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Bankruptcy Questions

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By mac750
September 23, 2003

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It will be 10 years on April 2004 when I filed, and I can understand how you are feeling. Every day I think about how all the debt accumulated over a few short years. It really is an emotional roller coaster before and after filing. It is the most humbling and embarrassing experience. I can only say that my 10 years of having a Scarlet letter on me will be off.

However, I am not ashamed like in the beginning to talk about it. In fact, I really learned from my mistakes.

One thing is that the lawyers try to act in a comforting roll and tell you almost anything. I also was told what you were told about:

The big line that keeps coming back is that I will be in a better position for credit since my "slate will be clean. And creditors are more attracted to you since you can't declare bankruptcy again for six years.

I did not find this the case at all. I tried to get a cell phone two years later and the company wanted a $1000 deposit. I have been denied even basic credit cards unless you are willing to put up a deposit with the credit card company for the same amount that you would be allowed to have credit. I now make in the six figures and still am getting declined for an AMX card because it is still on my credit report. I just bought a car and was able to pay half the price in cash and that, according to the dealer, helped me get the 2.9% interest rate.

If you do apply to rent your residence, you will most likely be required to put a security deposit of 2-3 months to cover in case you cannot pay.

Although you may see yourself as being debt free and have the means to pay, I never found it to be the case that you are viewed as a better credit risk because of the lack of debt. I have been seen as a bad credit risk because I was unable to handle my finances previously.

On the other hand, it was my only option at the time and due to the size of the filing. I am in a tremendous financial position today then I would have been had I not filed. Some thoughts:

1) I was able to keep my full 401K as it could not be touched as well as my IRA.
2) I do not know if I ever was declined for a job based on my credit. However, I have had only two jobs during this time. But I have been told that many employers do a check because it is determines character. Calling your previous employer does little good these days because most employers have policies to only divulge that you worked there and made $X...for fear of a lawsuit if something negative is said.
3) There is a limit to how much in assets (personal possessions) you can own if you file. I remember the form asked the value of everything you owned from equity in cars and stocks to toasters and minor appliances.
4) Some creditors, when you go to the trustee hearing, will attempt to work out a payment plan. Secured creditors like Sears or other stores try to work out a plan where you pay a certain amount...like $0.50 for every $1, rather than repossess. Visa and MasterCard are unsecured and did not show up to try to work out a plan. They were just written off.
5) I did not even attempt a home because everyone wanted a "risk premium" because of the bankruptcy on the interest rate. 2-3% higher was the usual case unless I could come up with a sizeable -- 30% and up -- for a down payment.
6) When I had to stand in front of the judge and he asked "what do you do for a living" with other people in the court and I said "an accountant"...he said "You may want to rethink your career in light of this"...the slap in the face I will always remember...
7) I was lucky because I did not list one of my credit cards and was able to keep it. However, the credit card company does periodic checks and when they did one, they did lower my credit line dramatically. I did reaffirm a car loan I had at the time since I had very little equity in it and thus could keep paying the payments.
8) Your auto and home/renters insurer will sometimes look at your credit. Apparently, those who have declared bankruptcy are more apt to make claims on their policies both actual and fraudulent claims. Premiums can be higher!
9) If you need to rent a car, reserve a hotel room, book a airline ticket...you need a credit card! Even the video store requires a major credit card in case they need to charge you for a late video or a lost video (although debit cards are more common now).

Whatever you decide -- and it is not at all an easy decision -- make sure you use all the resources on the web (the Internet was not at all what it is today when I filed). You will be impacted in many parts of your life that you would never have expected. It is a most stressful experience. I have been told by some that even after 10 years, it is still out there, although off the credit report. We will see...

On the other hand, I am happy I did it. Only because there were no other viable options at the time for me. I had to live with the ramifications for a long time, but again it was a lesson.

They do make it easy to wipe the slate clean and give you a fresh start...however, the fresh start is really starting back even behind square one.

Hope this gives you a perspective of one who has been through it....


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