Holly Gets Hired After Bankruptcy and Gets a New Company Credit Card
Holly was at the end of her rope. She’d been out of work for two years; she kept getting interviews but no offers; and she was feeding partial payments to her creditors, to try to keep them off her back. She believed she was losing job offers because of the late payments on her credit. She was doing everything possible, borrowing from family and friends, to stay close to current.
Finally, she gave up
She came to see me about bankruptcy when she finally got court papers; she assumed she’d never be able to get hired after bankruptcy in the tech field. I told her she would be fine.
After bankruptcy, the opposite of what she expected
We filed Holly’s bankruptcy case September 1; it was discharged—approved and done—December 12. On January 22, she got a job offer. She was offered Chief Technology Officer of the small business. She was excited to get hired after bankruptcy.
But still had a big concern. What would happen when she applied for a corporate Amex Card for business travel. She would be so embarrassed—might even lose her job offer—if Amex turned her down.
Check your credit score, I told her. “It’s 688,” she said, amazed. Of course she got the company card.
Everybody’s case is different.
Everybody’s case is different. Employers look for different things; and your credit score is based on very complicated and secret formulas. But I can say this. For many people, once you’ve started struggling with late payments, bankruptcy can be the quickest (and easiest) way to get your credit score back up.
Many employers are hesitant to hire someone who is struggling financially. They don’t want employees who
When she was dragging around bad credit, Holly got interviews but no offers. She got hired after bankruptcy—in only six weeks.
don’t sleep at night because of bills. They don’t want the sheriff bringing garnishments to the payroll office. (And maybe they don’t want people who are too dumb to take advantage of the laws in their favor.)
That’s why some people find it’s easier to get hired after bankruptcy.
For most people, bankruptcy works.
Every month I see people who have put off bankruptcy for years in order to “protect their credit.” They aren’t protecting anything. Like Holly, they think they are “protecting their credit” but actually just making things worse.
Keep the Car In Chapter 7 Bankruptcy: What Are your Choices?
When you file Chapter 7 bankruptcy, you are “in the drivers seat” with some choices on how to keep the car.
One choice is to give it back.
One choice is to give it back. Especially if you have a terrible interest rate on the car—and if you can put your hands on a junker—give them the car back. You are supposed to give the car back six weeks after you file your bankruptcy case. That gives you time to figure out another way to get around.
(Finding another way to get around is NOT going out and financing a car right after the bankruptcy. You’ll find car dealers eager to put you in a car at 24%—that gets you right back into financial trouble. But if you have a friend or family member who can give or lend you a car for a year or longer, you can then find some good financing deals. You can read about Alice, who got a 4.76% a year after bankruptcy. People who have a friend or family member who knows a lot about cars, also have good luck buying a car for cash, through a site like EBay.)
You can keep up the payments and keep it
Except for the special problems with Ford and Credit Unions, you can keep up the payments and keep your car. For most people, this is the best choice. No paperwork is required, you just need to be sure to make the payments on time. If you get late, they won’t call and yell at you. (That would violate the bankruptcy discharge.) They will just come and get the car.
Since they don’t want to violate the bankruptcy law, most car finance people will stop billing you. You need to pay them on your own. Honda Financial Services has a good set of instructions. And here are sample instructions from USAA. Making the car payment will be like paying the rent—you gotta remember.
You can redeem your car.
If you owe more than your car is worth, but really like your car, you can redeem it. You can keep the car by just paying the book value. (Book value under the 2005 law is what you’d have to pay to buy it.) There are some honest lenders who will finance that straight out of bankruptcy. One we used is called 722 Redemption. If you know your car is in good shape, this can be the way to go.
But you now have an after bankruptcy car loan. If you pay it, you are building up good credit. If you don’t, you are building up after-bankruptcy bad credit. You really don’t want after-bankruptcy bad credit.
You can keep up the payments and change your mind later.
Suppose a year later, your car has mechanical problems. You can change your mind and give it back.
The good thing about keeping up the payments is, down the line you can change your mind. Suppose a year later, the car has mechanical trouble. You can give it back without owing anything and without damage to your credit.
Suppose a year from now, your uncle offers you his car. You can give the old one back, without owing anything and without damage to your credit.
Suppose two years from now, your credit union will offer you a car loan at 3.9%. You can give the old one back, without owing anything and without damage to your credit.
People often ask me, how long do I have the option to give the car back? My answer: Until it’s paid for. Once it’s paid for, you can’t give it back.
Is there any paperwork? None. Just call and tell them to come and get it. Or, stop paying and they will come soon enough.
Can I keep the car without making the payments?
The short answer is, No, you can’t keep the car without making the payments.
At least, you can’t keep the car–unless the car finance company never bothers to come any get it. Sometimes they never bother. If the car will bring good money at a car auction, they are going to come and pick it up. But recently, a couple of people have told me nobody ever came and got their cars. Those were cars with about a hundred thousand miles on them–not junkers. But the credit union, in both cases it was a credit union, never picked them up.
So, you might get lucky.
Can I reaffirm the car loan?
There are reasons why some people need to reaffirm car loans with Ford or with Credit Unions. Except for them, reaffirming a car loan is not a good idea.
The car loan people want you to reaffirm—because it benefits them, not you. When you call, they will tell you your lawyer should have reaffirmed—because it benefits them, not you.
Under the law, the judge will not approve a reaffirmation, unless I sign off that it’s a good idea.
I don’t think it’s a good idea. So I’m not signing off. So the judge is not approving it. (The judge can, and often does, turn it down even if a lawyer signs off. Which I don’t.)
Less than a year after bankruptcy, Alice got approved for a 4.76% loan on a Nissan Versa.
Alice came to see me in March 2015. She’d just gotten back to work after being out for over a year. Her financial situation was so bad, she’d been living in a women’s crisis center, at very low rent We filed a Chapter 7 bankruptcy. Even working again, she could not afford her credit cards. I told her filing bankruptcy was the fastest way back to good credit. Much better than continuing to send in late and partial payments.
Good news in April 2016. Alice just emailed me to tell me about her after bankruptcy car loan.
Here’s the rest of the story in her own words.
So as you may recall, after my bankruptcy discharge in June, three months later at the end of August I had to turn in my leased Honda.
You told me that every month I could wait for a car I would save. So I have lived without a car for seven and a half long months.
I have walked and taken the bus and the metro through the winter. And it looks like it’s paying off!
On Saturday I went to a Nissan dealer, and they were able to get me financing at 4.76% for a shiny new black 2015 Versa Note SV! Today I went back there tonight to make sure the bank had actually given final approval for the financing at that rate – I told them on Saturday that even though it was in the range I was pre-approved for, I thought it was too good to be true.
But apparently it IS true! They showed me the screen today that tells them they have received final approval, and they assured me that they have it.
Less than a year after Chapter 7 discharge, I have a new car at 4.76% – 259 a month for 72 months! (I know that’s long but this is a new Nissan with some options that should help the resale value and I plan to refinance in 6 months or a year for a lower interest rate and shorter term.)
It’s been a slog for 10 months but maybe I’m seeing the light at the end of the tunnel!
Thank you again, SO much, for everything! The world needs more of you.