Life after Chapter 7 - My Bankruptcy Story (Transcript)
What's up guys, this is Dash with Mind Over Finance, and today I wanted to share a personal story with you. Now this isn't something I'm proud of or even really talk about all that much, but back in 2007, I ended up having to file for chapter seven bankruptcy. And without a doubt, it is one of the hardest things that I've ever had to do in my adult life.
You wanna talk about feeling like a financial failure? You wanna talk about feeling like a failure as an adult? You wanna talk about feeling like a failure as a man? Yeah, bankruptcy will do that to you. By the end of this video, I just want you to have a clearer understanding of what chapter seven bankruptcy is, some of the pros and cons to filing, and what happens after you file successfully.
Now, I'm not an attorney, and I'm not a financial planner, financial advisor or any of that stuff, but I am a person who's been through the process personally and I just wanted to give you that perspective. And hopefully by sharing my story, somebody out there listening who's either going through the process or considering it, hopefully it'll give you a little bit more insight.
Because filing chapter seven bankruptcy is a double edged sword, it is one of those financial decisions that you should take very seriously before actually deciding to do it.
So what is bankruptcy exactly? Well, according to Investopedia:
Chapter 7 Bankruptcy
"Individuals or businesses with few or no assets file chapter seven bankruptcy. The chapter allows individuals to dispose of their unsecured debts, such as credit cards and medical bills. So, a person filing chapter seven bankruptcy is basically selling off his or her assets to clear debt. Consumers who have no valuable assets and only exempt property, such as household goods, clothing, tools for their trades, and a personal vehicle up to a certain value, repay no part of their unsecured debt."
Why I Had To File Chapter 7
And why did I end up having to file chapter seven? Well, I'll put it to you simply. I was a broke, super broke teacher in my mid twenties trying to find a way to make more money, and I ended up chasing fast money.
You know the saying, if something looks like it's too good to be true, it usually is. That's what happened to me, and I got absolutely screwed for it. And teaching can be a really, really stressful job that doesn't pay as well as it should.
It sucks having more month at the end of the money. And at the advice of a friend, we're not friends anymore, I got involved with these two investment companies in Atlanta, and one of them dealt in real estate, and then one of them dealt in these car deals. And truth be told, I didn't understand either one very well. But I saw that a friend was making an extra few thousand dollars here and there and I'm like "Hmm, I don't make that much money, that's like, a few thousand dollars to me, that's like a month's salary, if I can make that in one go, it's a no brainer, right? Wrong.
And these companies ended up being predatory, so they use your credit, your unblemished, fresh, young credit to buy real estate or, and the car one, I didn't even understand that well, or to buy high end cars for high end clients, something silly like that. But to me, it sounded like a good idea.
When you're broke, and you just, you're so hungry to make extra money, sometimes stupid ideas sound good. And of course these companies were gonna take care of handling all the payments for these houses and these cars and oh no, no, no, it's not gonna affect your credit at all. Everything is fine. With the real estate investment company, you ended up getting money at the closing, and then with the car company, you ended up getting money from a car rebate, something like that. But either way, it was shady.
And the money that I got from the rebate and from the closing didn't mean jack compared to the headache and the financial trauma that I received after that, because soon after these quote unquote deals, everything started to go into default, so they started to default on the rent payments, and then the car payments, and I was stuck. Like there was nothing I could, I mean, I couldn't hope as a teacher to pay these things, I didn't have the salary for that, and I didn't have savings to speak of.
So my only option was to file chapter seven bankruptcy to get out of that mess.
Chapter 7 Bankruptcy: The Filing Process
Now, I know some people at the courthouse when I went, were filing on their own. I went through a lawyer.
But oddly enough, when I was trying to file bankruptcy, I had to go to several lawyers because many of them were like no, we won't take your case, and I think one lawyer took pity on me and he actually referred me to a guy who would take it, and back in 2007, I wanna say it cost, I wanna say right at about $700 for the lawyer to take care of everything.
I was so broke, my mama had to pay for that bankruptcy. I love you, ma
So I ended up having to sit down with this lawyer and go through all of my assets and liabilities and figure out what we could discharge and what we couldn't. And in the end, I just decided to discharge all of it.
That business stuff was the bulk, that was the biggest problem, that was the stuff that I couldn't handle, you know? So that got taken away, I think I had a Discover card that was I don't know, maybe $1,000, somewhere there abouts, put that on there too, and any existing bills that I couldn't cover, I just, I was like take it all.
The only thing that I could not discharge were my student loans. And at the time, I wanna say those were upwards of $30,000, somewhere in there. Ow.
Chapter 7 Bankruptcy: Owning Up To Your Mistakes
While my lawyer did help me file all the paperwork, and that did make things a lot smoother, I had to go to the courthouse and sit down in front of this court official. And I wanna say it was the attorney general but I don't know for sure, so don't quote me on that, but that part did not feel good.
So I'm sitting down in front of this guy, this older white gentleman with white hair, and he's reviewing all of the cases that come through, and you have to sit down and talk to him. I'm sitting there and he's reviewing my case, and he looks at me, he gives me the dirtiest look, and he says "You mean to tell me that you signed for all of these cars "and you knew nothing about this business?" And this was me. "Yes."
And he didn't approve it right away, he said he was going to review my case. So I think sometimes if you go in there, he can grant it right away, he can choose to say no, or he can review it, he was like I'm gonna put yours under review. I was like dang. 'Cause if that man had decided not to grant that bankruptcy, I was done.
A few months later, I did get an official letter from my lawyer telling me that all of my debts had been discharged, and it was a giant weight off my shoulders. Which brings me to the pros of chapter seven bankruptcy.
Filing Chapter 7 Bankruptcy: THE PROS
I don't know if it's changed in the decade since I did it, but the biggest pro is that you're able to discharge all of your debts that are not student loans. And the other pro is that those collection calls stop. The repo man's not gonna go to your mom and dad's house at like three in the morning and scare them half to death.
Filing Chapter 7 Bankruptcy: THE CONS
And what are the cons to filing chapter seven bankruptcy? The biggest one is that your credit is wrecked for like seven years. And I can attest to that first hand, my credit was horrific for a while.
Another con is that it's very stressful to go through that process. While I didn't experience this personally because I didn't have anything, if you have other assets that you can use to pay off those debts, then the court will probably make you liquidate those, so I'm guessing like stocks, bonds, mutual funds, that kinda thing.
You'll probably end up having to sell that stuff off and pay back what you can of the debt. But again, I don't know about that first hand because I didn't have anything.
Yet another con is that in a way, it tarnishes your personal image a bit. So when your family and friends get wind of you filing bankruptcy, it kinda gives you this image of being financially irresponsible, even when people don't necessarily know the circumstances.
The Chapter 7 School Of Hard Knocks
Let's not get it twisted, though, if you care about your finances, filing bankruptcy sucks, it sucks. And for me, it was one of the most depressing, darkest times in my entire life. But coming through that depression, coming out of that depression and looking back, I realize that it was the start of me getting serious about my finances.
It was this school of hard knocks, crash course in me learning about personal finance. And it really helped me see first hand how credit cards work, how your credit score works, your assets, your liabilities, and everything in between. And I'm not telling you to do that, I'm telling you to learn from my mistakes.
And guys, I don't know if you can see this, but it's dated March 4th 2008. That is my actual bankruptcy letter, and I keep it even a decade later because it is a reminder of the financial swamp that I had to wade through to get here.
So Much Has Changed Since Filing Bankruptcy...
So much has changed for me financially in the decade since I filed that bankruptcy. I've been living in Japan for the last 11 years, and to be honest, living here has helped me adjust to having a more minimalist lifestyle. I don't even own a car, and I haven't the entire time I've been here. I'm completely debt free. I've paid off every single cent of my student loans in full.
And for the first time in a long time, I actually have good credit. I think my score is right around 760, 764, 765, something like that. For the first time in my life, I have an emergency fund, an eight month emergency fund. And in addition, a few years back I started investing pretty seriously too, so that way I have money that's working for me, money that I don't have to pull out, money that I can let compound and grow.
I don't say any of these things to brag, boast, or rub it in your face. I say these things because I was bankrupt. And it really forced me to make a mindset and lifestyle shift, and once I did those things, things started to get better for me.
Now, I'm not where I need to be. My goal is to be financially independent, and I'm not there yet, but I'm working towards it, and guys, if I can get this far, I know you can too. That's it for today's video guys. If you enjoyed this video, please don't forget to hit that like button. Share and subscribe, 'cause I think at the time of this recording, I have two whole subscribers. All right, thank you so much for watching and I'll catch you in the next one, peace.