LutherMac

I'll be the first to admit, my credit is complete crap. My biggest problem is the fact that I ran up most of my debt when I was making the big bucks, but now that I'm near min wage, I'm really having trouble paying anything back.

I've got a few friends who all say "Bankruptcy is the way to go". Lose all the debt, and in a year or two, everything is pretty much clear.

The biggest reason, I'm really hoping to buy a home in the next year or so. Nothing fancy, just $50-$60K.... about what I currently pay in rent over 30 years. Everyone seems to tell me that if I went the bankruptcy route, I should easily qualify for a loan in a year or so, but I just don't believe it.

The biggest problem is that it'll take YEARS (probably even decades) to pay off everything at my current salary, so if I don't go the bankruptcy route, it seems I might NEVER own my own home.

Just want to get some ideas from out there.

Thanks!

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onetime2

Bankruptcy does not go off your credit record for 7 years and even then it's a red flag because many places will ask if you've ever declared bankruptcy.

It should be your last option not your first. Buckle down and pay down the debt or go to a not for profit group and get some credit counseling.

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sexymama

If you file bankruptcy you will be able to qualify for a home loan in 18-24 months. The loan will be at a higher interest rate and you will have a prepayment penalty for the first 2 to 3 years. This is to guarantee to the lender that they will receive your higher payments for those years, thus making a greater profit from their "risk." The good news, is once you have reestablished good credit by making your house payments on time, you can refinance at the end of that time period. But you MUST make all your payments on time!

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macmanmike6100

Yeah I concur that bankruptcy should be your last, not your first, plan of action. Credit counseling helps, but be sure to avoid scams by realizing that if it sounds too good to be true, it probably is. Good luck.

shakran

i think people are missing a key point here.

Bankruptcy is to be declared when your debt collecters come calling and you have no money with which to pay them. Bankruptcy is not to be used, nor will the court allow it to be used, so that you can buy more stuff while screwing over your creditors. The plan wouldn't work even if it were advantageous to you.

Cynthetiq

also the psychological impact of having declared bankruptcy, is important to.

it's the last of the last things you should do, and even then you should have squandered every last attempt at trying to MAKE GOOD ON DEBTS YOU INCURRED.

remember it's not like NO ONE pays for the bankruptcy. We all do in higher prices for everything.

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Daval

I think its pretty horrific how easy it is to abuse the bankruptcy system in my country (Canada).

A freind of mine had a small business of his own. He was to be quite honest a crap businessman and had to leave because of no inventory control, no proper billing or accounts recievables control etc.

He decided to go bankrupt over $30,000 and set a date about 12 months down the line that he would do this.

So, he took all of his RRSP's (401K's) - cashed them and started buying stuff, finished his basement, bought computers, tv's, go-karts all kinds of stuff. All the while whittling away his savings and maxxing out his cards.

At the end of the 12 months he declared the bankruptcy and everything was wiped from his record - he had to pay a pathetically low amount every two weeks from his paycheque for 6 months and then was discharged from the bankruptcy.

I was sickened by all this.

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Paq

heh..one of my mother's friends did something similar...

She was on welfare, a single mother of 9!!!! perpetually unemployed, the complete and total classic case against welfare system..

Anyway, one day she gets the bright idea...her daughter collected every credit application she could...they filled them out, upwards of about 60 credit cards. In the end, i think she was only accepted for 30 or so, but it was enough that she had almost $100K in credit...in 1 month, she maxed them all out on stuff like TV's, computers (1992, they weren't cheap) stereos, cd players, whatever she could get. i think she ended up somehow charging a bit over 100,000 ot them in total..then claimed bankruptcy...

Her lack of employment got her out of even a monthly payment and all of her debts were forfeited..she has HOOORRRRIIBBBLLLLEEEE credit now and lives wtih 4 of her children in some trailer somewhere.

that stuff is just aggravating..even on welfare, she bought more expensive stuff than my 2 working parents could afford...

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iccky

I think in that case its more of a comment on how its way to easy to get creit in this country then on the bankrupcy system. Any credit card companies that are giving out cards to cronic welfare cases with nine kids deserve to be taken for a ride.

Paq

true true, iccky

it's funny, though, in college, i received credit card apps daily in the mail and filled out just a couple and they were given to me with no hassle. I was jobless and they were giving $5000 limits..That should say something about how easy it is to get credit...either that, or they were just smart enough to bet that most college kids would find a way to pay it off, through parents or whatever..

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DDDDave

From banker's perspective.....

You are actually a better risk soon after a bankruptcy than before because you can only declare bankruptcy once every ten years.

You will pay much higher rates but credit will be easier to get.

???????

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bucket

Please checkout Dave Ramsey's books. He's got several out and they are great. He would likely reccommend not declaring, but rather creating a budget, having a yard sale, taking a second job, etc. His books have really helped me.

stevie667

the problem with bankrupcy is that it lasts a lot longer than a few years. loans and other items will cost a lot more for decades, and even though companies know your more likely to pay because you previously did declare it, they'll still make you pay through the teeth because they can.

i'd advise doing everything you can to pay off as much debt as possible, then if neccessary, take out a loan to cover anything left, and really just scrimp and save from there, and get a better job.

diddagirl

Bankruptcy is not the so called "way to go". That should be a last resort. If you fiel for bankruptcy- your credit will be screwed for 7 years. You can ask for credit cards, loans ect..... and the banks will repeatedly deny you. If there is ANY other way possible, FIND IT! Trust me... my mom has been living with the consequences for the last 5 years.

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diggerg56

I guess it's clear from this thread that everyone has had a different experience with bankruptcy. I actually had more damage done to my credit by using a debt managment company than from bankruptcy.

I filed as a last resort about nine months ago. I have obtained two unsecured credit cards for travel needs with no problem.

I lost no personal property in the deal and reaffirmed a debt for my vehicle.

Everyone's situation is different but I will pass on one thing. Run as fast as you can from companies like Ameridebt. Despite their claims they only make problems worse. I should have got on the waiting list for my local Consumer Credit Counseling agency and I may have avoided having to file.

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jay-g

That funny, because one of my friends, filed for bankruptcy. And at the same time, he braggs because he has $250 in his pocket, or he got new subwoofers for his car. What a idiot...

SixEdxMia

Can someone borrow me nine bucks?

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strife

What did they do that caused so much damage?

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phyzix525

OK, take it from someone that has been a Loan originator in the mortgage industry and is currently going through bankruptcy right now. Filing bankrupt is a pain in the ass, yes, but it is not as bad or as hard as you might think.

First of all you are looking to purchase a house soon. As a rule you can purchase a house the first day out of bankruptcy. Now you have to keep you credit score above a 500 and you can get financed, but you will have to put money down, depending on your score will depend on how much but usually around 20%. You do not have to get a loan with a pre payment penalty like someone else has said, you can buy those out at the begining with a higher interest rate. I know First Franklin is a good place to get a loan after bancruptcy. Now 2 years out of bankruptcy you can get a conforming loan. which means you can buy with little down and get the best interest rates assuming you have rebuilt your credit since the bankruptcy with good loans that are paid on time. Mortgage brokers do not go by the old rules anymore now with the automated underwriting systems, so it will all depend on what you are making and how stable you have been with your job at the time, etc.

As for fileing in the first place, it all depends on how much debt you have, do you own a home? do you have any equity, do you have anything you think they would want to take from you if you do file. (boat, cars, RVs)

Also do not go to a credit conciling/consolidation places cause lenders see thoughs the same as they would a chapter 13 bankruptcy. Also there are no differences in the eyes of a lender when you file a 7 or 13. !3 you have to pay back and 7 you do not. as long as you do not have steady income of more then your expenses they will not make you file a 13.

Bankruptcy will last on your credit for 10 years not 7. Assuming you check up on your credit though the procces with one of the agency (which you can for free) you should be able to get your credit back up to par in a few years no question.

Also if you have any student loans you cannot file on those. And if you do plan on filing don't go out and spend a lot of money on your cards. you have to do that 90 days before you file or they can make you pay that back.

But what you also need to do is check your state laws on that also.

Tell ya what, if you like you can PM me about your specific situation and I can help you make a wise desicion

Also if you credit is in shambles you can always buy a house contract for deed.

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phyzix525

She needs to go pull her own credit. Chances are she has outstanding balances and loans that were covered in her bankruptcy but are not fixed on her credit, this happens all the time and can be fixed with letters to all three agencies. Getting credit after a bankruptcy should not be that hard. Also a good step is getting a credit card that is secured, this can help her credit to get more credit and a co-signer on a car loan would make a big difference.

phyzix525

And the credit card companies are trying to push a bill though congress that would make it not possible to declare on CC debt. Of course this will not happen because of how miss managed the CC companies are about handing out credit in the first place.

Rodney

Right now every state has its own bankruptcy laws. Last year -- and not for the first time -- the financial industry almost pushed through Congress a federal bankruptcy law which is much tougher than the state laws and would supercede all of them. This is another case of the feds taking power away from the states to serve a monied special interest.

As Phyzic525 says, it's the credit card company's fault. They pass out credit cards freely to higher-risk customers, then cry when their losses mount. And then want the feds to change the rules for them. Listen, all they have to do is be good businessmen and not give out cards to shaky prospects. That's the way it used to be. Up until 20 years ago or so, it was fairly hard to qualify for a consumer card. A lot of people carried department store charge cards and gasoline charge cards -- Sears, Monkey Wards, Macy's, Shell, Chevron -- because it was all they could get.

Then the card issuers decided to go for market share and loosened their standards, figuring that increased volume and income would make up for increased defaults. Well, either that isn't working anymore, or they're getting even greedier (I'd vote for the latter). In any case, if you want to talk about welfare queens and people trying to soak the system, the financial industry is worse than any individual you might know.

So those laws could change. The financial industry can buy a lot of votes on both sides of the aisle in Congress. And they have.

amonkie

Since I started working in a credit processing agency, I've learned anyone who applies for credit that has declared bankruptcy in the last 10 years is automatically rejected or declined when their credit scores are pulled up for the decisions by our system.

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cherriesue

I know some people that filed for bankruptcy almost 7 years ago and 2 years ago they purchased a $250,000 home

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