The Rich Life That Follows Bankruptcy
(This article should not be taken as an encouragement to pursue bankruptcy. CentSai supports financial prudence and believes that filing for bankruptcy should only be used as a final resort.)
I remember when my stepfather heard I was filing bankruptcy. He told my mom that I wouldn’t be able to get a home in the future because of my decision. This simple statement was profound to me. In fact, I’m actually grateful he said it.
Anyone who knows anything about me can tell you, all someone needs to say is, “Latoya can’t do X, Y, or Z,” and I’ll go out and find a way to do exactly what they said I couldn’t.
Some folks may surrender, but I wasn’t one of them. I decided to learn from my mistakes, and that’s precisely what I did.
I wasn’t going to let a couple of years of being a complete fool with money impact the rest of my life.
In July 2008, I rolled up my sleeves and got busy. I created a budget. And once I did that, I opened a savings account. I then focused on changing my money mindset so that I would never purposely put myself in the same predicament again.
I had no idea how soon I would get a house – that wasn’t even on my mind at the time. All I knew was that I wasn’t ruling out the possibility of buying one sometime in my future.
But two years later, I walked away from the bank with a mortgage in my name. It may be hard to believe that someone could get a home so soon after bankruptcy, but I’m living proof that it’s possible. Allow me to share with you exactly how I did it:
Starting a Family
Exactly a year after I filed bankruptcy, I walked down the aisle to marry the love of my life. Luckily for me, my husband wasn’t as reckless with his credit as I was with mine. So, with my encouragement, he got a credit card during our engagement. Our plan was to build his credit and repair mine.
My debt discharge came in 2008. This gave me about a year to start working on my credit before I got married. As a part of my bankruptcy agreement, I was able to keep an auto loan. And of course, my student loans were still there. I’m grateful there was some remaining credit in my name to work with. No one was going to give me a credit card during that time.
I owed around $7,000 on my car, and the interest rate was insane. To give you a little perspective, I ended up paying around $13,000 total for a $7,000 loan. It makes me sick to think of all the money I paid in interest, but this payment really helped me increase my credit score. I made my final payment in December 2009 – around 18 months after bankruptcy.
I was seven months pregnant when I received the title to my car. Let’s just say that we came back from our honeymoon with a little permanent souvenir.
Figuring Out Housing Arrangements
Adding to our family so soon after marriage wasn’t in the plans. Having a kid changed everything for us. We’d signed our lease for a one-bedroom apartment two months before getting married, so naturally, getting a house wasn’t on our minds at the time. But we needed at least one extra bedroom for the little one.
We could have rented another apartment, but the rental rates for two- to three-bedroom apartments in our area were the same as mortgages on houses. When we realized that, we finally felt the itch to buy a house.
At the time, the government was offering first-time homebuyers an $8,000 tax credit, and we figured we’d give it a shot. I’d been working on improving my credit for a little over 18 months, and my husband’s credit score was coming along nicely, too.
Our daughter was born in February 2010. That’s when the walls in our apartment started closing in on us.
Baby stuff lined the walls in every room and the closets were overflowing. We decided that it was time to call real estate agents.
Making My Credit Score Work
I checked my credit score, and to my surprise, it was around 650. It wasn’t good, but it wasn’t as bad as it had been, either. Combined with my husband’s pristine credit score, we qualified for an FHA mortgage. The only caveat was that we couldn’t close until my bankruptcy discharge was two years old.
We made sure that we had enough money to meet our required 3.5-percent down payment. In April, we found a perfect house, so we decided to put in a bid.
Unfortunately, our first deal fell through, as the seller couldn’t wait until June 30 (two years post-bankruptcy). We were disappointed, but we picked ourselves up and found another house the very next day.
Everything went according to plan, and we closed on our home as scheduled. Our first interest rate was five percent, and our mortgage payment was perfect for our budget.
In 2016, we refinanced our mortgage to a better interest rate, and our mortgage payment is now even lower than the amount we were paying to rent that one-bedroom apartment all those years ago.
Life After Bankruptcy
Next year will be 10 years since I filed bankruptcy. Instead of becoming discouraged by my stepfather’s comment, I used it as motivation. I decided to learn from my experience and pursue my goals despite what family – or the world – thought about me.
There are many misconceptions and a lot of shame around filing bankruptcy. But I didn’t allow those misconceptions or that shame keep me from living the life I wanted to live.
I now have an emergency fund and a credit score of 730. Plus I got rid of all my credit card debt. And yes, that’s with the bankruptcy residue still smudged on my credit report. I didn’t allow a couple of years’ worth of mistakes to hold me back financially. I forgave myself, learned my lesson, and moved on.
True, I could be further ahead than I am right now. But couldn’t we all?
There’s plenty of opportunities that many of us have probably missed out on. Don’t allow the “what ifs” keep you from making progress toward a better future.
If you’ve filed bankruptcy, don’t quit pursuing your dreams. For those of you considering bankruptcy, don’t allow the world to convince you that there’s no coming back from it, either. I proved the folks who said I wouldn’t be able to recover wrong, and so can you.