My Story: After Bankruptcy
contributed by E
The Credit Reporting Agencies You Don't Know About
This is for anyone considering bankruptcy. I have been there and done it. While it does seem easy, and it is a weight off your shoulders for the time-being, consider what life changes you might go through in the future.
For example, if you have to move, good luck trying to get a mortgage on a new house. While it can be done, the difficulty finding a mortgage broker to help you, the sky-high interest rates, and the pure humiliation of explaining your bankruptcy to everyone involved will definitely make you regret it.
How about when your car dies and you need a new one? Assuming you don't have cash to pay for it, like I didn't, you will have to get a car loan. You'll end up on the shady side of town, paying more than book value for the car and also paying high interest rates. You will be upside down for longer than the car will run.
What if you want/need to change bank accounts? One thing I never would have considered was that many banks won't even set up an account for you if you've got a bankruptcy on your record. Home Federal told me that they won't even consider it unless you're two years out of bankruptcy. I came back two years later and they had amended their policy to no bankruptcy at all. Even my local credit union, where I had an account all along, told me I wouldn't have been able to open an account today as they now have a rule that doesn't allow new customers with a FICO score under a certain level (I believe the score was 620 - 650.).
If your FICO score matters to you in the slightest, better forget about bankruptcy. My bankruptcy was 3.5 years ago and it's still in the lower 500s, despite every attempt to repair it. I bought a house, paid off a car loan, and paid everything on time. I can't buy appliances, furniture, etc. on credit or even those "90 days same as cash" programs. I can't open a credit card except with those "certain banks" that are always willing to give you a 19% APR card with a $400 or $500 limit.
Even if you have money in the bank, but you have no credit, you can still feel pretty rotten when you need something (vet bill, doctor bill, car repair, etc.) and can't pay for it. I guess if you do live a truly frugal lifestyle and won't pay for anything except in cash, this won't affect you too much, except for emergencies, medical bills, and the situations I mentioned.
I am not trying to tell you bankruptcy is a wrong choice, but I do want to warn others out there to have a plan in mind as to how they are going to handle things for the next seven to ten years. It's terrible when you declare bankruptcy and find out that with medical bills, student loans, living expenses, etc., you still haven't come out ahead and are still living hand-to-mouth, as was my situation.
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