Bankruptcy is often looked at as a bad word, but it personally was the best financial decision I have ever made.
You may be in the process of trying to determine if you should file bankruptcy.
Hopefully, after reading about my personal experience, as well as what filing for bankruptcy has taught me, you will have a little bit more clarity on what decision you should make.
Before I can tell you what I learned from filing bankruptcy, I need to start out by explaining why I filed for bankruptcy in the first place.
Why I filed Bankruptcy
Before I lost my job, my husband and I were both working your typical 9-5 careers. I had a government job for the Navy, and my husband was working in banking as a customer service representative. We were like the typical couple in America living one paycheck to the next.
Early in our marriage, we made some financially irresponsible decisions.
We maxed out credit cards, charged unnecessary things, financed a pet from the pet store, you name it.
This made it so we barely had any wiggle room in our budget, and we were not saving at all.
One day I got some life altering news, my job informed me that I was being laid off. I was devastated.
Not only was this a major loss financially, but I was also three months pregnant at the time with our first child. Talk about “bad timing”.
I knew that this was going to be tough on us because we were making just enough to pay the important bills, and we were somehow also trying to prepare for our new child that we would be responsible for.
Immediately after my last check came and went the bills started getting behind.
We applied for assistance to receive help with food, but the money we needed for bills still wasn’t enough with just my husbands income.
Creditors were calling us and asking for payments, it got to the point that I just began to ignore calls because I felt helpless.
I didn’t have an answer for the infamous question, “When will you be able to make a payment?”
Applying for jobs felt pointless because but all I got in return was white noise. I was unemployed until three months after I had my son.Talk about stress!
A little light at the end of the tunnel
After my son turned 3 months old, I finally got a job offer as a substitute teacher.
This was very convenient at the time because I could pick and choose my schedule and I could work around my father who was helping watch the baby whenever I had to work.
Still, the money that I was bringing in just wasn’t enough, so I continued to search for other opportunities. I ended up getting a position as an assistant director of a child care center full time.
Finally, we were now in a position where we were bringing in enough money to pay all of our bills, but there was still one problem, we were still so far behind.
We thought about filing, but we decided to try to consolidate our debt with a loan from the bank.
My husband’s parents decided to help us out and cosign for us because our credit was so messed up.
Now the pressure was real to make the payments on time because we did not want to harm their credit because they were on the loan.
Although we consolidated, it still felt like we were drowning because all of our small minimum payments now were rolled into one large payment.
We paid the loan each month, but because of our other bills, things were very tight, and now with a new baby we had even more expenses that we were responsible for.
Deciding to File Bankruptcy
We finally decided enough was enough. Starting over was necessary so that we could get our heads above water.
Somehow we were able to get our consolidated loan out of our in-laws names, so that we could file and not have them affected in any way.
Our next step was to schedule a meeting with some local bankruptcy lawyers and sit down for a consultation.
She told us the amount of money that we were going to need to file, and the paper work we would need.
When my husband and I got our taxes back we saved up that amount and decided to file for Chapter 7 Bankruptcy.
The only real assets we had at the time were our cars because we were renting. We found out through the lawyer that if we continued to make the payments on the cars that we could keep them.
10 Things I learned from Filing Bankruptcy
- File sooner rather than later: The one thing I regret is that we didn’t file sooner. In all honesty instead of trying to consolidate, we should have filed then. When you file your credit score “pauses” where it is. Our credit score was higher when we first got the consolidation, so we would have been in a better position credit wise if we would have filed then
- Consolidation Caution: The only thing that I can say about this is if you decide to consolidate your debt into one payment it needs to be worth it. Remember you are no longer going to have several small minimums, your going to have one large payment. Consolidation is worth it if your interest rate goes down significantly, and your overall payments per month will decrease, but if you know that adding another large bill is not going to be doable for you then do not consolidate.
3. If you can’t afford to pay for it, do not charge it!: After we filed, my husband and I changed the way that we handle our finances significantly. We stopped charging silly things like food, and clothing. If we can’t afford something at the time, we simply do not buy it.
- Pay your credit cards off at the end of the month: I do not want to villainize credit cards because they are powerful tools to build credit. Credit cards need to be used responsibly in order to reap the benefits. Paying off your credit cards at the end of each month can prevent interest charges. It also helps you build your credit back up.
- Switch to a rewards card: Having a rewards credit card is way better than having a regular credit card. Using your credit card for everyday purchase will allow you to earn rewards points that can go towards your balance. I look at it as a coupon when I purchase gas with my rewards card I get 1.5% cash back. Which in turn saves me money on gas, and once I pay my balance off at the end of each month, I use my points to go towards my balance which in turn saves me money.
- Say No to Store Cards: I know it may be tempting to get a Victoria’s Secret or JCPenny Card, however store cards have very high interest rates. The “points” you earn are often not worth the 25% interest that you will have to pay, especially if you are not paying your card off at the end of the month as you should be.
- Avoid Financing: Some purchases make sense to finance such as buying a new car, however, things like furniture should not be financed. Often there are stipulations when financing things like furniture. For example, we financed a sofa and if we did not pay it off in 6 months the price of the furniture was going to double. Also, the payments we were making on the furniture was not even going towards the sofa it was only going towards the very high interest.
- Your credit score will go up!: After you file for bankruptcy and all your debt is wiped, your credit score will shoot up. You will also immediately get credit card offers and offers to purchase a vehicle. However, take heed and be wise, remember this is your fresh start don’t end up back in the same position by making the same mistakes.
- You can still purchase a home: After your bankruptcy has been discharged and falls off your credit report you can then purchase a home. We filed for bankruptcy in 2015, and we purchased our first home in 2020.
- Learn to Say No: I think the most valuable lesson I learned from filing bankruptcy was to learn to say no! No to bad financial decisions, no to going places with people when I knew I didn’t have the money. No to buying things before I had to the money to pay for them on my own. Sometimes we get into financial situations because we are not brave enough to say no.
If you enjoyed this blog post please let me know by commenting below. If you found this information helpful, or if you have any questions about the process of filing for bankruptcy let me know.
Also check out my blog on how to survive job loss.
~Peace & Love,
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