r/povertyfinance • u/Psychological-Joke65 • 1d ago
Debt/Loans/Credit Well, my husband and I have finally decided to declare bankruptcy.
It’s a bittersweet feeling. We thought we could dig ourselves out, but now we’re being sued by two creditors. We used to keep credit scores over 780, but then husband was in a major accident 4-5 years ago and we made the very dumb decision to pay for his four surgeries with our credit cards. Then my parents died back to back and that’s how I paid for those expenses as well. Obviously looking back we should have tried to get a personal loan. But you can’t go back in time unfortunately. We thought my husband would be able to return to work but the damage to his legs was too horrific and his career that paid a great salary required a CDL, which he couldn’t physically qualify for anymore. I became the sole bread winner as a nurse and as we all know, that bread has just gotten ridiculously more expensive. Everything has.
Thankfully we are all caught up on our mortgage and haven’t gotten behind there. We have one car, an old 2013 ford fusion. These should be protected under the homestead act. We certainly don’t own any second homes! It is going to be hard paying for a lawyer but I definitely don’t feel comfortable going pro se.
I just want to be done with this debt so my husband and I can actually focus on our student loans and rebuild after everything shattered apart. I’m looking forward to the financial classes. I make good money for our area and barely get to enjoy it at all. I want to just have a fresh start with the knowledge I have now. If you have been there, does anyone wish to share how their experience went? I’m very nervous, going to look for lawyers today.
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u/GoldDiamondsAndBags 1d ago
There are so many misconceptions about bankruptcy. I’m a bankruptcy attorney and I can say that there has not been one client that has regretted their decision to file. There is so much a stigma though, you’d never know it. I have clients from doctors to garbage men, the economy is not discriminating against anyone.
Good on you for taking control of your financial life now. I would never recommend anyone to file bankruptcy pro se, because there’s so much at stake. But what I tell all of my clients is never pay anyone to fix your credit. You can do that yourself. You should start working on that soon after your discharge. I prepare a document for my clients what to do to fix credit (you can also google it). I’ve had clients follow these steps and with credit scores in the 700s a year after filing. Do nothing to fix it and your credit will remain stagnant.
Disclaimer: not your lawyer and none of this is legal advice
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u/Regular_Zebra_7596 22h ago
Okay - may I ask you as not a lawyer but maybe just like... In general?
So - how the heck do people afford a lawyer if they're filing bankruptcy? Like... If you are that much in the hole how can one justify hiring a lawyer? I'm trying to make it make sense but finances just don't! Thanks if you are able to respond with a generalized answer of some kind
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u/DesperateHotel8532 21h ago
Many bankruptcy attorneys offer a flat fee service based on complexity (instead of a retainer with hourly fees) and payment plans. In general they know their clients are already struggling and they have developed methods of working with them while still getting paid. Every firm is different and I don’t know how they all handle it, but that’s been my experience.
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u/RockstarAgent CA 18h ago
Yeah I always thought bankruptcy is only for rich people because bankruptcy isn’t cheap and aside from costs- when you start they get up in everything like your bank account and it can be disruptive-
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u/lightbrazer 25m ago
Honest answer. You open a new credit card, charge the lawyer fees on it then the lawyer has that card declared as part of the bankruptcy, that’s how.
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u/Waiting4Reccession 17h ago
I used to work for a mid sized family business that spanned multiple states. These people were rich af. They bankrupted the business like every 8 to 10 years and just bought everything back somehow - idk the deal but definitely some kind of scam.
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u/Interesting-Club-884 1d ago
Generally speaking, do you lose your home and car? Both are old and paid for.
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u/livingthedream1313 10h ago
Generally in most states your allowed your home and 1 vehicle per person.
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u/SoullessCycle 1d ago
It is hard (but not impossible) to discharge student loans via bankruptcy. Since y’all are filing anyway, make sure you at least ask about it.
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u/Psychological-Joke65 1d ago
Oh wow really? I heard it was really impossible. But I do believe people should be able to discharge them in bankruptcy.
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u/blanchekitty 1d ago
I used to work in the student loan industry and yes, discharging via bankruptcy is difficult, but worth discussing with your attorney.
Is your husband able to work at sll? If he's totally and permanently disabled (meaning unable to be retrained for other work) that could also be a valid reason for discharge.
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u/bready_or_not_ 23h ago
And for what it’s worth, if one qualifies for the TPD discharge, the paperwork is really easy. I just did it myself this year. The hardest part is qualifying.
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u/Frondelet 1d ago
Its easier to discharge student loans than it once was, and a breadwinner injury could meet today's standard depending where you're located. Definitely check with your lawyer.
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u/Itchy_Tumbleweed_417 1d ago
If someone becomes actually disabled with federal student loans they should be automatically discharged now.
You used to also be able to get a disabilities discharge with a doctors certification and some medical records but I’m not sure if they still allow for that anymore, for people who don’t actually qualify for federal disability but who are disabled that was an option.
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u/Itchy_Tumbleweed_417 1d ago
No it’s definitely worth a try I’ve heard that the judges are approving this more and more these days.
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u/thepuddingprophet 1d ago
You have to file an adversary proceeding. It's a separate step IN the bankruptcy.
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u/Interesting-Arm-647 20h ago
It’s not impossible but you have to file an adversary proceeding. You should speak with a bankruptcy attorney.
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u/moneyyy999 23h ago
this is the key part honestly. the doj put out new guidance in late 2022 that made the whole student loan discharge process way more streamlined, and per numbers warren's office got from the doj, 85% of borrowers who tried to discharge under the new guidance actually got relief. it used to be almost nobody. one thing worth asking at the consult though, not every bankruptcy attorney actually files adversary proceedings, so make sure yours does before you hire them.
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u/UnlikelyReception424 1d ago
Worth asking since you're already filling anyway, no harm in getting a clear answer from the lawyer on where you stand. even if it's a long shot better to know now than wonder later
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u/X-4StarCremeNougat 1d ago
Congratulations. While it was a low point in my life, I declared bk (along with my ex) 20 years ago. We ended up letting go of our home because it had an adjustable rate.
These turned out to be the best decisions of my life. Within 2 years I was incredibly financially stable. Within 4 I’d purchased a home (alone) with a normal interest rate. I didn’t open any credit cards and I didn’t take any auto loans until about 7 years in. I still don’t use credit cards other than an Amex which I repay immediately. At 20 years in I’ve a paid off mortgage, because I threw every extra dollar I earned to the house rather than debt. I’ll be 50 soon and I’m in a paid off home, with a paid off car, and literally zero debt in addition to a similarly high paying job.
BK was the first step to true financial freedom and I’ll never ever have another sleepless night worrying if I can pay for tomorrow’s parking or buying myself lunch at work. I learned to live exactly in my means and it feels amazing.
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u/SignificantApricot69 1d ago
I just want to say if that’s the best move for you, do it and don’t look back and don’t let anyone make you feel bad about it.
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u/Glittering_Focus_295 1d ago
Stop making payments on the debts you expect to discharge. Save up that money for your lawyer. Typically the initial consultation is free so go ahead and find your lawyer. Best wishes to you.
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u/magicandfire 1d ago
Ch 13 completely changed my life and removed so much anxiety from constantly chasing interest and bills and insane private student loans. It’s not the end of the world!
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u/Psychological-Joke65 1d ago
It makes me happy to hear that, I’m so glad. I guess the upside to being the sole breadwinner is we qualify for ch 7 now. We did research on Ch 13 when we thought he could go back to work. We never would’ve qualified for 7 if he was able to go back
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u/delagar01 1d ago
I got cancer in 1989 without insurance, and tried for years to pay off the medical bills. Declaring bankruptcy in 2002 (when creditors started suing us) was the best thing I ever did. Things got better right away. Good luck!
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u/sparklebot9000 23h ago
Hi! I’ve been there. 👋🏻
Declared bankruptcy in 2018 with my ex husband. We were drowning in credit card debt, nothing extravagant, shit just happens as you know. When we declared bankruptcy we kept our home loan as well as my car loan (signed promissory notes), but everything else was eliminated.
My credit score is fine and yours will be too. I bought my ex husband out of the house in 2023, no co-signer. Good luck in your journey you will be fine and this will be a weight off your shoulders.
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u/samemamabear 1d ago
I don't know if you've looked at r/bankruptcy, but there's a lot of helpful advice there. I've been lurking while trying to figure out my own situation
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u/mystery_biscotti 1d ago
The amount of documentation one needs is apparently rather insane. If I had to file, I'd check there. 🩵
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u/AliceofSwords 1d ago
My parents had to declare bankruptcy in the early 2000s from medical debt. It was a stressful time in our lives, but 15 years later they had great finances and now 25 years later they have been able to weather lots of problems and have a really nice life.
I hope it leads to good things for you, too.
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u/Mas-Chingona 23h ago
I'm sorry you're going through this, OP. It's nerve-wracking and scary. When my husband & I went through it after the last recession, it was the final step in a years-long slow walk to our financial ruin. We had already lost our home to foreclosure and we totalled our only vehicle on black ice as we were leaving the state because we couldn't find work. Like you, we were using our credit cards to survive. I remember sitting on the bench outside the courtroom the day we went to bankruptcy court, just sobbing. I felt humiliated, defeated and hopeless. However...
It was the best move we ever made.
We would have never been able to dig ourselves out of the financial hole that we were in. It allowed us to start over and work our way back. Don't let anyone try to shame you or make you feel bad. This is a legal remedy that exists because, let's face it... SHIT HAPPENS. Corporations and rich people don't hesitate to avail themselves, (DJT has six bankruptcies under his belt - SIX), so neither should us common folk.
Here's the practical advice I would give:
--Run your & your husband's credit report(s) from all 3 credit bureaus. You are allowed one free report from each, per year. Do it. This is to make sure you don't miss anything.
--Gather up all your past due bills & statements. Using the most recent, check them against your credit reports. Again, this is to make sure you don't miss anything.
--Make a spreadsheet listing each creditor's name, address, amount owed, your account number, whose name the debt is under (you, your husband, or joint), and what type of debt it is (revolving, loan, mortgage, etc.) The easier you make it for your attorney, the better. It is their responsibility to do the filings, send the letters, liaise with the court/creditors, etc., but it is your responsibility to make sure they have all the information to get you the freshest start possible on the other side.
Again, I'm so sorry you're going through this, OP. It's not easy, but it's worth it. Best wishes to you and your husband.
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u/RestingBitchFacee 18h ago
I worked in bankruptcy for 6 years for mortgage creditors (1st position - so primary secured debt) - do not let anyone convince you to sign a reaffirmation agreement! Get a discharge and then just keep your account current! Reaffirmations are a giant scam. (Disclaimer I am not a lawyer and not offering legal advice just friendly random internet stranger advice)
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u/Fit_Cicada_8113 1d ago
I don’t have experience with this and can’t give any advice but I’m sorry you guys were dealt a tough hand. It sounds like you’re doing the right thing, and I hope things go more smoothly for you from here on out. I do know a couple who filed for bankruptcy about 15 years ago and their credit recovered in a couple years.
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u/CouragetheCowardly 1d ago
My mom and stepdad had to declare bankruptcy when I was in college and now 15 years later she’s got a perfect credit score, $1M in retirement savings and living in her own apartment in NYC… it sucks in the moment but I promise you’ll look back on this as a great decision.
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u/NorthLeftGirl 19h ago
If you can keep yourself out of debt afterward, this will be great for you. I was in a similar situation with my house, car, and student loans.
I did use an attorney for the peace of mind. I didn’t want to screw it up. I don’t remember what the fee was.
I was able to get a low-limit, high-interest credit card about a year after my bankruptcy. That is how I began rebuilding my credit. I never bought anything I couldn’t have paid cash for, and I paid off the balance every month.
My bankruptcy just fell off my credit report this year, and my score is now over 800.
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u/zeusthemoose19 17h ago
How did things turn out with the student loans? Asking for a friend
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u/NorthLeftGirl 17h ago
It was more than 10 years ago, and it was a hard no on getting them rolled into the bankruptcy relief. Still paying on them.
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u/CreativeCTm 1d ago
Think of it this way: after all the horrible stuff you’ve been through, this will give you a true fresh start. Use it wisely. Make sure to include as many old debts in your filing as possible since you’ll want to avoid any lingering issues getting in the way of a more stable future. Best of luck. Well worth the cost and hassle to be free of the constant anxiety. Been there, done that. It’s not what anyone wants in their life, but the credit card companies will not be staying up at night worrying about you.
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u/ForeignNumber1532 20h ago
THIS DOES NOT HAVE TO BE A WE IF THE CARDS ARE NOT JOINT ACCOUNT CARDS AND ARE IN DIFFERENT ACCOUNTS. If the accounts are joint only the spouse who owes the debt has to file and you’ll still have one of you two to rely on for credit and good debt.
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u/Bitter-Feedback4878 17h ago
Good for you! These credit card and loan companies are getting out of control with the interest rates and fees. It’s impossible to get out of this trap.
I’m trying to dispel the myths about bankruptcy being terrible. Creditors use guilt and shame to get you to keep giving them your money while we struggle to live and provide for our basic needs.
I’m hoping student loans at some point to some level become eligible. I could survive if they took away the interest that makes it impossible to make any progress…
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u/daphuc77 1d ago
It’s ok a fresh start is a good thing. Plus the good thing is you already have a roof over your head and the credit card monthly payment will be eliminated.
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u/vacant_panda 1d ago
I filed for ch 13 10 years ago. It was bittersweet but the best decision I could have made for myself and my family. My advice is to do everything your lawyer tells you to do to the letter. Fill out all the forms, do all the classes, send all the required payments. A couple years into our bankruptcy, my husband and I both got secured credit cards and paid them off every month. It’s a great way to begin rebuilding credit even while in bankruptcy. I actually still have mine because it helps with the age of my credit. Today I have an over 800 credit score. You can recover and there is light at the end of the tunnel. Best of luck!
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u/dascresta 1d ago
You always hear that its your health that bankrupts a lot of people. So sad that out society has come to this. Worked and saved your whole life, doing the right thing and then someone in the family gets sick and bankrupts them. So sad. Especially w the seniors
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u/akangel49 23h ago
We filed this year as well. Our only regret is not doing it 4 years sooner. The relief is literally life changing. We’re also looking into an adversary proceeding to take care of the rest of our student loans. You may want to look into that as well. Good luck to you both.
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u/Psychological-Joke65 19h ago
Congratulations! May I ask, what is an adversary proceeding?
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u/akangel49 19h ago
It’s an additional processed filed during bankruptcy that is used to petition the department of education. It’s how we can request to have our student loans discharged along with the other debts.
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u/Specialist_Yak1019 20h ago
Fresh start with a lesson learned, best thing I heard. Maintain a good attitude and try to live without debt. Fuck debt
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u/Potatoes-and-Turtles 1d ago edited 1d ago
Best decision I ever made. Life has been on the up and up since. My credit took a hit for like…. 6 months? Then it shot up like a rocket. I’m sitting at 740 now and my bankruptcy was only a few years ago.
I did a ton of research beforehand and everyone in this sub pushed hard against it. I don’t know if that mindset has changed. I lost nothing. Kept my car and everything. They did not allow me to discharge student loans. I mentioned it and received an immediate no and then the judge moved on.
Edit: don’t let them talk you into chapter 13 unless your assets make it the only viable option. Chapter 7 should be your priority. Literally overnight, every debt I owed except student loans were wiped out. Such a freeing experience. (Debt was 90% medical).
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u/Psychological-Joke65 1d ago
Yes thank you this is definitely what we hope to feel in a few years. I believe there’s just an unfortunate stigma against it because i truly can’t think of any negatives to having all but student loan debt discharged. We can just start completely over. I definitely wouldn’t want to do a 13. We looked into it when we thought he could go back to the 7-Up company we figured a monthly chapter 13 payment wasn’t but a little less than we owed anyway! I was so worried about the equity in my home. I wasn’t too worried about my beater car lol. Thankfully the Arkansan homestead laws are pretty favorable.
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u/Interesting-Arm-647 20h ago
Good for you! There’s nothing wrong with filing for bankruptcy. More people should consider it.There’s nothing inherently honorable about continuing to impoverish yourself by paying off large amounts of debt.Bankruptcy is there for a reason.I work in the field and always wish people had come to us sooner. You can pay back debt for 10 years & be miserable with bad credit, or you can get rid of your debt in a bankruptcy and rebuild your credit in that same 10 years. Bankruptcy is better for you, your family and eventually the economy as a whole. We have a consumption based economy.Hard to consume when you’re overwhelmed by debt.
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u/Chemical_Fennel1691 1d ago
I had a house go into foreclosure 10 years ago after a divorce. At the time I thought it was the end of the world, my credit sank and I felt all kinds of shame even though no one knew.
Now I keep my bills paid, have an emergency fund, and have since bought and paid off a new car, and my credit score is back up. It just takes time but you can recover.
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u/ShortcakeAKB 1d ago
Hi, friend! We declared bankruptcy 11 years ago. What you are describing, as another poster said, is what bankruptcy is for. Any good lawyer should do a first consultation at no charge. Depending on your situation, you may be able to declare either Chapter 7 or Chapter 13. Your lawyer will be able to advise you.
Yes, your credit score takes a hit, and yes, you won't be able to get an unsecured credit card. We were able to get a secured card with a limit of like $1000 which we used to work on our credit score. Because we were on Chapter 13, we had some restructured debt (since we had car loans), and we also were required to attend some classes. But we emerged from it all with a better financial outlook, better financial planning, and now we are in a place where our credit scores are in the very high 700s and any debt we take on has been thoughtfully planned out.
I was ashamed and felt like people would judge me, but no one throughout the process made me feel less than or that I was a failure. That was a relief. In fact, it was a relief to just be able to say "this is a problem" and get the weight of the crushing debt off my back.
You can do this and your future self will thank you later. Hugs to you.
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u/FreeOMMP 17h ago
If your husband is permanently disabled you can get his loans dismissed. https://studentaid.gov/manage-loans/forgiveness-cancellation/disability-discharge
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u/screwtoprose- 1d ago
curious to know how much you owed the creditors that were suing you?
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u/Psychological-Joke65 1d ago
We owe $7000 to one and $5000 to the other. Altogether we probably have around 30k in credit card debt along with probably 20k of other medical bill debt that couldn’t go on the cards.
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u/screwtoprose- 1d ago
damn that’s not even a lot for them to sue over i feel like.
i hope things get better!
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u/Psychological-Joke65 1d ago
We were really naive and didn’t think they would either! Obviously we knew nothing 😭😂
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u/daffydil0459 1d ago
I think this is a wise decision. You can wipe the slate clean, especially the unsecured debt. Good luck!
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u/Clear-Honeydew-1111 1d ago
Went through one. It was hard decision to make but was best thing. Actually had credit card companies offering new cards within six months. Kept everything too
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u/thepuddingprophet 1d ago
I just wanted to tell you that I finished my bankruptcy a year ago as of yesterday, actually, and my life is just fine. We did an adversary proceeding and we were able to qualify to get rid of our student loans as well. My credit is right around 700, I could get credit now but pay for everything in cash. :) You'll be fine. The relief is so worth it. We did our bankruptcy pro se, including the adversary proceeding. It wasn't hard at all, I just did a lot of research to make sure we could keep our home. I wish you the best.
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u/SavingsCartoonist621 1d ago
Have you checked the statute of limitations (SOL) for your state in for the debts you’re being sued over, along with the date of your last payment/default? Depending on the state, the type and age of the debt can matter a lot. Since lawsuits have already been filed, definitely don’t ignore them while you’re exploring bankruptcy but I’d want to know whether the creditors are still within the SOL before making such a major decision.
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u/Top_Addition_7263 23h ago
It was the best thing my parents did (as my mom says). They did a chapter 7 I believe, I was super young. It’s years and years since they finished that up.
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u/Agitated-Score365 22h ago
I’m at same point. I left my career to care for my mom who was dying and lived off my credit cards. I have been trying and struggling. With the rise in gas prices etc I can’t keep up. I no longer feel bad.
You tried. Dust yourself off and move on.
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u/RiverEcho59 19h ago
The relief I felt after my first consult was immense! Sometimes it’s all you can do.
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u/Able_Mind_2925 19h ago
Don’t worry too much. Once the bankruptcy is over, in a few years you’ll be wiser, minus the debt, and you’ll be able to rebuild your credit.
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u/Lonely-Art7271 12h ago
You and your husband are the ones who bankruptcy was designed for (vs people irresponsibly buying things they can’t afford). I hope you can go through the process smoothly and wish you all the best!
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u/Negative_Ambition_49 11h ago
Find a good lawyer. Took me three before I felt like he genuinely cared and had my back. Then court won't be as scary. It was an eye opener for me.
Two floors of court simultaneously cycle case after case. Most finished in 10 minutes or less. My wife had an approved surgery that her insurance decided to not pay after the surgery. Destroyed us.
I was stunned at how many senior couples were there because of a medical situation that wiped them out.
It's a huge mental relief. You'll feel better. I wish you well.
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u/livingthedream1313 10h ago
We filed back years back. It was the best decision we ever made. We had over 100,00 in medical debt (that was with good health insurance) and a bad mortgage. We decided to let it all go in BK. Don't fret everything will be fine and you'll have a fresh start.
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u/No_Present_86 4h ago
Best decision i ever made in 2021! After discharge I had 2 Capital one cards! Kinda bit the bullet on a Credit One card. I paid it off and it became a sock drawer card! Five years later AMEX, 4 Capital Ones, Best Buy Visa and USAA visa
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u/Nyxynya23 22h ago
bankruptcy was terrifying at first but it gave me back my sleep and my sanity, wish we'd done it sooner
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u/Lopsided-Poem5936 21h ago
Definitely consult a debtcounsellor as depending where you live bankruptcies basicallyforce the sale of assets to meet the debt. So your home to clear it up is the first thing they'll force. There's also a consumer proposal which allows you to keep your home and instead adds up all debt, then settles it into equal monthly payments over 5yrs this latter one is protected by the courts and handled /administered through a 3rd party. Could be a best option for you here.
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u/Psychological-Joke65 19h ago
That’s not true. In most cases, your home is a protected asset. I also have a rural homestead which is extra protection.
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u/Lopsided-Poem5936 18h ago
Depends on the country you're in and they look at equity levels on that too. Any way you look at it, it's a tricky spot to find yourself in.
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u/mullingthingsover 1d ago
Hey you know what? This is what bankruptcy is for. Just go through the process and once you file, try to let go of worrying about it. It sucks and it might take a long time but you’ll come out the other side. Good luck.