The Bankruptcy Process: Stage 5 – The Do Over

In The Bankruptcy Process: Stage 4 – The Deliberation, we reviewed what your day in court would be like and some time lines for when things will occur.

If your bankruptcy has been approved, you’ve officially been granted a “do over” – and this is where things get tough.

  • Credit Report. It will take a few months, but everything on your credit will show as discharged by bankruptcy. In addition, there will be notation of bankruptcy very clearly identified on your report from all three credit reporting bureaus.   (What? Did you think no no would know?)
  • Show Me the Money.   From this point forward, plan to live on a cash basis for a long while.   At a minimum, you’ll have 2-5 years before you can do anything.   And those people who tell you can buy a car or house are only partially correct.   We were able to buy another car – with a 12% interest rate.   However, we were not able to get a mortgage loan, and wouldn’t even be considered for a loan until we reached the 3-year mark of having the discharged entered.
  • Credit Cards.  While we got some credit card offers, most were guaranteed fund types – which really makes them a debit card.   Only now (after the 3-year mark) have we started getting offers for a “real card” – and torn them up and threw them in the trash.   If you learn one things from this whole experience it’s that you NEVER EVER want credit cards again (especially if that’s what got you here in the first place).
  • Budget.   The only “B” word worse than bankruptcy is Budget.   You do learn about budgeting during the education requirement of this process, but it’s not the same as having to live with it.   To this day, I still look for ways to cut or expenses.   We keep the thermostat in the summer at 74, we stopped going to the gym, we only eat out 3-4 times a month, we buy what’s on sale, we only buy clothes when we’re going to be naked, and we opt for a card instead of a gift for birthdays and such.   (We’re a little hold to make the macaroni picture frame for the parents.)    I wouldn’t say we live on a budget: we just live with what we have.  If we don’t have it, we don’t buy it.
  • Materialism.   Our whole attitude about money changed.  We have now found that we’re no longer materialistic.  Sure, I have the cash to buy a new car now if I want…but I don’t really want to.  My current car is fine, the payment is low, and it gets me back and forth to work.   In other words, my transportation situation isn’t broke and doesn’t need to be fixed.   We also found ways to have work done around our house for a reduced rate or via barter.   We’re selling off everything we can.  In fact, we made $545 last weekend selling a couple of things like hardwood flooring and a fish tank.  The pets eat the generic pet food, and we eat peanut butter and jelly sandwiches every so often.   It’s not the life we used to have, but the trade off of ZERO debt makes it worth it.
  • Savings.  It took a few years but we’re now saving.  In fact, we’re saving using something called the “Money Speedometer” form.  We use it every day, tracking how much money came in.  This is money that we didn’t anticipate to have – e.g., because we sold something, got a rebate, saved on groceries, etc.  At the end of the month, we take this money and put it into a special savings account.   You’d be surprised at how addictive this can be.  You get the point where if you found a penny on the street, you’ll record it on the Money Speedometer!

This series about bankruptcy was written by someone who’s “been there, done that” and designed to give you an overview of what this process is like, that it can be a life savers for many people, and it is your chance to have a financial “do over.”    Oh…one more thing: we did not lose our house or cars in the bankruptcy.   If that’s the reason why you haven’t talked with an attorney, don’t let it be.   It costs nothing to find out what your options are.

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