Why I Didn’t File for Bankruptcy at 23 (or 24, or 25, or 26, or 27, or 28)
To follow-up on on the woman who declared bankruptcy at 23: I have obviously considered this! (I love a quick fix, lovelovelove.) However: I very quickly unconsidered it. Here is why:
2. For a long time, having just read the first couple sentences of his article about why I shouldn’t declare bankruptcy was enough. Then at some point (last week), I wanted to know more. Was it really that bad? I read the article. La la la, wouldn’t wish this on anyone, blah blah blah, compared it to divorce, and then:
Chapter 7 Bankruptcy, which is total bankruptcy, stays on your credit report for 10 years. Chapter 13 Bankruptcy, more like a payment plan, stays on your credit report for seven years. Bankruptcy, however, is for life. Loan applications and many job applications ask if you have ever filed for bankruptcy. Ever. If you lie to get a loan because your bankruptcy is very old, technically you have committed criminal fraud.
Despite being kind of a fatalist, I do foresee a future when I’ve pulled myself out of this mess (yes, right, I can mostly only see this happening as the result of a magical windfall of money, but hard work is also an option) (Hard work is the only option.) (Which is a bummer.) (But: Reap what you sow, get what you pay for using money you don’t have, etc.)
Basically: I’m not prepared to have my debt affect more of my life than it already has and is going to until I pay it off. When it’s over, I want it to be over. And then I want to borrow all of the money, forever. (Not really, but I can imagine a scenario in which I will want to purchase a house, and will need to borrow some money to purchase that house.)
Also: I spent that money. I am going to pay back that money. This is all very simplistic, I’m sure, and if anyone has experience filing for bankruptcy and it actually turning out great, you know, GET AT ME.
One more thing about Chapter 13! it is a pretty strict payment plan in which you pay what the judge deems to be your “expendable income” to creditors for 3-5 years. if you fail to stick to your plan, which is not outside the realm of possibility because you got that far into debt in the first place, then you haven’t discharged your debt and have just spent years living like a monk. it is a v. risky business.
Wow. WOW. The US is so harsh on bankruptcy! Maybe things will change once FDR gets into office and you all get a New New Deal? I dunno. Here, you’re discharged after 7 years and after that time period it’s like it never happened – you can say no on forms that ask about bankruptcy. Although if I’m wrong someone should tell me. Logan, I meant to comment earlier this week when (I think?) you wrote that you had two very high interest cards. Can you call them yourself, or have Mike call them, and ask them to reduce the interest rates? Debt relief agencies do this all the time – the rate is at their discretion. Or maybe a consolidation loan, so you aren’t paying gross interest rates. Ugh. It makes me sick to think about it. Solidarity! (Bankruptcy wasn’t that bad for me)
Also: Canada. Should have mentioned that.
I think you’re making a very good choice, Logan. It’s difficult, but you’re owning up to it and taking full responsibility for your finances and some not-great decisions you’ve made in the past. And you’re right, it will feel GREAT to have them all paid off and in the past, with the only lingering effect being that your credit score will start to slowly increase.
Bankruptcy also does jack shit for student loans! Why? Because America, that’s why!
@Leon Tchotchke No, because if it didn’t then every student would declare bankruptcy as soon as they got out of school, figuring they could wait 7-10 years to make big credit purchases. And then bankruptcy laws would get tightened up for everybody.
@deepomega I believe you used to be able to discharge student loans via bankruptcy provided they were at least seven years old. It was only in the last 10 or so years that this was changed, AFAIK.
Article idea/request! Do credit counseling agencies actually work? I’ve seen subway ads for rethinkingdebt.org that a little research says is for a nonprofit counseling agency so it seems legit?
@forget it i quit They work in the sense that they educate you about how credit and credit histories work–how certain behaviors affect your profile and what actions you can take to improve your credit score. They help you understand your finances and get a budget in order, and meeting with a counselor provides some accountability. But they can’t magically expunge bad info from your credit history, like scam artists claim to do. If you’re looking for help, find one certified by the National Foundation for Credit Counseling–those are generally reputable and won’t promise you the moon. http://www.nfcc.org/
Logan,
I think if you filed for bankruptcy, you would just find yourself in this position all over again because you haven’t dealt with the root causes of what causes you to overspend. You need to find a way to deal with that rush you get when you have the urge to spend money.
There are people who’ve filed for personal bankruptcy multiple times because they still have issues with money( and maybe large doctor bills).
BTW, you can file for bankruptcy and get a credit card within a few months. I’ve known people who filed and got mortgages too.
I filed for chapter 7 with my husband last summer, we did it as a precursor to divorce since it was cheaper to do it together, and I didn’t trust him to do it himself. Much of the debt was as a result of his chronic unemployment, tied with his overspending on stuff for himself (and his emotional/verbal abuse that kept me from doing something about it). We had about 35k in debt that was discharged, well worth the $1300 in lawyer and court fees we paid. Because the cause of the debt was not MY bad spending choices, I’m doing well so far and not having any issues. I was discharged in October and have gotten 3 low-limit credit cards since then to use in rebuilding my credit. Out of curiosity, I applied for an auto loan and was approved, as well. The interest is insane (15%) but I could do it if I had to.
I worked at a mortgage company and usually you can get a home loan 2 years after bankruptcy. The questions are usually phrased as ‘have you been discharged in the last 7 years?’ not ‘have you EVER.’