This is part 9 of 11 of my bankruptcy experience series.
My spouse and I filed for chapter 7 bankruptcy in July of 2022. It was a decision that took us a few years to come to, hindsight we wish we had done it sooner. It was one of the best decisions we made for ourselves and our future.
Here at Ascend, I get the privilege of speaking with people everyday who are in the midst of trying to figure out the best way to tackle their debt. I am very upfront and transparent with them about my bankruptcy experience. I get asked different variations of this question almost every time: “How long ago did you file and how is your credit score? Your credit is ruined, yeah?”
Quite the opposite, actually.
Bankruptcy for me did what it was supposed to do. Give me a financial reset and allow me to get my finances under control. That is exactly what it did. Do I regret it?
Now that we are a bit over 1 year post bankruptcy discharge, let's talk about how everything looks now. In this article I am going to discuss:
What credit accounts I have
Major purchases I have made
Major purchases I am on track to make
How I manage my accounts now
Current credit score
I currently have 5 personal credit card accounts with a total limit of about $18,500. Immediately following the bankruptcy the card offers that we received were not the best. They either had ridiculous monthly/annual fees or crazy high interest rates. For us personally, the interest rate did not matter as now we were planning to spend within our means and never carry a balance. We each chose to open one card each.
My spouse opened a Discover It Secured Card and made me an authorized user, and I did the same with a Capital One Secured Card. Both cards provided decent rewards, and a road map that outlined how to get your security deposit back and graduate to an unsecured card. My card was upgraded to a travel card and the limit went from $1,000 which was my initial security deposit, to $3,300 at the start of month 7. The limit got increased again at the end of the 12th billing cycle, the limit got raised to $6,900. When I first opened the card, I called Capital One and I asked how to get a limit increase and the representative told me that the more I spend on the card and pay off, the higher of a limit they will give me. I believe that is why my limits got so high on that card specifically because I put a majority of my personal expenses on it.
Oftentimes I hear people saying that you cannot buy a new car after you file for bankruptcy. While it may be challenging while your bankruptcy is open, once it is discharged you may be able to if you meet the criteria such as income and employment etc.
We had a 2021 car that we had planned on keeping for a while, I remember right after my bankruptcy was over I was checking out rates to buy cars. I mainly wanted to see what options were available to me. The rates were well over 20% immediately after my discharge, until about 6 months after. We ended up not buying anything until 10 months after when we needed to get a second car.
We built our credit up enough that we walked onto a lot and bought a brand new car and were not required to show proof of income. There was no downpayment requirement and the rate was under 5%, which to me was pretty good seeing that a few months prior it was over 20%.
Two weeks ago my spouse and I met with a mortgage broker to go over our options for purchasing a home within the next year. This has always been a major goal for us and was one of the main reasons why we filed a bankruptcy in the first place. The broker gave us a list of things to work on/continue to work on:
Keeping our credit card balances under 10%
Make all of our payments on time
Do not apply for any credit accounts (cards, cars, basically anything that will leave an inquiry) within 6-8 months before we are ready to get officially pre approved
Pay down student loan and auto loan balances as much as we can without causing a financial hardship
It was implied that if we followed these items, we would not have an issue getting approved through that specific lender when it came time to start the home buying process around October of 2024 (2 years post discharge).
I am currently a renter, renting an apartment. A lot of people are in the same situation and are worried about not being able to rent after having a bankruptcy.
I often get asked: “Is it possible to rent after a bankruptcy?”
The short answer is yes. However, you may have to jump through a few more hoops than someone who has great credit with no bankruptcy.
I moved right in the middle of my bankruptcy. I filed my case in July and ended up moving in August to a new apartment. The apartment complex ran my credit and I know they saw bankruptcy because they called me and point blank asked me if I had an open bankruptcy case. I told them yes, and I explained the situation.
I was approved, but we had to put down a full security deposit. Sometimes apartments will do promotional deposits. At the time our apartment was doing a promo for one month free and a $200 security deposit. We qualified for the one month free, but not the security deposit promo. Our deposit was equivalent to one month of rent.
It is important to notate that some rental companies may not rent to you if you have had a recent bankruptcy. There are a few way that you may be able to mitigate this:
Work on establishing credit post bankruptcy discharge
Handle your credit responsibly
Watch your balances
If you know you are going to have to move and are planning on filing bankruptcy, maybe wait until after you move to file. Only if that is possible of course
If any of these apply to you and you are either thinking of moving and are about to file bankruptcy, or are in the middle of bankruptcy and need to move I highly recommend calling the property management of the places that you want to live in. You may be surprised at how willing they are to work with you.
I am determined to never have to file for bankruptcy or use any form of debt management or relief program for the rest of my life. That being said, if I ever need to do it, I will instead of waiting. The day we filed our bankruptcy we started practicing healthy money habits.
We learned and knew healthy money habits prior to even needing to file, but our debt to income ratio was so high that it was almost impossible to be successful in doing so. Once we no longer had a debt obligation and our bankruptcy was filed, we immediately started saving 10-20% of our income each month. Once we got paid we would put the money into our savings account. The amount of money that we save each month varies depending on expenses, but the bare minimum amount we save is 10%.
Once we started getting credit cards and having balances we made notes on our calendars on the payment due date, and the statement closing date. These are two very important dates to know. Your payment due date is the date that your minimum payment is due. If you do not make your payment by this date you can be hit with fees, or even an increase in your APR. The statement closing date is the date that your credit card lender reports the balance to the credit bureaus. I have attached photos below as an example.
This photo is your closing date. This may look different depending on your credit card issuer, but most lenders offer something like this on either your mobile app or the statement.
Our credit scores have fluctuated from month to month post bankruptcy. At the 12 month mark my scores finally hit the 700’s. See the example below:
It may not be everyone's first choice to have to file for bankruptcy. Filing for bankruptcy is not a credit death sentence, there is always light at the end of the tunnel. I am still on the road to recovering my credit and I imagine I will be for several more years. Based on my own research and trial/error here a couple of things that you can that may boost your score:
Asking a financially responsible friend or relative to make you an authorized user on their credit card
Getting a secured credit card
Getting a secured loan (house, car etc)