Personal Chapter 7 Experences (1 Viewer)

[Paul Jenkins]

Interested in comments from those that have gone, or are considering, going through it. I'm not interested in a discussion on credit counseling, or debt management or anything else related to that, but comments only towards Chapter 7 *personal* bankruptcy and what your experiences have been.

We are interested in how the process was, how long it took to complete (I understand 2-4 months total before your discharge papers), whether you did it 'pro-se' or with an attorney, if you have been able to re-establish any credit, what personal property you lost (house, cars, jewerly, music, home theater equipment, etc.), whether you would do it again, how the credit card companies harranged you, etc., etc.

If you'd like to email rather than post due to privacy concerns, I understand. There seems to be an issue many people have with taking this step (the stigma about it), but we are 95% sure that it is the right step for us...

Thanks
Paul

 

[Steve Schaffer]

Paul,
Did it back in 88, mostly as a by-product of divorce. Didn't own a home at the time, so nothing to lose there. Did use an attorney but it only cost a couple of hundred dollars.

Had already had one car repo'd. Didn't have enough equity in the other to have to give it up. I forget what the limit is, but if you own a car outright that's worth more than a certain amount, or have the equivalent amount of equity in a car you're still paying on, you have to sell it to help pay off the debts.

As far as furniture and stuff we didn't have to sell any that we owned outright, and I had some stuff I'd bought on credit after the divorce but before the BK that I was allowed to just keep making payments on.

Unsecured credit card debt goes bye-bye, and we never heard from any of our creditors after the BK was final (about 2 months after we filed). There was one hearing where any creditor could come and challenge the BK, none of ours showed up. They heard about 20 cases the day of our hearing, and most of the other folks getting BKs had just bought new cars with no money down so they could continue the payments and keep them because they had no equity.

It was about 3 years before I could get a car loan and it was at a very high rate of interest. The BK stays on your credit report for 10 years, repos only 7. I've heard from others that it's actually easier to buy a house while the BK is on your record than it is to get a decent rate on a car loan.

I couldn't get a credit card for maybe 5 years, and the first one I got was collateralized.

My BK disappeared from my credit report in late 98, since then I've been able to buy a condo, car, etc, and have at least 4 or 5 offers of low rate credit cards in my mail every week.

My and my 1st exe's BK was mainly due to a divorce and her subsequent unwillingness to continue to work for a living (she made the same amount I did the whole time we were married, quit just about the time she served papers on me). While our debts would have been manageable if we'd split them and she continued to live up to her responsibilities, her refusal to do so meant her creditors would have come after me regardless of who was assigned which debts in the divorce settlement.

Rather than have me spend 10 years paying off her debt as well as mine, we decided to do the BK.

It was a tremendous relief to me to get out from under and start living on a cash basis again. I didn't have a very nice place to live or a really great car to drive, but found that since I deliberately lived in a much cheaper place than I could afford and usually had a paid for or cheap car, I could save up cash for stuff fairly quickly.

I was pretty ashamed about doing it at first, then talked to a bunch of folks and was amazed at how many of the people I worked with and socialized with--people I had a lot of respect for--had done the same thing at one time or another.

Laws have probably changed since I did mine.

 

[Paul Jenkins]

Steve,
Thanks for the input. We are going to try to work 2nd jobs and not file if we can. I called the credit card companies and got the 25% interest rates on both of them down to 14% and 17%, so that helps. It still may come to it, but we are going to give it another go to save our credit and own up to our debt. Being this far in debt is embarrasing, demoralizing and makes you feel a bit stupid, luckily I've talked to a number of people in the last couple of days that have made that a bit better, and giving it another shot before we file means we are doing what we can to try to get out of it "the right way", so to speak...

Thanks again,
Paul

 

[Scott Van Dyke]

Steve,
My experiences were similar when I went chapter 7 in '94.

Paul,
If you are going to do it, you will want to go down with flying colors, because the next 6 - 10 years is going to be rough. You can write up debt for people you don't even owe, then have them claim it on their taxes in April. Get as many cash advances on new unsecured credit cards as you can, then make sure this money is not in an account with your name on it. I believe you are allowed $2500 in cash that they can't touch. The lawyer, if he's cool, should only be $300 - $600. Good Luck getting an auto loan under 22% interest. You'll get the loan, but spend 6 years paying it off. Credit Card? forget about it. Took me 6-7 years before they touched me. I'm now trying to buy a house 8 years later, and it's still tough. Rent an apartment? Yes, that was difficult too. It is very embarrassing telling potential creditors you have a bankruptsy. I certainly would not reccommend it unless you have no other option. Not to mention, if the terrible situation of a break up were to happen with you and your loved one, it takes a very understanding new girlfriend / fiance` / spouse to stick by your bankrupt ass.

Best of luck.

 

[Clinton McClure]

Isn't this a bit illegal?

 

[Ron-P]

If you are going to do it, you will want to go down with flying colors, because the next 6 - 10 years is going to be rough. You can write up debt for people you don't even owe, then have them claim it on their taxes in April. Get as many cash advances on new unsecured credit cards as you can, then make sure this money is not in an account with your name on it.

Great idea, lets just blatantly rip-off credit card companiesBTW: the Judge will be looking out for this kind of activity, so I would avoid it. Also, it is just plain wrong. Why screw other people out of money for your mistakes.
When my wife and I first got married we racked up over 25k in credit card debt. We went to the usual CCCS and considered BK. Instead, we tightened our belts, lived on a shoe string budget and paid it all off in 15 months. Because of that small sacrifice we have perfect credit and no outstanding debt other than 1 car payment and the house.
It is much more rewarding to pay it off yourself, if you can.
Peace Out~

 

[Paul Jenkins]

Clinton, taxes are illegal, so what Seriously, we would never do that, we would go in with exactly what we have been doing, trying what we can to meet our financial obligations but showing the court we are having problems doing it.

 

[SteveA]

I agree with Ron-P. I was in a similar situation: 25K in debt just five years ago. Today, I have no debt other than my low-interest mortgage - and I have a 780 credit rating. I also have self-respect knowing that I am a person who meets his obligations.

I strongly encourage taking the high road, if possible. There are all kinds of services available to help negotiate lower rates with creditors. I don't mean to condemn bankrupsty altogether - especially for people who have experienced major medical bills or something like that. Still, you need to remember that when someone declares bankruptsy just to make their lives a little easier in the short term, EVERYBODY pays.

Plenty of people have found themselves drowning in debt at some point in their lives, but most people repay it honestly.

 

[Paul Jenkins]

Still, you need to remember that when someone declares bankruptsy just to make their lives a little easier in the short term, EVERYBODY pays.

Actually, there isn't too much truth in that. The credit card companies make money, lots of it, and take into account a certain %age of default accounts.

 

[Paul Jenkins]

Plenty of people have found themselves drowning in debt at some point in their lives, but most people repay it honestly.

Just to clarify, bankruptcy is not a "dishonest" pathway for everyone. For most people it is a mistake, a bad break (loss of job, medical bills, etc) etc., and not a dishonest attempt to "screw" the credit card companies...

 

[Erich_H]

If there is any way to avoid it, take that route. On the other hand, my BK was discharged in Sep' 97 and the wife and I are almost completely back. We have low interest car loans (0% and 5.9%), low interest credit cards, and are in the process of buying a house. If you do choose to do it, I would definitely try to re-establish as soon as possible.

If I had had a choice, I wouldn't have done it, but given the circumstances that I was face with, I really didn't have a choice. At no time during my BK proceedings did I ever feel "dishonest", nor should anybody that chooses to file for chapter 7 unless, of course, you are trying to defraud credit card companies.

 

[Paul Jenkins]

Erich,
Thanks for the feedback. When you filed, can I ask your debt to income ratio? In other words, how much of you take home pay was going towards debt repayment? Did any of that have a bearing in your BK proceedings (i.e. did they question the debt to income ratio and your ability to pay back the charges).

In my case, I have tons of credit card and student loan debt, in addition to a house and two car payments. My %age of debt to income is high, and that prevents us from saving for retirement, prevents saving for the kids college, and that is a struggle each month to pay all our bills. Removing the credit card debt would give us a lot better chance to meet our other 'secured' loans (house, cars) and loans that can't be discharged (my wife's student loans) while being able to save a bit for retirement and the kids college.

 

[Holadem]

In my case, I have tons of credit card and student loan debt, in addition to a house and two car payments. My %age of debt to income is high, and that prevents us from saving for retirement, prevents saving for the kids college, and that is a struggle each month to pay all our bills. Removing the credit card debt would give us a lot better chance to meet our other 'secured' loans (house, cars) and loans that can't be discharged (my wife's student loans) while being able to save a bit for retirement and the kids college.

Paul, it doesn't sound like the end of the world. Obviously I am speculating based on what I am reading. You said very specifically not to talk about credit counselling but... have you tried credit counseling .
Seriously, it seems your situation could be arranged with some more belt tightening and counselling.
--
Holadem

 

[Erich_H]

Paul,

I can't remember exactly what it was, but when we filed, the only things I could do with my money was pay rent, make a truck payment, and buy food. I know that we owed more on monthly minimums than we brought home. The first thing our lawyer looked at was whether or not we could go chapter 13 (kind of like CCCS, but I believe all the interest is waived), but that was not possible. In your case, that is probably the first thing that a lawyer will suggest, but don't quote me on that. The first question a good lawyer is going to ask you is whether or not you have looked at every possible way to avoid chapter 7.

 

[Paul Jenkins]

You said very specifically not to talk about credit counselling but... have you tried credit counseling

no, i can counsel myself with help from the board
seriously, i've heard that counseling is actually worse than a bankruptcy since you still have the debt to pay back, while incurring the negative credit issues associated with a bankruptcy.
my choices are to continue to tunnel out as best I can or decalre bankruptcy. Sticking with the tunneling approach for now, we'll see what the fall brings (layoffs continue to hit this area hard, especially in the IT/Telecom area which I'm a part of... 400 let go from Alcatel this week here in Plano...)

 

[Leila Dougan]

Actually, Paul, counseling is not worse than bankrupcy. Sure, it doesn't look so great but it does show the creditors that you are not trying to escape your debt. I would take the counseling and repayment any day over bankrupcy. I would, seriously, try to do EVERYTHING to avoid bankrupcy. Get rid of your cars and buy a used one, get credit counseling, get rid of everything unnecessary (cable tv, dsl, tivo, cell phones, whatever) and just put as much money into your debt as possible.

Of course if you've done all that then BK may be the only way. I figure, though, that you may end up having to get rid of the cars anyway you may as well try to do it on your own and avoid the BK.

In any case, good luck with all of this. I know a few people who've been through this. While I don't know the specifics of their situation, I do know that it does get better and eventhough there is quite a stigma attached to it there are more people out there who've done it than most of us realize.

 

[Paul Jenkins]

Leila,
Thanks for the advice. My dad about had a cow when I broached the subject with him the other day Talk about stigma!!

 

[Ron-P]

We did, what Leila suggests. We sold my wife's brand new Saturn and bought a 10 year old Mits. Mirage. That alone cut 300+ out of the monthly bills. We also canceled our Satellite TV and went to rabbit ears. We had no money to go out on and gave ourselves only $20 a week spending money.
There is no doubt that it was a hellish 15 months, but it was very worth it and we learned a lot about money management, something neither of our parents taught us.
We still live close to that same budget with a few exceptions.
Peace Out~

 

[Ryan Wright]

Quote:

Pure bullshit. Counseling is NOT worse than a bankruptcy! It's not even close! Your credit report will show two things:
1. Your debt has been paid in full. This is a GOOD thing.
2. Some creditors may stipulate that "the debt was not paid according to the original terms." Meaning, you agreed to pay back at 25% and instead paid 2%, or whatever CCR negotiates for you. This is not necessarily bad; you should have few problems getting credit when you're finished.
CCR will show responsibility on your part. Creditors like that.
You are obviously misinformed about both CCR and bankruptcy proceedings. I highly suggest you contact a credit counseling office immediately and discuss your situation with them.

 

[Holadem]

seriously, i've heard that counseling is actually worse than a bankruptcy since you still have the debt to pay back, while incurring the negative credit issues associated with a bankruptcy.

This is what I was suspecting. I am sorry but your situation doesn't seem bad enough to warrant a bankruptcy unless as a cop out. I have always picture bankruptcy as a last resort measure. I strongly suggest revise your standards of living as per Leila and Ron's advice.

Of course I am one to talk, my situation isn't brilliant either - I am on counseling. But I would sell off my HT (which is really all I have) before even considering bankruptcy.

[EDIT] Well, it seems Ryan took the words right off my mouth!

--
Holadem