Bankruptcy experiences

ryanjoachim

Well, it's official now. Just wrote a check for $1300 to the bankruptcy attorney, and got the ball rolling.

We (mostly my wife, but her name is mine so I guess I get blamed too!!) have almost $20k in debt right now, from a credit card and several medical bills. I know this may not sound like a lot to some of you, but i'm the only one able to work right now, and with my wife going to school (and using financial aid to pay for child care) the bills have all gone to collections except for house-related items.

Has anyone had to go through this whole process? Was it worth it in hindsight?

I'm really interested in hearing other people's experiences through this process before, during, and after everything is said and done.

How hard has it been for you to live with that on your credit report?

Kex

Ryanjoachim, I can't offer you any experiences to share on the topic, but with foreclosures going on all around us these days (just about one on every street, it seems like), I'd just like to wish you the best of luck.

Honestly, it astounds me how you felt it necessary to suggest that $20K might not "sound like a lot to some of you". This mentality (not on your part, I hasten to add) is part of the problem IMO. Everyone wants to sell us premium products, such as TV service for $100/month, or refrigerators for $2,500 and up, same story with new ranges and dishwashers, more of the same with cell phone plans and high speed internet ..., and how could we not mention increased co-pays, no more parking validations at the dentist or doctor's office, and increased health insurance premiums all at the same time.

We are lucky that we don't really have to worry about any of that, when such costs are trivial compared to the cost of housing in SoCal. The prospect of $5/gal. gasoline would have no impact on our monthly spending either since gasoline is such a small part of our budget anyway. But how on earth does anyone expect the average family, with an average income, to survive with this constant nibbling away at our wealth? $20K is no trivial amount in my book, and there are a good number of very smart (honest) people that have been struggling to "succeed" for quite a few years.

I don't know how you got where you are today, but from everything I have heard, it is possible to recover quite well from your predicament, with time, if you keep your credit squeaky clean from here on ... but, as I said before, I can't offer you any first hand accounts to validate this assumption.

Good luck!

NotaSuv

Girl friend had over 90k in debt when I met her...made her file cost her 1200 and made payments of 385 for 5 years..walked away from many $$$$$$$$$$$$. 6 years later her credit score is 735 with very little effect from her filing...very were sending her cc offers 3 months after she first filed...go figure..her score is better than mine...most debt was from raising 4 kids on her own..now pays cash for everything never uses her card, only payment is a monthly car which she got at 0%.

mhmacw

like kex i cant give first hand experience. i can how ever say it must not be too bad to deal with. as i was struggleing without the use of credit cards and driving a pos(paid for though) and my buddies all had new cars it seemed i was doing something wrong. them about 5 yrs later when i had upgraded a few times and had a newish car that was paid for and they still had there car and payments left it seemed things were paying off. then one hapless day i hear a friend of mine is out buying all sorts of toys on his creditcards as hes getting ready to file bankruptcy. he did file and i thought to my self how glad i was to have worked for it the whole time and not gotten into the toys now bills later thing. that feeling lasted about 10 minutes when here he comes with a brand new pickup he bought on his way home from the bankruptcy hearing. im not saying this applies in your case as we all go through life a little different. the one thing i do know is ive gone 35 years without putting more than 1000 dollars on my credit card. this economy is a symbiant circle with the card holders. sure the housing market is shot but its due to everybody wanting a 300000 dollar house and 50000 car on a 7-11 salary. we honestly have no one to blame but ourselves for the economy as its the direct result of every body wants and no one wants to pay. i am truly sorry when i hear another american has filed bankruptcy or fallen to forclosure. sure its rough on the person that cant afford the house or cars or what ever but think of us that have paid our way and not used credit only to foot the bill anyway in the form of intrest rates, higher taxes and inflation. i can see a little humor in paying the lawyer with a check haha thats a good one. good luck ,dan

ryanjoachim

Yeah, it's a bit disheartening to be in this position. My wife (I guess I helped a little) maxed out her CC when the limit was $6500, and ended up paying it off the following tax season.

We kept the balance under 1k for a couple years, and kept up payments. 2 years ago though, she was t-boned in the middle of an intersection by a guy blowing a red light going 45mph. Because of her recovery time she ended up losing her job, so the CC had to be used to pay some medical bills and insurance co-pay, as well as some utility bills.

6 month later, I'm driving at around 35mph down the road and a drunk hispanic man (more a boy really) pulled out in front of me from a side street. Totaled our brand new Kia...1 week after our "price protection" plan wore off on it. I ended up in physical therapy for 3 months, and since I couldn't drive to my work anymore (worked 45 miles away) I lose my job. That left both of us jobless, so all the bills ended up going on the CC for another couple months till we could find jobs again. Oh, and in the middle of all this we were still managing to make the $220 payment on the CC on time. Even though we never missed a payment, Bank of America doubled the interest on the card and our payments went from $220 up to $350. That's when we were forced to chose between a duplex payment or the CC...crazy us, we chose the duplex.

Add to that the cost of raising 2 young children, and you start to see how a 10k CC limit doesn't last all that long.

cstmar01

I work on the bank side of foreclosures, bankruptcy, and stuff like that. I can say after looking at this all day long that right now it will hurt your score, and depending on banks, a rule of thumb is not to lend to you for certain amount of time, normally unsecured debt. This is all dependent upon the bank however. Do make sure that you request for anything type of mortgage you have either be a 1st mortgage or 2nd that you keep getting statements as they will stop due to the Bankrutpcy as it can be construed as an attempt to collect a debt. I know it sounds silly but a lot of people have 2nd mortgages they forget about and then the 2nd will start Foreclosure to recover their amount ect and it can be a mess. Also make sure you have a good attorney that knows what they are doing. A lot of bigger firms, (we like to call them mills) tend to give bad advice at the sake of it being really cheap. These guys often misinform the client and it causes headaches on our end as well as frustration as why the attorney didn't tell the client in the first place.
Your score will go up after BK is filed, but it does take some time. Wait a bit and get a secured CC or just simply keep paying on your secured debt like a car or home loans and this will help improve your score. after awhile you can apply for unsecured debt, however I would say don't take out anything major just a small card of like 500 or 1000 or so. If you do use it pay it off right away that month and this will help increase your score.
Also debt collections will stop, as they legally can not call you. However some places if you have secured debt will still call you. You can tell them to stop due to the BK laws and they will.
Also are you filing a Chapt 13 or 7? There are different rules to each and different things you have to do in both. Its never a fun thing to do, and I"m sorry to hear that you had to file.

ryanjoachim

Thanks a lot for all the info cstmar01!

I believe chapter 7 is what we're filing. The attorney we're working with has been doing this for 23 years, and seems to know what he's talking about.

Demiurge

ryanjoachim wrote: »

Yeah, it's a bit disheartening to be in this position. My wife (I guess I helped a little) maxed out her CC when the limit was $6500, and ended up paying it off the following tax season.

We kept the balance under 1k for a couple years, and kept up payments. 2 years ago though, she was t-boned in the middle of an intersection by a guy blowing a red light going 45mph. Because of her recovery time she ended up losing her job, so the CC had to be used to pay some medical bills and insurance co-pay, as well as some utility bills.

6 month later, I'm driving at around 35mph down the road and a drunk hispanic man (more a boy really) pulled out in front of me from a side street. Totaled our brand new Kia...1 week after our "price protection" plan wore off on it. I ended up in physical therapy for 3 months, and since I couldn't drive to my work anymore (worked 45 miles away) I lose my job. That left both of us jobless, so all the bills ended up going on the CC for another couple months till we could find jobs again. Oh, and in the middle of all this we were still managing to make the $220 payment on the CC on time. Even though we never missed a payment, Bank of America doubled the interest on the card and our payments went from $220 up to $350. That's when we were forced to chose between a duplex payment or the CC...crazy us, we chose the duplex.

Add to that the cost of raising 2 young children, and you start to see how a 10k CC limit doesn't last all that long.

Two accidents and insurance didn't cover your medical expenses, time off of work, or fix the vehicles for you in either case?

I realize it can happen because it happened to me. My car got slammed into from behind at a red light by a drunk **** at 5 PM on a weekday and she sent me careening into oncoming traffic at a 3-Lane intersection. Fortunately I wasn't injured other than some slight back pain I still have to this day. I was young at the time driving a car that wasn't really worth much monetarily but was worth a great deal to me for getting to work. I didn't have the best insurance coverage so my insurance company did nothing for me. She was uninsured.

I don't believe in frivolous lawsuits so I merely tried to sue her for the damages to my vehicle and nothing more -- she filed for bankruptcy though and I got f'd over twice.

cstmar01

ryanjoachim wrote: »

Thanks a lot for all the info cstmar01!

I believe chapter 7 is what we're filing. The attorney we're working with has been doing this for 23 years, and seems to know what he's talking about.

sounds good. There are some places here that have guys fresh out of law school that have no clue to what their doing and it makes things just a nightmare for us. Best of luck and I hope everything works out for you.

ryanjoachim

Demiurge wrote: »

Two accidents and insurance didn't cover your medical expenses, time off of work, or fix the vehicles for you in either case?

Both people at fault in mine and my wife's accidents had the minimum liability required by Oregon law. In both cases our vehicles were new (2005 Dodge Dakota, and a 2007 Kia...something), so their insurance was only enough to cover the cost of paying off what was owed on the truck, and most of what was owed on the car, and "some" time-lost wages and physical therapy. We still ended up having to pay $1600 on the car, even though it was completely totaled, because the drunk Hispanic's insurance couldn't cover the whole amount.

It was really frustrating when we found out that even though the accidents caused our job-loss, the other people's coverage wasn't good enough to help cover wages lost.

joeparaski

I don't know...but it seems to me that 20k is not that excessive a debt that you need to file bankruptcy. Couldn't you work out some sort of consolidation loan with the bank, pay off the cc's and keep your name clean?

Joe

Demiurge

ryanjoachim wrote: »

Both people at fault in mine and my wife's accidents had the minimum liability required by Oregon law. In both cases our vehicles were new (2005 Dodge Dakota, and a 2007 Kia...something), so their insurance was only enough to cover the cost of paying off what was owed on the truck, and most of what was owed on the car, and "some" time-lost wages and physical therapy. We still ended up having to pay $1600 on the car, even though it was completely totaled, because the drunk Hispanic's insurance couldn't cover the whole amount.

It was really frustrating when we found out that even though the accidents caused our job-loss, the other people's coverage wasn't good enough to help cover wages lost.

That sucks, sorry to hear.

kn505

Do you have under-insurance coverages for your autos?

ryanjoachim

its some no-name insurance company called Unitrin, so I have no clue.

wutadumsn23

For what it's worth bankruptcy isn't the end of the world. When I got re-married my wife and I had to start all over putting a house together for us and 3 kids. Needless to say we put a lot of stuff on credit and soon weren't able to pay for it all. We filed Chapter 7, got to keep all of our stuff, and only put what we wanted on there. Had a court date, paid the fee and it was done. It's been about 6 or so years now, and we are doing much better. Clean slate and we have kept our noses out of trouble ever since. Good luck.

-Jeff

muncybob

Jeff, you are the exception to the rule! I have well over 25 yrs experience as a lender, collector, repo man, etc. I can't tell you how many times I have seen people living well beyond their means...filed BK and within a very short period of time racked up the credit debt again! I have seen most people get right back into large debts after consolodation loans that reduced their monthy payments by a good chunk...very frustrating!
Filing BK has it's place and is a good tool to rectify a bad situation that perhaps is largely due to no fault of the debtor(the OP's situation?)...but it irks me when people "borrow" money for luxuries and use the system to avoid paying back a lot of the $$. Of course the lenders need to recover that money somehow so it's responsible people that pay the price in the form of higher interest rates on credit very much the same way retailers recover some of their shoplifting losses in the cost of their goods.
Is $20k a lot of money???...sure it is. Could the OP have worked out an alternative to filing BK...probably. Now that you will be debt free...stay that way as much as possible. We are debt free now and it's great...didn't happen overnight though. We drive our cars until they won't start anymore...pay off any CC within 30 days(never pay interest on a CC!!!!!!)...and of course the big one, live within our means. Life is so much more enjoyable this way. But, to each his own!!

wutadumsn23

Good advice muncy and I assure you I have tried to be as responsible as I can. Have paid off my credit cards as soon as possible and not get back in that same situation again. That is the most important thing about bankruptcy, is making sure you don't end up back there again.


-Jeff

wingnut4772

NotaSuv wrote: »

Girl friend had over 90k in debt when I met her...made her file cost her 1200 and made payments of 385 for 5 years..walked away from many $$$$$$$$$$$$. 6 years later her credit score is 735 with very little effect from her filing...very were sending her cc offers 3 months after she first filed...go figure..her score is better than mine...most debt was from raising 4 kids on her own..now pays cash for everything never uses her card, only payment is a monthly car which she got at 0%.

6 years after the filing or after the discharge?

Fireman32

Watch the Dave Ramsey show. A coworker of mine got me hooked on him. I am starting his financial peace university this sunday. They go over how to write a budget and paying cash for everything and never using a credit card again. It is alot of common sense stuff.

heiney9

Dave Ramsey gives good, solid advice..............and he tells his callers exactly how it is w/o being rude. I catch his radio show a few times a week. Reality and the truth hurts for some people, but from what I've seen if you follow his plan(s) you'll be on your way to recovery.

I started paying cash for everything a long time ago after gettting into CC debt right about college time. Never again!

H9

ryanjoachim

Yeah, after this is over and done with we'll be staying away from all types of credit except for a $500 or so "emergency" card.

It'd be used for doctor's/emergency room visits and deductibles, gas card, etc. And we'd never accept a limit increase. I didn't realize it back then, but raising the limit on your card is just another way for the CC companies to get a lot more money from you.

kn505

ryanjoachim wrote: »

its some no-name insurance company called Unitrin, so I have no clue.

Unitrin is not a no-name insurer. It is not as popular as larger insurers such as State Farm. In Oregon, the minimum limits for uninsured and underinsured coverage is $25,000. Since the premium for these coverages is inexpensive, there is a good chance that you had higher limits. Check your insurance policy or call your agent/company to find out about your limits. Or better yet, notify your company about your accidents (since either accident is your fault). In general, you are supposed to report the accident to your company as soon as possible. HOWEVER, since you are filling bankruptcy, you might want to wait so that won’t complicate your bankruptcy. Chapter 7 bankruptcy should be completed in about 6 months or so.

Here is a link to the general information about insurance in Oregon: http://www.oregoninsurancelaw.com/

WilliamM2

How much of the debt is CC, and how much is medical? I just racked up $10,000 in medical debts. My coverage is max $10,000 out of pocket per year, $5000 co-pay and then 80/20 until I hit $5000 more.

I haven't received all the bills yet, but am informed that medical bills can not affect your credit as long as you pay SOMETHING each month. The one bill I did receive was for anesthesia at $1600. When I called and asked for a payment plan, they immediately offered 25% off if I paid in full, so I payed that one. The bulk of the $10K will be owed to the hospital, who have been known to offer even better discounts if paid off, or payment plans as low as $50 a month. Apparently lots of people don't pay at all, so they are willing to deal. Just a thought.

ryanjoachim

Out of the debt, at least 10k is from the CC. If I remember correctly the total amount is just shy of 22k. The rest of the 12k is medical bills.

Our hospital here isn't very helpful when it comes to setting up payment plans for some reason, or maybe it was just the 3 or 4 different people we got stuck talking to. They offered to drop the price of each big bill by 25% for a full payoff, or take $75 a month for each bill.

Because the bills were from different counties (my accident/hospital bills were in a different county), they weren't able to condense them into a single plan and there was no way i could afford $150+ a month for all those bills.

In hindsight, there was probably some things that I could have done differently with those bills to pay some of the smaller ones off...but then again, hindsight is always 20/20.

danger boy

20 years ago, I had a 2 seater sports car that I totaled and didn't have insurance on
I still owed 9k on it when I rolled it, i went to an attorney and he suggested I file ch 7 bankruptcy, so I did

I had some trouble getting any kind of credit card with a average fee, i could get a low limit one with a high interest rate

those 10 years went by fast and after that I was able to buy a new car and house without any problem at all

20 years later if someone asks me if I have ever filed for ch 7, I tell them no, unless it's something very important or if it's to get some kind of clearance for a job

good luck, and your attorney will handle all the paper work and will make things pretty painless

It's nothing to be ashamed of, most of us just get into a tight situation that we had no intention of ever having to file for bankruptcy

Ugh! the period on my keyboard just stopped working and I've only had it for 3 weeks ahh bugger!!!

madmax

Fireman32 wrote: »

Watch the Dave Ramsey show. A coworker of mine got me hooked on him. I am starting his financial peace university this sunday. They go over how to write a budget and paying cash for everything and never using a credit card again. It is alot of common sense stuff.

I was going to suggest the same thing! He gives a lot of advice on foreclosure as well as becoming debt free. I am a BIG fan and listen to him all the time. Although not following his plan exactly I find he heads me in the right direction. By 2014 I will have zero debt so mortgage, loans and CC bills will be a thing of the past.

Jstas

ryanjoachim wrote: »

Yeah, after this is over and done with we'll be staying away from all types of credit except for a $500 or so "emergency" card.

It'd be used for doctor's/emergency room visits and deductibles, gas card, etc. And we'd never accept a limit increase. I didn't realize it back then, but raising the limit on your card is just another way for the CC companies to get a lot more money from you.

I wouldn't even bother with your $500 "emergency card". It won't help you and a dormant card will hurt your credit rating.

Establish a savings account and put your emergency money in there. At a minimum, it'll gain interest. It's also your money and you can put way more than $500 in there to handle "emergencies".

As far as bankruptcy advice, I can't help you. I was well past that point and probably should have declared myself a couple of years ago. My ex ran up credit card debt to the tune of $54K. With $12K in outstanding car loans and $16K in student loans, I was well past your point 4 times over. I ended up changing jobs after the D saddle me with the debt to handle by myself. I cashed in 4 months of vacation time as well as unused holiday time and covered a large chunk of it. I had a mutual fund that had matured years ago and used that to pay off more debt and got very lucky and ended up with an inheritance that I was not expecting. I got my debt load down last year to 1/8th of what it was 2 years ago. October of 2009, I made my last payment on all debt. I have no credit cards except the corporate AMEX card. I use a Visa check card for large purchases and I don't spend what I don't have. I don't have much in savings right now either but that's changing and for the first time since I got married, I have money I can invest and I no longer have to forgo savings plans and retirement plans at work because I need the monthly cash outlay.

It wasn't really my fault that the debt load got so out of control. I had worked for 6 years to pay off about $100K in school related debt. I was down to about $22K total. Then my ex and her horrendous lack of self-control ruined me. And it wasn't something I could have prevented. The ex called up a couple credit card companies and told them she was my wife and asked for duplicate cards. Those companies actually issued her cards on accounts that I had for years before I was married. The ex then ran up the bills on garbage and would intercept the mail and throw out the CC statements before I got home from work so I wouldn't see them and yell at her. It only lasted about 6-8 months but that whole time I thought I had clear credit cards. Then the lawsuit notices started showing up. Livid is too nice of a word. Now she tells people I was abusive and controlling because I turned her purse upside down, found the credit cards, flipped out on her, cut the cards up and then flipped out on the CC companies for issuing cards on accounts she had no legal right to. I went around and around in courts over it for a year and a half.

It took me 3 years of complete sacrifice and a bit of help from my parents to get that situation rectified. I did not go out, I didn't buy anything new unless I could work out a deal like I have here at Club Polk for stuff. I worked two jobs to make ends meet. During the day, sys admin extraordinaire for a giant defense contractor. At night, diesel/heavy equipment mechanic for a trash company. I worked 16 hour days and smelled like garbage every night just to avoid bankruptcy. The only place I ever went was to the bar that Katie worked at because she never charged me for beer. All I had to do was buy dinner. She'd share it with me and my weekend would cost me $20. If I wasn't there I was killing time in my friend's shop building outlaw drag radial drag race cars with him. I had to be that cheap. I haven't even bought a new CD in 4 years. I get used stuff at the flea markets. Dude, it sucks. But whether the bankruptcy is self-imposed or court approved, it'll be better in the end and you'll probably recover faster than I did.

ryanjoachim

As always, a man of many words!

Thanks for sharing your experiences Jstas.

The only thing we're hoping to get out of this is a chance to start over credit-wise and apply all the lessons we learned growing up as adults towards getting our family into a house. It's been our dream since we first got married 2 years ago (we've been together for 6 total, and known each other for 10+), but with her already having money on the CC and some bills, it wasn't an option.

Random thought - anyone else find it unfair that most monthly payments you make have 0 effect on your credit history unless you start missing payments? One would think that if you made on-time payments on all your bills for 5 years in a row or something, that a good mark would show up on your credit...But no, you pay on time for 5 years and then run into trouble, well congratulations you just got a bad mark on your credit!

cstmar01

Dormant cards do not always hurt you. My parents have over an 800 credit score, have 1 card that is never used, then have a store card that they use very little and never pay interest and pay off in full every month. I have something of the same with one card I never use and I'm over 700 but I also have never had any other debt besides that and an unsecured loan which sits unused (Over draft protection through my bank) and the only thing that is "hurting" my score is that I don't have secure debt, that and I'm young and don't have enough "history" yet.

Kex

I mentioned your case to the wifey last night. She works with corporate lawyers every day as part of her job. She was wondering how come you were not able to get anyone to take on your case against the at fault drivers in those accidents, since their insurance did not cover either of the lost income claims you would have had against them. Her clients are never directly involved in this kind of work (obviously, since they're in the corporate field only), but those who do usually work for a portion of the proceeds, and they almost always get something (apparently).

Did you ever look into this option at any point? If it's not too late, I could ask her for more details, but she seemed surprised that you were filing for bankrupcy at all given the circumstances described in post #5 and 10 above.

muncybob

ryanjoachim wrote: »

As always, a man of many words!

Thanks for sharing your experiences Jstas.

The only thing we're hoping to get out of this is a chance to start over credit-wise and apply all the lessons we learned growing up as adults towards getting our family into a house. It's been our dream since we first got married 2 years ago (we've been together for 6 total, and known each other for 10+), but with her already having money on the CC and some bills, it wasn't an option.

Random thought - anyone else find it unfair that most monthly payments you make have 0 effect on your credit history unless you start missing payments? One would think that if you made on-time payments on all your bills for 5 years in a row or something, that a good mark would show up on your credit...But no, you pay on time for 5 years and then run into trouble, well congratulations you just got a bad mark on your credit!

Of course you get noted for on time payments...it's called a credit rating! I-1 or R-1 depending on the type of credit. Your credit history shows all manner of payment...good & bad. Along with the actual rating your score(which is way over hyped by the media) also may increase with time depending on many other "variables" that are apparently top secret!