The year was 2009. The great recession was in full swing and my step dad was one of its victims. He had made some bad real estate investments and was upside down on all of his properties.
Bill Collectors began harassing my dad for money he didn’t have. They called the house every day and they even called his cell phone which I thought was illegal!
I had advised him to do debt settlement but he was a skeptic and decided to do bankruptcy.
“If I just go bk everything will be okay” is what he told me…
Sadly nothing could’ve been further from the truth.
He didn’t qualify for chapter 7 bankruptcy
Like most Americans since the passage of the bankruptcy abuse prevention and consumer protection act of 2005 more popularly known as the new bankruptcy law he didn’t quality for a full discharge chapter 7 bankruptcy. Instead he was relegated to chapter 13.
His repayment plan took 5 years and ultimately cost him $5000 that he didn’t have! That’s not even the worse part of it though. Under a chapter 13 bankruptcy plan all major financial decisions had to be approved by the magistrate.
That didn’t sound too bad until his car went kaput. He was a traveling salesman so a car was a necessity. He shopped around and found a nice Mazada that was reliable and fuel efficient. The payments would’ve only been $250 a month so he figured the magistrate would be no problem.
Here is how the process to buy a car while in bankruptcy looks on paper
- First he had to find a lender willing to lend to someone in bankruptcy
- Second he had to get a sample financing statement from the dealership
- Third he had to give the statement to the trustee
- Fourth the trustee files a motion to incur another debt with the court
- Fifth the court approves it
Here’s how it looked in real life
It was almost impossible to find a lender willing to deal with someone in bankruptcy. He finally found a car dealership that could help him but they were a big dodgy. They wanted almost 20% interest to loan him the money! He had no choice so he accepted it.
He got the financing statement and submitted it to the trustee. The trustee told him it should be okay and that usually the person doesn’t have to appear.
My dad got a hard magistrate
Unfortunately my dad got a hard ass magistrate who made him appear in court. She was the real life version of Judge Judy! She grilled him on why he wanted that car and why not a 5 year old used car instead.
He explained to her he was a traveling salesmen and reliable transportation was a must to keep his job. She still insisted on getting a cheaper car.
Then she insulted him by telling him if he had been more responsible he wouldn’t be in this situation in the first place. After what felt like an eternity she said we would receive her decision in the mail.
Weeks went by with no decision. He called and they kept telling him he’ll be notified when she decides. Finally after 5 weeks he got approved!
It was the worst time of his life
In the meantime he had to ride with friends and borrow money from my grandparents to rent a car when he couldn’t ride with them. All in all it took 2 months to be approved and he almost lost his job.
Thanks to that magistrate what was already a difficult time for my dad and all of us was compounded into the worst time of his life.
It was the first time I’ve ever seen my father cry.
Thank God we all got through it.
Please don’t make the mistake he did!
I don’t recommend anyone file bankruptcy unless they have to. When I had my own financial storm I used debt settlement. It took 18 months to complete instead of 5 years and dumped over half of my debt.
If you’re reading this then maybe your not in the best financial times right now.
That’s okay you’re certainly not alone. The Washington Post reported last year that 6.3 million Americans are behind 90 days or more on their car payments and millions more are delinquent on their credit cards.
The truth is these things happen. Before you make any rash decisions though make sure you’ve explored every alternative to bankruptcy first!
Here’s what you may face if you file for bankruptcy!
You probably won’t quality
The bankruptcy laws changed in the early 2000’s making it significantly more difficult for most people to file for bankruptcy than it used to be.
The new bankruptcy law created an ‘assumption of abuse’ for bankruptcy filers. In other words the courts default position is to be that you are trying to commit fraud by filing for bankruptcy.
Most Americans don’t even qualify for chapter 7 bankruptcy!
Chapter 13 bankruptcy will take 3-5 years of your life
That means you’ll have those creditors hanging over your head for that period of time. Debt settlement, on the other hand, only takes 12-48 months on average.
During those 3-5 years you’ll be financially under the control of a judge or magistrate. All significant financial decisions will have to be approved by him or her.
A family member filed for chapter 13 bankruptcy and needed a car; badly. However since he was under chapter 13 bankruptcy he had to get the purchase approved by a judge.
It took him over a month to get thumbs up all the while he was without good transportation.
Bankruptcy isn’t cheap
As you read bankruptcy cost my dad $5000 and he’s not alone. The average bankruptcy attorney can charge anywhere from $1500 to over $5000 depending upon the complexity of your case.
Oh, and most of them want their money upfront or a significant deposit first.
You may lose your home if you file for bankruptcy!
Contrary to popular belief you can lose your house if you file for chapter 7.
…it’s likely that a debtor will lose the home in a Chapter 7 bankruptcy if there’s significant equity that the trustee can use to pay creditors.
-Nolo Law Firm
By law the bankruptcy court is obligated to take whatever non-exempt assets you have in order repay your debts.
Bankruptcy will make you a financial leper
Having a bankruptcy on your credit report automatically shuts the door to most lenders.
For the next 7-10 years you will be considered a subprime borrower which means you’ll pay extortion level interest rates on all borrowed money and that’s if you can get anyone to lend you money at all.
I learned from my dad’s mistake
Like father like son. I too ran into financial troubles due to losing my job
Overnight I ended up with $60,143 in debt!
It was like someone came up to me from behind and punched a knife right through my back into my heart..I was devastated!!
Like most people I didn’t have 60k laying around. I tried to work it out but the hospital ended up turning me over to a collection agency. They were the worst!
A girl named Shaniqua Johnson began calling me everyday and threatening me. She said she would call my job and let everyone that was a ‘deadbeat’ when I told her I knew that was illegal she said they would sue me and have my wages garnished.
After seeing how my father was treated during bankruptcy I decided to do debt settlement as I suggested with him. After much searching I found out how to deal with debt collectors and National Debt Relief.
I was nervous and stressed because of my situation but as soon as I called them it was like a huge weight had been lifted off my shoulders. They really helped me out.
Their plan was to put money into an account in my name and pay into it every single month after a certain amount of time they would offer a lump sum to my creditors to go away.
This took about 18 months and all in all I ended up having to pay about 20k of what I originally owed.
P.S. You don’t have to go with national debt relief though. There are other companies such as: