I Filed Bankruptcy and it didn’t kill me
Kamika Dillard – Citizens Trust Bank Next Generation Advisory Board
I made a poor financial decision. I put a friend as an additional cardholder on a few credit cards that I had. The arrangement started off great- she would make the payments on time. But a few months down the line, she was unable to make the payments and she had racked up a large bill- $35000. Because of her inability to pay back the debt, I picked up another job. I had never had a late credit card payment before in my life and I didn’t want to ruin my credit. I understood the importance of good credit very early as an adult. At 25, I found myself working over 70 hours per week. I had a full-time job where I clocked over 50 hours a week (some weeks, even more), and a part-time job where I worked 24 hours. The debt put me under considerable stress. Because I was working so much, I wasn’t sleeping much or eating properly. exercise was not on my radar and I had no social life.
My mom told me that I was killing myself slowly. She recommended that I file bankruptcy and get a fresh start. I looked at bankruptcy as a failure as an adult. I thought that I would never be able to get a house since you need good credit to get a mortgage. I thought that I would never be able to get another job if I filed bankruptcy since companies ran your credit before they had hired you. The thought of filing bankruptcy made me anxious.
After six months of working crazy hours, and not making a dent in the debt, I finally decided to do the unthinkable- File bankruptcy.
I met with a lawyer. She walked me through the entire process of a chapter 7 bankruptcy. I attended the mandatory debt counseling workshops. The day I went to court was hard, but I had my lawyer and my mom by my side. All my debt was resolved except for my student loans. I was grateful for the fresh start and resolved to take the reins of my finances.
Here are the things I did after my bankruptcy to put myself back on track financially:
- Created a budget
One of the things that I learned through the mandatory credit counseling classes was the importance of a budget. I created a budget for everything: from a pedicure to a movie night, I made a budget and stuck with it. I recommend using Intuit Mint app to track your budget as well as all your finances. It will send alerts out if you go over budget for something. There is also a feature for savings goals. I use Mint to keep my finances at the forefront of the mind.
- Created an emergency fund
After my bankruptcy was final, I worked my part-time job for an additional two months and used the money to begin to build my emergency fund. Additionally, I set up a direct deposit for 10% of my paycheck to continue building my emergency fund.
- Got a secured credit card
A year after my bankruptcy was final, I applied for a secured credit card. A secured card requires a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500. There are a variety of options for secured credit cards. Citizens Trust Bank has an option for a secured credit card.
- Rebuild my credit through my mother
After demonstrating financial responsibility, my mother put me as an additional user on her credit card. Through her credit history, I was able to rebuild my credit profile even sooner. While I didn’t use her credit card to make purchases, I was able to benefit from her on-time payments and credit limits. This resulted in me being offered a credit card (unsecured) 3 years after my bankruptcy.
- Used my credit card but paid my balance in full every month
I used my credit card but paid off the balance every month. I used my credit card for purchases such as my cell phone bill and my power bill. I created automated bill payments to pay off the credit card bills immediately so that I would not forget about it.
Today, I am 10 years post my bankruptcy and preparing to purchase my first home. My credit score is a strong 743. I have very little credit card debt and an emergency fund that will cover 4 months of expenses. Bankruptcy helped improved my life tremendously. Failure is not fatal, and bankruptcy will not set you back permanently if you learn from your prior financial mistakes.