A Debt Consolidation & Credit Counseling

How Bankruptcy Can Affect Your Future

In 1999 a friend of mine decided she had to file for bankruptcy. Her divorce, medical bills for a child that had long since left home, her own medical bills for a series of home accidents, and expenses from a failed business financed with her credit cards, left her feeling overwhelmed. She felt the only way out was to file for bankruptcy.

Lisa scheduled a complimentary visit through the local lawyer referral service to discuss her options. The attorney told her that once the paperwork was filed for bankruptcy the harassing phone calls and bombardment of delinquency notices in the mailbox would stop. That sounded good to Lisa. Then the lawyer got to the other part of the visit, the costs. He would need a deposit of at least $1,500 plus filing fees of about $100 to move forward with the filing. She told him she would think about it and left feeling dejected. If she could have come up with $1,600 dollars she could have put a dent in the amount of money she owed. Why, she questioned, would it cost so much for a person who has no money to file court papers detailing that fact and asking for relief.

Later on, when discussing with a friend the result of her visit with the attorney her friend suggested looking into filing bankruptcy on her own using easily obtainable legal forms. Lisa got online and found the necessary forms on disc in a packet of materials costing less than $50 dollars. When the material arrived she immediately filled out the forms and submitted them to the court along with a form declaring herself indigent and asking for a waiver of filing fees. In about two weeks she received notice that her forms had been received and issued a case number. 

Lisa then embarked on the part she most looked forward to. With the case number she could now send each of her creditors a letter notifying them of her filing for bankruptcy. Upon receipt of the notice they would no longer be able to contact her about outstanding balances. She had requested a credit report from each of the three major credit reporting agencies so was prepared with a list of all the creditors she wanted to add to the bankruptcy creditor list. She sent the letters return receipt requested and waited for the signed receipts to come back.

In about four months her hearing date came up. Lisa drove nearly 100 miles to a downtown metropolitan area where the nearest Federal District Courthouse was located. She paid for parking, then nervously went through security and took the elevator to the floor where she was to meet with the court appointed Trustee. The entire hearing took less than 10 minutes. The trustee asked her about her finances, if there were any possibility she could pay back the money, if she were sure all creditors were listed, and told her that no creditors had contested her filing. He then thanked her for appearing at the hearing, and told her the debts would be discharged. She walked out of the federal building feeling like the weight of the world had been lifted off of her shoulders.

Within the next 6 weeks Lisa’s mailbox was stuffed with offers of easy credit for everything from credit cards and home loans, to car notes and department store charge cards. Lisa was feeling pretty exuberant about being pre-approved for credit. Though she did not take up any of the offers of easy credit, she felt vindicated that despite what she had heard, filing for bankruptcy would not negatively impact her life – or so she thought.

Her lease was going to be up on her apartment in a couple of months and with the debt off of her shoulders she felt she and the two children still living at home could afford to move to a little better neighborhood. It didn’t take long to find a perfect apartment. It was closer to work and had more space in a better neighborhood. She enthusiastically filled out all of the forms and put a deposit on the apartment. One of the papers she barely noticed signing was an authorization to obtain a credit report. The next day the apartment manager called and asked her to come pick up her deposit. Confused, she asked why and was told that she had a bankruptcy on her credit report. They didn’t rent to people who had filed bankruptcy within three years. In calling around she discovered that many other apartment management companies had the same policy.

At about the same time she came up for review at her job and felt confident that she would be promoted to assistant manager in her department. The job performance review went well with Lisa receiving high marks in every aspect of her job duties. She and her supervisor left the review confident that Lisa would be tagged for promotion. Early the next week the human resources director called her to the office. Thinking she was being summoned to accept the promotion, Lisa quickly appeared in the director’s office. She was told in professional terminology that she could not be promoted to a supervisory position because of her bankruptcy. 

Incensed, she began looking for a new job but found that nearly all of the prospective employers required her to sign a form giving them permission to obtain a credit report.

The logic was that if she could not manage her own financial affairs how could she be trusted to manage those of her department or the company? In addition there is the perception that those who suffer from chronic financial problems are more susceptible to theft. The realization of what she had done by filing bankruptcy was beginning to dawn on her. She had traded one type of financial hardship for another, and it didn’t end there.

When her auto insurance came up for renewal the rates went up sharply even though she had not been in any accidents or received any citations. You guessed it; the bankruptcy put her in a higher risk pool that cost her over $300 a year more. The agent also told her she would not be able to provide content insurance on her apartment with a discharge on her credit report. Actuary tables apparently demonstrate that those who file for bankruptcy are more prone to loss through fire and theft than other groups. No insurance company is supposed to provide renter’s insurance to people who have filed bankruptcy.

When her bank merged with a big conglomerate bank service she decided to open an account with a community bank near her home, but was turned down because of her bankruptcy. She could not get a department store credit card. Lisa was unable to get utilities turned on in her name without paying a large deposit even though she had never been late on a utility payment. Getting a cell phone proved impossible. 

When her old clunker of a car finally died she tried to get another decent used car. The dealership would not finance her for a used car, but would finance a new car purchase. The interest rate was nearly 30% more than what her neighbor had paid for the same loan amount. Of course there would also be the increased cost for comprehensive coverage on a new vehicle at the higher risk pool rate. As Lisa muddles through the next 7 to 10 years with a bankruptcy on her credit report she will suffer the consequences of not being fully informed of her options in regard to discharging her debts.

If you are in debt and feel that bankruptcy is the only option then maybe you need to reconsider all of the ramifications of such an action. There are other options. Click on the link below and find out what thousands of others have already discovered. Fill out our simplified online form and let a professional, certified, debt consolidation specialist provide a free and confidential consultation.

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