I filed Bankruptcy When I Was 22..10 Years Later, Now What?

My world wasn't over. Yours won't be either.

Photo by Melinda Gimpel on Unsplash

A couple of things happened to me in 2009. Let’s see, I had a two-year-old daughter, my marriage was one year TOO old, and oh yeah, I filed bankruptcy. Chapter 13 to be exact. What I should have done was file Chapter 7. First Mistake. No, that was my second. My first mistake was not educating myself /properly_ / about what bankruptcy IS exactly. What it is, what it does to your life, your credit (another concept I was ignorant on), and how it can seemingly take FOREVER to get your life back. First things first. What is bankruptcy?

According to Investopedia:

Bankruptcy is a legal term for when a person or business cannot repay their outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common, All of the debtor’s assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.

Okkkk..let’s keep going

The dictionary:

The state of being bankrupt. (I find it unforgivable when the word you’re looking up is being used to define it. If I knew what bankrupt WAS, I wouldn’t be using the dictionary).

This second one is my favorite tho. 

The state of being completely lacking in a particular quality or value. Basically, you ain’t shit, you ain’t worth shit, so just die. Maybe not that last part, but yes, basically, when you file bankruptcy you feel like you ain’t shit and you are telling your creditors and the WORLD, you ain’t worth shit.  

Simply put, when you file bankruptcy, you are telling your creditors, that you can no longer afford your obligations. In my case, it was the 13 credit cards I’d acquired since college to finance, trips to the mall, rental cars for my soon to be ex-husband, expensive tech that I no longer have, food, bills for my soon to be ex-in-laws (sigh), and whatever else I could buy with that shiny piece of plastic. Not to mention a few medical bills, (who pays those anyway), a $1300 Sprint bill (those in-laws), and a car I was EXTREMELY upside down on, (again ignorance). Once you admit that you can’t afford your extravagant unnecessary in my case lifestyle, you apply to the courts for relief. 

The business dictionary provides these two major objectives to bankruptcy: 

(1) a fair settlement of the legal claims of the creditors through an equitable distribution of debtor’s assets, and (2) to provide the debtor an opportunity for a fresh start. In my case, the second one, that’s what I was looking for.  

Now here’s the part they don’t tell you. It cost A LOT of money to file. You may be asking yourself if I can’t pay my debts, how in the hell do you expect me to be able to pay you $1300? That math doesn’t add up. Something else they don’t tell you? Depending on which chapter you file, it remains on your credit for 7 to 10 years. This means, in a year when you need a new car, and you go on down to your local dealer, to apply for one, you get a resounding FUUUUUCK NO. Or they take you in the back and say, I’ll give you a car, for one MILLION DOLLARS, in my Austin Powers voice. Not quite, but the interest you’re going to pay if you’re approved, makes it feel like that’s how much you’re paying. 

I filed Chapter 13. Chapter 13 Bankruptcy is a reorganization bankruptcy they will offer you if you have regular income and have money left over each month to pay back something to your debtors. In my case, I was making $32,000 a year, bringing home $1250 twice a month after taxes and they decided to garnish me $600 bucks a month. I had $1500 a month to live off on. I was talked into filing Chapter 13 by my lawyers because I wanted to keep my car, which was financed. The first lesson to learn here folks. NEVER go into something without educating yourself first. Because I didn’t even know Chapter 7 Bankruptcy Existed, not to mention that I would have been able to keep my car. Chapter 7 Folks, is a liquidation bankruptcy. It wipes out most of your general unsecured debts such as credit cards and medical bills without the need to pay back balances through a repayment plan. Hmm. See above for the list of debts I needed to get rid of. Chief among them? CREDIT CARDS and MEDICAL BILLS. Why didn’t my lawyers suggest Chapter 7 for me? My guess to the answer to this question I found on national bankruptcy.com

Total Cost Chapter 7 with attorney: $1,500-$3,000

Total Cost Chapter 13 with attorney: $3,000-$4,000

Perhaps that’s a tad bit cynical of me, so let me offer another explanation. I didn’t want to include my student loans in my bankruptcy, (because I was still in school), and I wanted to keep my car. Chapter 13 is a reorganization, so it allows you to pay back a portion of the debts that are not discharged (debts such as credit cards and medical bills), and keep those assets. In Chapter 13, you can make up missed payments over time and can keep your car. You cannot do this in Chapter 7. In a Chapter 7 bankruptcy, the trustee will sell your assets to pay off your debtors. And like I said, I REALLY didn’t want to sell my car. 

Ultimately, I ended up converting my Chapter 13 to a Chapter 7 and it was discharged within a few months, about two years into my bankruptcy. What brought that on you ask? That GLORIOUS car I mentioned I didn’t want to sell? (A 2007 Black Chevrolet Malibu btw), was totaled and paid off through Gap Insurance. Which sucked at the time, but turned out to be a blessing in disguise because it got me out of bankruptcy payments. Chapter 7 is quicker, more efficient, and you get to start over quicker. Those “honest” bankruptcy lawyers I mentioned earlier, DIDN’T tell me that while yes your assets are sold to pay back debtors, in some situations (like mine), you can also keep your house or car as long as you’re current on the payments (I was), can continue making the payments (if I can afford to be garnished $600 a month, I sure as hell could afford to keep making those damn payments), and can exempt the amount of equity you have in the property (point me to someone who has equity in their car after owning it for two years and I’ll shake that person's hand). EDUCATE yourself. The biggest lesson I hope someone can learn from reading this. 

Sooooo What Now?

January 2019, that’s when my bankruptcy dropped off and my credit score jumped almost 70 points. I was approved for an American Express (I didn’t need, but after being ostracized for so long due to my credit I just wanted to flex), and I’m sooooo anal about my credit. Did filing bankruptcy end my life? No. Was I this social pariah who couldn’t get a job, lost all her friends and family, and ended up living on top of a Laundrymat/Restaurant Combo? No, I am gainfully employed, and I still have friends, family, and don’t live on top of the weirdest combination of business, that somehow works I’ve ever heard of. I am grateful I filed for bankruptcy. The stress from discolored envelopes, ducking and dodging phone calls with local area codes I didn’t know (yes, collectors I’m on to your game, you don’t live in the 804), and not being able to pay my bills on time was GONE. Because the first thing that happens when you file is an “automatic stay.” An order that immediately stops most creditors from pursuing collection efforts. Yeah, Sprint. Fuck Off. I had a plan to pay everyone back, and those who I couldn’t? Capital One, Citi Bank, Wells Fargo, and a bunch of store cards I can’t remember, got pennies on the dollar, which they ultimately just wrote off as bad debts and losses and gained on anyway, were just fine. In fact, all of these companies have offered me credit cards again by the way. 

What I’m trying to say is while I don’t recommend bankruptcy if you can avoid it, try and negotiate with your creditors FIRST. Sometimes the very threat of bankruptcy will make a collections agency settle with you for 60%, (better to get something than nothing at all). Dispute. Dispute. Dispute. Creditors have to give you some time to respond to a collections effort, and if you send a written response disputing it, they have to by law take the time to investigate that effort, and during that time the debt in question is placed on hold. What I’m saying is try all efforts before you file. But if you do? Your world won’t end. File Chapter 13, and you’ll have a plan to pay back your debtors, typically over 3 to 5 years and you’ll get to keep some of your assets and your dignity. File Chapter 7? And most of that debt is wiped out and within months you can start over again, with your dignity intact. Life goes on, creditors find other prey, and you get the fuck over it. I know I did.