Beyond Bankruptcy

 It’s been a few years now since the bankruptcy and it was the best thing we could have done to have gotten out of the hole we were in. To start anew with a fresh, clean slate has been awesome. We got to take what we learned and apply it, understand how it all works and move on from there.

It was not easy at first as the stigma of it can really stick in your craw like it does with me. But, we are human, we make mistakes and it’s okay. You have to forgive yourself. It’s what we do with those mistakes that counts, how we learn and move on, get better, improve, that’s what matters most.

In order to improve the credit scores, we had to get a new credit card. I know that seems contradictory to go into debt to make your credit scores higher, but yes, that’s the case. The reason why is to show you can handle your bills again, you can handle debt. This is so that future creditors will be able to see that and trust to lend you money again.

What to choose? Well, first is the type of card. No store cards that we really wouldn’t use anyway. I had one just before the bankruptcy with Pier 1. I loved them greatly and shopped there a lot until they went out of business and closed their physical brick and mortar store. You can still buy from them but it’s all online now. So sad! They also got rid of their credit card. So much for that! Once the balance was paid in full, they closed the account. Rats! 

Pier 1: https://www.pier1.com/

We looked at a few but chose Care Credit as I had good experience with them. They have no annual fee which is super important. The interest is high but only when you keep a balance as they do have a special interest free program for when you charge a certain amount you get so many months free of interest so long as you pay it off by a certain time. This is a promotional program that I love! So when you charge on it a good amount say $1,000 or a few hundred, the entity you are paying will place the promotional time frame on there. When you get your statement afterwards, you can see what the date is that you have to pay it back. This is super important because if you don’t pay the balance by that time, you will get charged ALL that back interest they didn’t charge you. Ouch! Yep, they do keep track of it. 

Why is this a good thing? Because it makes you pay that balance off. What I do is figure out how much a month I have to pay before that time is up. Subtract the last month and add on that amount to the other payments. Then you know you will easily pay it off before the promotional time ends. 

Sometimes I’ll just pay extra or double it so I can pay it off rather quickly. Each pay day when you have a little extra, just send it on over! You don’t want to cut it too close cause you have to allow for processing time on their end.

We chose Care Credit because let’s face it, dental insurance is not good. You never have enough coverage when it comes to the dentist. Then as I just explained, they do those promotional interest free time periods and so it keeps us in check as the interest rate is high. No annual fee is great as well.

I used my online bank to set it up, adding Care Credit to the Pay Bills area and then I can schedule payments when I want them to go and how much and I can edit as need be. Then the bank will send the amount you chose and from which acct and going to who you selected to pay. All done for you at no extra cost. Brilliant!

Recently, our banker we’ve been talking to suggested we get one more card to use for more general purposes and just charge it, then pay it off again next pay period. Keep doing that and it would also improve our credit score.

Believe it or not, the scores bounced back from the bankruptcy very quickly. Up to high 600s and then right into the 700s! How awesome! Now most likely it’s cause we kept paying the house payments on time and more than required and then paid off the Jeep. Boom!

It was surprisingly easy to not have a credit card. Only the debit. It made life very simple and easy. Definitely a great feeling!

Bankruptcy---The Aftermath

So after a full year going by since the bankruptcy, I have to say it's been really nice to not have those big bills hanging over our heads. We have gotten many offers in the mail for credit cards and have thrown each of them away without even looking. We know that those offers will have high interest rates and some even have annual fees involved.

Also, those are offers, and it does not mean that you will have it approved should you apply.

You have to remember that each time you apply for credit on something, your credit score gets dinged on top of that.

That being said, we know we have about 7 years before the bankruptcy falls off although it will never really go away, it is there forever. But after a time you can show that you can be responsible and pay your bills and be on time and not have any issues. Not to say you weren't before especially if you were in my position where I unexpectedly lost my high paying job.

Last year in March, we went down to Hammond Tractor to see if we could apply to get a nice tractor with a snowblower on it and of course it came back with a no. I knew we would more than likely be laughed at, but, at least we would know and tried. So this year, we went back down there to talk to them to find out exactly how much it was going to be for what we wanted. This way, we would know then how much we needed to save.

We also were not putting anything down on the tractor last year whereas this year, once we sell the UTV that we were able to get with the tax return, we can look at putting that money down and asking if they would allow us to finance the rest. If the answer is still no, then we will just save up more money and try again next year. Keep doing that until we either have the money to pay it in full or until we are able to finance it. Once a year is not bad as far as dings on the credit report.

In many ways, not being able to finance anything is really great as it prevents you from getting into trouble with payments. We are sitting in a better position financially as well in not owing anyone anything beyond the Jeep and the house. The Jeep being paid for as of next year, if not sooner!

So that's all really great! The downside to it all is knowing despite your great credit scores, you are still very limited as to anyone wanting to lend you anything. I get that tho', I do, despite the reasons why we had to.

The other thing that was cool was not everything was included in the bankruptcy. There are a few accounts that were not listed and ones we had paid off and had zero balances but they are still open accounts and as such, we have been able to use them. I didn't know they would still be active and stumbled upon that nugget of wonderful last year. Because they were not included in the bankruptcy, they are still open accounts despite the zero balance.

So why would we use them? To re-establish credit! And without having to have high fees either, we are keeping the same terms as we had before with that company and yet, by keeping a low balance and paying on time, that all helps you to establish your credit again. So that was a bonus. Accounts like Pier1 is great to do that. They are a store I don't shop in too often nor do I get things from there hardly at all, and so easy to go shop a bit, pick up a few things and charge it and then make payments on time and keep the balance below 1/3 or a 1/4 of the total credit available and that keeps your credit scores up and not effected at all and in fact, actually helped by you being and showing responsibility. Love it!

Dell is another company that I still have a business acct with. I thought it was closed but nope. I don't use them too often really at all. Just when a computer takes a nose dive which none have as of yet in a long while. And they are ones that we always paid off before the interest free time period expired so then you don't have to pay all that back interest that they do keep track of and will bill you for it you don't pay off the item during the promotional period. It's a great deal but you have to be diligent and timely.

The only other thing about the bankruptcy is that it would make it a lot harder for a bank to want to allow us a loan or mortgage so moving is not an option for a few more years yet. Not just due to that but also the money issue and whatnot. Lots of factors into that. Not that we want to move at this time but it may come down to it that we may just want to do so later on in life. Time will tell there.

It's been an awesome feeling to not have those bills over our head tho'. It gives you a sense of freedom and gave us more wiggle room to be able to focus on the renovations and changes we want to do with the house and garage etc. We will be going slower since I don't have that job with the crazy silly money but at least it is all paid for! :)

Moving forward, you do need to be careful about what credit cards you choose to accept and how you spend your money. You have to be responsible and can't fall into the same issue you may have had before, can't live beyond your means. I can hear my dad in a lot of this. Cash over the barrel and he only did time payments, something they don't really have anymore unless it's a promotional item like Dell or such, that's as close to that as you will get aside from the car payments.

So now things have settled and it feels pretty good. I think back on the kind of money I had been making and how so much was thrown away to bills. Crazy for if I had that now, I would be a lot better with it and of course now, it would mean so much more since I would save it and put it to things we really need. It's funny because you hear of how so many people lose their minds when they win the lotto or such. I know I wouldn't as I've learned that lesson earlier. It is so easy tho' to slip into it and be silly with silly money. Why so many people hire someone to help them manage it better, keep a tight rein on themselves. I also like the idea of taking time before you jump to a purchase too. Really think about it if that is what you want or need. Helps prevent the impulse buy.

Anyway, this whole ordeal has been mostly a good experience. Lots of bumps and whatnot on the road but overall, it feels good to be free and clear of the debt. I hope if you end up in a similar situation, you will have the same good results! Start again, a lot wiser! :)

Bankruptcy, Part 2--Procedures

A date is set up for what is called the creditors' meeting. This is where you meet up with your lawyer at a courthouse or a chosen place with a bunch of other people who sit in a room and wait to be called to come before the judge.

Now you do have to pay for credit counseling online. Before the meeting and then a 2nd class after this meeting. Be sure and check with your lawyer as to which is court approved or recommended. Then that certificate has to be sent to your lawyer upon completion.

Both husband and wife need to be there at the creditor's meeting and you can only reschedule this date in an emergency or really good reason.
Sitting before the judge, he asks you a few questions, first stating your ssn and other personal data, name and address and he asks to see your state ID. He will then ask you a few questions pertaining to your case, reason why you are filing, making sure you don't have anything extra not stated on the forms that your lawyer filled out etc.

You will have to pay court fees as well and we set up the lawyer's fee in payments which was really nice.

What is funny is that it costs you money to claim bankruptcy which is saying you don't have money. What a conundrum that can be!

So then at this creditor's meeting, this is the chance for your creditors to show up or send a letter to protest or seek to get you to keep their debt or challenge you or whatnot. Usually they do not show up and did not for us. Although we did get one company that wanted us to pay for a few items we had purchased a year before and so we had come to an agreement with them about paying a smaller amount than what they were looking for.

After this, the lawyer will file the papers as the judge signed them and we signed them and that is that. It takes about 30 days or so afterwards and then boom, done.

Credit scores fell but within just less than 30 days, the numbers rose right back up again. And then the ads and offers will arrive in the mail looking for you to sign up with them and of course those interest rates will be very high. The reason they do this is cause they all know you can't file bankruptcy again for another 7 years.

This was a painful process mostly for me as I had a hard time not paying my bills. But the lawyer made it a smooth and easy process.

Now the phone doesn't ring from any of those companies and such a huge burden has been lifted off our shoulders and it feels so strange. I did feel bad a great deal for doing that to those companies and most of them I did like and hated to do it but with having been let go like that from my job with no notice or warning, I had no choice, sadly enough. I would have paid them all off this past year if I had had my job still, that was my plan. But like all good plans you know....it happens.

I look forward to the day I make more money than I ever did before. :)

This really sunk home what my dad always tried to instill in me and I heard him and felt his presence throughout this whole process. What used to be a shameful thing however, no longer is these days. I still hated it cause of how he raised me, but there was nothing else I could have done. It was a hard lesson to relearn. Now, it's cash or saving up for what we want and no more charging anything unless it can be paid for quickly. It has slowed us down a lot as to renovations and upgrading things here but it is nice to know we don't owe anyone for what we do at this point. It's a good feeling to be debt free aside from the house and car. I learned a good and valuable lesson.

Bankruptcy--Chapter 7 or 13?

Once the decision is made that you believe you need to file for bankruptcy, there are a lot of things to think about.

Firstly, is to contact a lawyer. Be careful to not go through a 3rd party online who you have to pay a fee and then they will contact or find an attorney for you, who will then charge you a fee as well. Cut out the middle man and go looking for a good lawyer yourself if you don't have one already.
A lawyer who specializes or does handle bankruptcies is the one you want. Check and read over their reviews and references so you know what you are getting into with that person because they are going to be the key person to help you through this.

Second, stop charging your cards or accounts. You definitely do not want to be charging up your cards willy-nilly like you hear of other people doing just before they file. Only charge what you normally would. The reason for this is so that if you charge up a bunch of debt, knowing that you were going to file bankruptcy, the creditors can actually file a suit against you for doing that and it would turn into a nasty mess where you could be fined and/or do jail time for fraud. Because that's what it is, fraud. Big no-no. You can't and don't want to take advantage here as it will come back to bite you in the butt.

Hopefully at this point, you have kept a good record of all the credit cards and debt you have, including account numbers, amount you owe, the monthly payments, interest rates, balances, etc. This is all good info that you really do need to have set up on a nice Excel sheet so that you can see what you have. It would also be a good idea to write the company name of who the debtor is as well.
Plus, you should also keep track of your monthly utility bills and monthly expenses, food and rent/mortgage loan payments and how much your paycheck is month to month, both gross and net.

I always get those two confused, gross and net. The way to keep it straight is to think of it as gross amount being before anything is taken out, where as the net is after everything is filtered through the net, all your taxes and deductions are removed, this is your take home pay or what you have left in the net when you fish. :) So that should help to remember the difference between those two.

You will need to keep your back statements for everything from the past couple of months as well as tax returns from the past 2 years. Set up a meeting with your lawyer and they will go over all that you provide, earnings, debt, etc and what you are wanting to accomplish and they should be able to advise you as to whether you are better off filing chapter 7 or chapter 13 bankruptcy.

The difference between those two?
Chapter 13 is when all your debt is taken together and a new lower payment plan is set up over the course of 5 years. You keep all of the debt etc, but then after the 5 years are up of making those lower payments, whatever debt is leftover, goes away and you no longer have to pay anything on them. Your credit is not really hurt by this too much.

Chapter 7 is usually when you lose it all and not make any payments at all whatsoever. EXCEPT! You can reaffirm some of the debt such as your car or house. What that means is that your lawyer lets the mortgage lender and car loan people know that you wish to keep their debt as you can still afford to pay it and you want to keep your house and car. All the rest of your debt, usually credit cards and project loans etc, are all discharged. The credit card companies will write it off as you could not pay your debt that you owed and your credit score drops significantly and it will become harder for you to apply for new credit cards or a car for a while or if you are offered them or approved, the interest rate is very high as you now have become a huge risk for them to lend money to. You can recover from this, but it takes a few years to do so.

Once your lawyer tells you to, you stop making payments on your credit cards if you were still doing so. All of them must stop at the same time thereabouts. Make note of who you paid last and how much as this will be asked of you later.

Also be prepared to fill out a mountain load of paperwork. It will serve you well if you keep a good accounting as I mentioned earlier in this post and keep everything scanned in and put in an organized file on your computer so that you can pull up anything you need instantly and you know exactly where it is located at. I could not stress this enough as to how much this really helped a lot to know.

Once your lawyer and you decide on a plan of action and choose which chapter best suits you, they will begin to prepare the paperwork needed in order to file.
Sometimes, you may have to wait if you have lost your job and that is the main reason for the bankruptcy, for your paycheck to fall off your job history by around 6 months. This was the case with myself. So we needed to struggle for a few months before we could file.

Stopping payments from being made for bills was difficult for me to do. I detest being late and will always be early and usually more than the minimum. The very moment these bills were not paid, the phone calls began. Followed by the emails and regular statements and letters in the regular mail. The calls became incessant. Some people suggest changing your number but as I like my number, I just let the answering machine get it and did not pick up unless I recognized the number.
This was a very difficult time period.

Once the bankruptcy is filed with the court however, all your debtors are informed that you have done this. The calls and emails and mail then begins to peter down and slack off until they finally stop for the most part.

 (continued)