if not get your lawyer involved to help you answer.

    F. The clerk says is there anyone else here to testify against Joe Blow?, If not, he slams the hammer and says thank you and then says the next name in line, Sue Jones and then you go home.


    G. It literally takes 2-5 minutes in the hot seat if that.

    H. About 100 days later you will receive your discharge letter in the mail.

    So anyway, enough with all of that ramble, and on with the rest of our story. It has been right at two years now since we have filed for bankruptcy, we had filed on everything except two cars. We lost our home, and $150,000 in debts.

    We still have all of our belongings and personal items, they do not come to your home and take all of your furniture or the clothe from your dresser or anything like that.

    I guess that we are now in that white trash category, if you are into name calling and want to call it that. We are now just like Walt Disney and Donald Trump and the other guys.

    But, we are on a much better road now. The rough road was left behind and we are now back on a smooth pavement path and on the road to success with new smarter choices to make.

    Soon after our bankruptcy, we both studied about finance and debt management as well as a credit building course. We each got a small credit card about a year and a half ago, or six months out of our bankruptcy. It only has a $250 limit, but what do you expect for being high risk? We purchase small items ($25-$50) with it every other month and pay it off as soon as it posts to the account for credit building purposes only.
    Thus far we have not paid one penny in interest on either card. We do this every other month on each card and it seems to be working great. The limits were automatically raised to $750 on each card by doing so and we continue the habit even though we don’t need the items, we need to build our credit back up and that comes at a small cost. We never get close to a $100 balance on either of the cards. Let’s just say that my wife now has a lot of brand new cookware that we use all of the time.

    We reaffirmed the two car loans with the local banks and those two cars have been paid off since for about a year now. We still have our student loans as you can’t file on those. Renting is the hardest part for us to deal with as we know that we are just throwing money down the drain.

    We have checked our credit score and it is rite back at a 700 WOW! We will be getting a home loan in the next few months after we have saved up enough for a substantial down payment. We talked with a local banker and his exact words were “your credit is better than 90% of the people that walk through this door” and I can help you at the two year mark, meaning (two years from the discharge date). That is great news.

    Our bankruptcy has taught us a lot about financial responsibility and I don’t regret filing for bankruptcy for one minute. We have managed our money ever since. We have saved for what we want, and we don’t use credit to buy things other than to currently build our credit back up. It has been a long rough road but it is possible to see daylight again.

    I have always dreamed of becoming a private pilot, but never had the money to do so. I saved and bought and now own a small Piper single engine airplane. I never in my wildest dreams would of thought that that would ever be a reality or possibility for me. In my opinion, our bankruptcy was an important part of our life and we don’t regret it at all.

    There are some folks who keep on sinking, Keep on reaching, and trying to dig out and keep going under deeper each time.

    I know of a couple that were having almost the same trouble as we were, but not quite at the same stages early on in our disaster that we seen and are now on their last legs barely standing. They have now borrowed money from their family and are sinking fast even with family loans. It tears me apart to know what it would be like to file bankruptcy on a family member. I could not imagine what that would be like and don’t want to either.

    I ask myself,
    “Where would we be, had we never filed Bankruptcy two years ago”

    I wish you all the best of luck on your journey through this difficult time, and please know, though it may not seem like it at times, There Is Hope And Light At The End!!!

  • #2
    My husband and I were just staring at our household expense spreadsheet the other night and I literally had tears in my eyes. Discharge in 03/2012 it is remarkable where we are now and how we handle our finances. The above post talks about saving money and boy do we save, we have structured our lives so that we can live on one paycheck and pay all expenses. My check goes to retirement funds and vacation savings account (I get pd 2x a month), my husbands checks (pd 2x a month) the first one pays all our expenses and the 2nd one to savings/emergency fund.

    We live in a very nice place but we downsized for the 3 of us and we rent, the biggest stress reliever there is! We pay rent and that is it, no issues with the roof, no issues with paying for new appliances, something breaks call the landlord, lock it and leave it! We went from owning 2 homes (primary here and rental in another state), we hated being landlords and as all know there is always something to spend money on when you own. Renting has provided us the financial freedom to live on one check and build that all so important savings/emergency account. We realized that owning is only paying rent to a mortgage company until its paid off with all the hassle and responsibility of upkeep, we sleep so well now at night with money in the bank. Since our discharge we have replaced our car (was a 2003 with 165K miles on it) with a 2011, no issue at all with getting a loan (under 5%) for 4 yrs and put half down, we will pay off in less than a yr. No issue renting a nice townhome (3 beds/2 baths 1500 sq ft, pool and tennis cts) in a great school district.

    We live on cash and have everything we need or want for that matter. We travel (pay cash) often (looking at trips to Italy next summer as we speak and cruising this Christmas) and the quality of our lives have improved beyond what we could have thought. That quality has made us richer than ever imagined. We will never go back to that stress as described in the post above and the snow ball effect of losing jobs or wiping out retirement or savings account to save a house or pay the cc each month. We have structured our lives to not be caught off guard again.

    Comment


    • #3
      How I wish I could talk my hubby into renting and when something breaks it's some one else' s headache. We are like 5 to 6 years away from retiring and I just don't want the hassle anymore

      Comment


      • #4
        Welcome to bkforum, 13ZULU! I moved your excellent post to it's own thread because it really should stand alone. It also kind of threw the other thread off track.

        If you want me to revise the title of the thread, let me know.

        I hope you will stick around and continue to give others the benefit of your experience.
        Last edited by LadyInTheRed; 08-08-2014, 04:32 PM.
        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


        • #5
          That was an excellent post. Sort of felt like you were talking about me a few years ago.

          Welcome.
          All information contained in this post is for informational and amusement purposes only.
          Bankruptcy is a process, not an event.......

          Comment


          • #6
            Thanks for sharing. My path to bankruptcy was also paved with a number of vacations that probably were $2-$3k apiece, dinners out every week, and purchases for me, my wife, the kids and the home were done while I muttered "we can pay it off later, we can handle it" each and every time.

            You are not "whiskey tango" for filing bankruptcy. We BK debtors come from all walks of life and got to this place for a whole litany of reasons. I make six figures and hold a bachelors degrees from a highly regarded state university. None of that helped me properly manage my income and unsecured debt, which equaled each other when I filed my Ch. 13. As someone from Storage Wars once said, "We are all four or five bad decisions away from (going Number 2) in a bucket" and it's easy for those 4-5 decisions to be made in a short and scary time. I estimate I was at bad decision #4 before I filed BK.

            I'm bothered too by the stigma that goes with bankruptcy, but I am comforted by this observation: unlike the cliches you hear about people on public assistance you will never, ever hear anyone get outraged about the BK debtor who pulls up to the Trustee's Office or courthouse in a luxury car and whips out his or her iphone5 while waiting for their 341 meeting, since you really have to go out of your way to find BK debtors if you want to shame them and if you do you really, really need to evaluate your life's priorities.

            One of many things I learned from BK is that your debt is nothing more than a commodity to the creditors....an instrument to make money off you (and a lot of money at that) in return for the ability to buy things you can't afford, to be charged off as a loss (presumably for the tax benefits), and to be sold for a fraction of the cost to debt buying firms that will do nothing more than make money off your misery. I don't lose any sleep giving any of my creditors and debt buyers pennies on the dollar. I only stress about living life on a Ch 13 budget, which is less stress than blowing off collection calls, filing for mortgage loan modifications that get rejected, etc. Your level of "personal responsibility" in managing your debt is rewarded by creditors with more inducements to go deeper into debt (lower interest rates, higher credit limits, the "prestige" of the [insert precious metal here] card) which my wife and I too eagerly took advantage of. When I saw how much of my debt was sold off to debt buyers and how much was never "proof of claimed" by some creditors (nearly 50% of my total unsecured credit), I realized that all that stress, worrying and sleepless nights were in vain and arrogant, sanctimonious types who wail that not paying debt is equivalent to theft really have no clue what they are talking about.
            Last edited by switch625; 08-08-2014, 10:20 PM.

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            • #7
              We are 30 days out of our 341 meeting and I feel the same way. If I had known it would have made such a positive impact in my life I would have filed 3 years ago. I wasted 3 years (and probably more due to all the stress) freaking out, throwing dollars at a problem that won't ever go away and countless hours of sleep trying to figure out a plan to balance all the debt. If anything consider bankruptcy for your health, I finally sleep again.

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              • #8
                Originally posted by LadyInTheRed View Post
                Welcome to bkforum, 13ZULU! I moved your excellent post to it's own thread because it really should stand alone. It also kind of threw the other thread off track.

                If you want me to revise the title of the thread, let me know.

                I hope you will stick around and continue to give others the benefit of your experience.
                Yes you can retitle it if you would like so that others may find it easier. Thank You -Ryan

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                • #9
                  Originally posted by 13ZULU View Post
                  Yes you can retitle it if you would like so that others may find it easier. Thank You -Ryan
                  I meant that you should let me know what title you would prefer. Sorry I wasn't more clear. I already gave it a title. As the author, you are the one qualified to retitle it.
                  Last edited by LadyInTheRed; 08-20-2014, 01:33 AM.
                  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


                  • #10
                    Originally posted by LadyInTheRed View Post
                    Welcome to bkforum, 13ZULU! I moved your excellent post to it's own thread because it really should stand alone. It also kind of threw the other thread off track.

                    If you want me to revise the title of the thread, let me know.

                    I hope you will stick around and continue to give others the benefit of your experience.
                    Thank You , Lady In The Red, I just like to help others if I can.

                    Comment


                    • #11
                      Wow, thank you for sharing your story. "Luckily" my credit has been terrible for a while so I've been living without credit for years. Although, I have yet to file, I am looking forward to a clean slate. I don't wish this on anyone. Thanks again for sharing this will help many of us.

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