5 lessons I learned from bankruptcy
My bankruptcy was my one big do-over, and you don't often get another one.
Editor's note: Debt Kid found himself in serious debt after day-trading away more than a quarter-million dollars. He's been blogging since 2007 about his journey back to zero.
In 2007, after trying a debt-management plan, and selling most of my possessions on eBay, I hit my breaking point. I couldn't afford to keep servicing more than $250,000 in debt. I did something I never thought I would have to do: I filed for Chapter 7 bankruptcy. Doh!
- Quick quiz: How bad/good is your credit score?
Fast-forward to today, and while it was not an easy process to go through, I learned some lessons from the whole ordeal.
Lesson 1: You will feel shame. It's normal and justified. I felt terrible about having to file bankruptcy. And rightly so. It's breaking a promise to the people you agreed to pay back. Even to this day I wish it hadn't been necessary, but I really had no other choice. And that's what it's there for, the absolute last resort. To this day I wouldn't want my friends to know I had to file, but at the same time, three years later, it wouldn't crush me if they knew either.
Lesson 2: You might still get contacted by creditors. I was at a summer barbecue about five months after filing bankruptcy and I got a call from a number I didn't recognize. Since most of the collection calls had ceased, I picked up. "Hello?" "Hi, is this (my name)? I have a document here for you." My heart rate picked up. I hung up and turned off my phone.
The next day the lady showed up at my apartment and served me papers for a judgment on a debt that I thought had been discharged in bankruptcy. The debt wasn't valid. I wrote a letter to the lawyer and never heard from them again. But still.
Just because your bankruptcy was discharged doesn't mean something might not fall through the cracks. Be prepared for this.
Lesson 3: Bankruptcy is a fresh start. Don't mess it up. Before your bankruptcy is discharged, you have to complete a financial literacy program. I did mine online. It was pretty basic stuff -- how to make a budget, how insurance works, etc. But it reinforced all the changes I had had to make in my life. I knew that I would never again trade stocks. My bankruptcy was my one big do-over, and you don't often get another one. So I vowed to never again put myself in a situation like that.
Lesson 4: Filing bankruptcy won't ruin your life. It will make some things more difficult. Life isn't just peaches and cream after your bankruptcy is discharged. There are consequences -- some more painful than others.
For me the biggest issue was finding a place to live. Forget any decent traditional apartment complex or any place run by a management company. Even after I had a large deposit to put down, I could not get approved because of my recent bankruptcy.
Try Craigslist and search for individual owners, be up front with them about your credit, and see if they will not even run your credit so it won't ding your score. It doesn't hurt to ask, and I've gotten three apartments since my bankruptcy without too many issues using this method.
Filing bankruptcy won't ruin your life. Anyone who tells you it does just can't think outside the box enough. Yes, you won't get approved for a new mortgage anytime soon -- but that's OK. The last thing you need after a bankruptcy is credit again.
Lesson 5: I don't ever want to file bankruptcy again. My 341 meeting (where creditors can show up and hash it out with the trustee and you if they want) was incredibly awkward. None of my creditors showed up, which is normal. However, your name is displayed on a fancy LCD screen as you walk into the room, every other person there feels the same way you do, and you could cut the tension with a knife. I don't think I made eye contact with a single person other than the trustee and my lawyer the entire time. It's an experience I never want to have to go through again.
Bottom line: If you get to a point where bankruptcy is your only option, take it, but make sure you never get to that point again.
Have you ever gotten to a point where you thought about or did file for bankruptcy? What lessons did you learn?
The last thing you need after a bankruptcy is credit again.
I DISAGREE OGRESSIVELY!
Living without a CREDIT CARD is very difficult now, considering even utilities want to bill plastic nowadays.
Right now a payment by mail to my MD is lost in the mail for over a month. And, I dont want to give anyone access to draw FUND$ directly out of my checking account, so...
Credit card companies are the secondary cause of BK! They fail to communicate to debtors and seek only to maximize their debt burden and late payments!!!
Even worse is GE CAPITAL who has taken over many credit issuers operations: JC PENNEY...CHEVRON...
Second is HSBC, who is so big and who relies on scripts to ignore you.
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