One Year and Counting

Where have I been over the past six months? Wow, has it really been that long since my last post? Yes, I guess it has. It has blown by quite quickly.

Life on the post-bankruptcy front has been going along well. We are still essentially debt-free. We have just one credit card, which we use occasionally and pay off every month (which, of course, is the only way that a credit card should be used). Our cars are both paid for (we have resisted the wishes to have new cars because our desire to have no car payment is stronger), and our only real debt is our home loan. Life is good.

Since filing for bankruptcy, we have moved into our new home and even begun tithing to our church. Our new house payment is more than twice what we were paying for rent before we moved. But getting our debt relieved and moving closer to work has so greatly reduced my commuting expenses (the price of gasoline being so high) that we have been able to add tithing to our monthly budget and barely notice the impact (financially, that is). Of course, I believe that tithing has also brought God's blessings upon us and made us better stewards of the money we have left.

We have had money in our savings account for the past six months, and haven't been living from paycheck to paycheck as we did so frequently pre-bankruptcy. Having opted out of pre-screened credit card offers, we have eliminated the potential credit trap that so many newly debt-free people find themselves in. We simply don't receive the offers, so we don't have to resist the temptation to respond to them.

We just hit the one-year anniversary of our discharge date two days ago, and it is a wonderful feeling to still be so fully in control of our finances. It is truly a liberating feeling.

That is not to say that there won't still be an occasional challenge to your debt-free status so long after discharge. Just two weeks ago we received a mailing from a creditor demanding payment of a debt that was discharged as part of our filing. The nicest part of it is, a simple phone call to notify them that the debt was discharged was all it took to end the notices.

The birthday season for our family is now fully in swing, with Christmas following closely behind it. This can be a very tempting time to resort to credit cards and other offers to purchase gifts now and pay for them later. I have just one word of advice that has become my mantra in the world of credit:

DON'T!

For those who you still struggling with the decision to file for bankruptcy, it has not been a bad experience at all. You have to first understand that the option of bankruptcy is there because creditors tend to take advantage of consumers, and we need to have an alternative to being buried in debt. The reason for making the bankruptcy laws so much more prohibitive was to prevent abuse by repeat filers, not to prevent legitimate first time filings. It is not really a difficult process at all, and the past year has been nothing but a positive experience.

I am no financial expert. I am just one man who has been there, but I am more than willing to share my experience with you and to answer any questions that you might have. Just leave your questions in the comments, and I will answer them in the comments.

Credit Offer Opt Out

One quick note worth mentioning. You may notice after your bankruptcy has been discharged that you will once again start receiving "pre-approved" credit offers, and similar solicitations. You receive these because the big three credit bureaus actually sell your information to companies looking to mail out credit offers. And each and every one of these companies can cause an inquiry to appear on your credit report, which does not look good to actual credit providers that you might be trying to business with.

There is a solution. Simply go to www.OptOutPrescreen.com and you can ask to be removed from such offers. While it may take several months for the offers to trickle away, you can up out online for up to five years, and you can opt out permanently by mail. I highly recommend that you put a stop to these credit solicitations before your bankruptcy has been discharged. Check it out today!

By the way, there is no cost involved, and I receive nothing for recommending them here, other than the satisfaction of knowing that I might be helping someone else who has been in a similar financial situation to the one I'm emerging from.

Thoughts From The New Home

It has been two months since my last update. Things in the bankruptcy arena tend to slow down a bit aftrer discharge. We're in our new home now, and have been for about a month and a half. Details are much as I explained them in December. We're currently renting the home, with a purchase agreement that will go into effect within the first twelve months. The rental arrangement is much as if we already are the home owners.

Getting out of the lease for our old home was only a minor issue. We had lived there for approximately five years, and were on a month-to-month lease at the time, so our only obligation was a thirty day notice (with rent) before vacating the home. We did that, and the landlord actually complained that we weren't getting out a few days earlier so she could re-rent the home at the beginning of the month (our original projected vacate date was January 4).

What was most surprising of all was her reaction to the fact that we were moving out in the winter. Her comment was something to the effect of, "I always treated you guys right, except for that one time when I tried to sell the house. I can't believe you would do this to me, moving out in winter. You try to do somebody right and this is the thanks you get." Talk about being furious!

It turned out that we were able to get into the new home on December 28, so I took twelve days of vacation and we began moving. It felt like a much longer process than it actually was, but we finally got everything moved and dropped off the keys to the old place on New Years Day.

HAPPY NEW YEAR!!!

And so it has been. We have loved the time in our new home, and my wife is already making color choices for paint in every room. She has gone nuts trying to pick out her window treatments and wanting to change out light fixtures here and there. And she wants to buy a new black refrigerator to match the appliances in our new home.

So what has happened on the credit front? Well, I have been attacking the credit repair process. I have looked into the possibility of credit repair companies, but have rejected those. They seem to be nothing but a costly way for a lazy person to have someone else do what he can do easily enough himself.

By simply logging on to view your credit report online, you can submit errors on your report for investigation, and you can do so with all three major credit bureaus from one site. THIS IS THE ONLY SITE AUTHORIZED UNDER THE LAW THAT ALLOWS YOU TO VIEW YOUR CREDIT REPORT ANNUALLY FOR FREE. ACCEPT NO IMITATIONS. Others will look like this site, but will trick you into signing up for some kind of credit protection scheme that you don't need in the first place. It's just another way for services like these to tack more debt onto you. Don't do it.

I have filed for investigations on nearly every item on my credit report with all three agencies. Those investigations take approximately 30 days to complete. At that time, they provide you with an updated copy of your report and give you the opportunity to file for additional investigations, if needed. You can pay more to actually receive your credit score if you like -- that part isn't free -- but if you simply address the issues that need correction, the score will improve itself.

Also, I opened a secured credit card. This is a credit card that is guaranteed to the lender by a savings account that you open with them or a partner bank for an amount equal to the credit limit on the card they issue. Many banks offer secured cards. You may want to check out one or more of the following:

• Orchard Bank
• Washington Mutual (WaMu)
• Capitol One
• Bank Of America
• Wells Fargo
• your local bank

I cannot specifically endorse one bank over another, and naturally you must research which choice is right for you. The above banks are all reputable banks that offer secured credit cards. You can expect to pay some sort of fee, whether they call it an application fee, or an annual fee, or some other name of their choosing, but if you shop around you can find a very reasonable fee to open the account (mine was less than $40). They will make you feel like they are "approving" your credit, but for most of these institutions, all the approval needed is an associated savings account that guarantees they aren't taking any risk.

The above mentioned banks will report your payment performance to all three of the major credit bureaus. This is the most critical part of any secured credit card. The only way to rebuild your credit is to use it. Do not waste your time with someone who will not report your payment performance -- good or bad -- to the three bureaus.

Another important note! It is not necessary to carry a balance on a card to improve your credit. When you receive your secured card, you should do four things:

1. Sign the back of the card immediately
2. Call to activate the card
3. Use the card to make one small purchase or utility payment that you can immediately pay off
4. Put the card away where using it will be very inconvenient

My wife and I use our secured card to make one payment every month, whether it be for a utility or for gasoline or some similar expense. We then immediately log onto the issuing bank's website and make full payment in the form of electronic check from our checking account. Don't ever wait to receive a statement before paying your bill. By the time you've received your statement, you have already incurred finance charges and interest. The only way to avoid such charges is to keep your card balance at zero every month when the bill is cut.

Rebuilding your credit is easy, if you have the drive to do so and take a little time to do the research.

And remember, you must always be wary of those past creditors from your pre-discharge days. Some of the less reputable ones will still pursue and try to scare you into making payment. If you enter into any agreement to repay any debts you incurred before your bankruptcy was discharged, those agreements are legally binding and those debts are once again valid. After paying so much money to get your debts discharged in the first place, don't let anyone trick you into agreeing to accept those debts as valid again.

We received in the mail today a statement from someone claiming to have purchased a debt we owed to Capitol One prior to filing for bankruptcy. That debt was discharged in bankruptcy in August of last year. This will happen. When it does, don't worry. You have the full power and authority of the United States Court System standing behind you. If you included the debt in your bankruptcy filing and your bankruptcy has been discharged properly, you no longer have any obligation to repay this debt.

I placed a simple phone call to the company that sent the letter. I was very polite to them, and when they asked if I would like to take advantage of their settlement offer, I replied, "No, I'm calling to inform you that this account was discharged in bankruptcy six months ago." You should be prepared with the case number, which district the bankruptcy was discharged in, whether it was an individual or joint filing, when it was discharged, and the name and phone number of the attorney who represented you. After providing this information, if the creditor contacts you again, they are breaking the law and can be held responsible for paying punitive damages.

I guess that's about all for this month's update. I'll try to do these on at least a monthly basis. If you have any questions, please feel free to post them in the comments section (please, no personal information about yourself), and check back for more information.

Our Home Purchase Arrangement

We have been lucky enough to stumble onto something that we could not possibly have anticipated. Just five months after being discharged in bankruptcy, my wife and I will be moving into our very own home. It is a highly unusual situation the details of which I can only briefly discuss at this time.

My wife originally found the listing and quickly became very interested in the house. I spoke with the seller by phone and explained to my wife that I wasn't sure it was the right time or the right situation for us to buy. I told her that if something like this seemed too good to be true, it probably was. She emailed the seller and explained to her that we felt the timing might not be right and that we would have to pass for the time being.

The seller replied to my wife by email with some very encouraging, enlightening information. My wife and I discussed the situation further, prayed on it together, and told the seller that we had reconsidered and would at least see the home. We made our first trip to the home on the Saturday after Thanksgiving.

When we pulled up to the home, we were both pleasantly pleased with what we saw. The home is in beautiful condition, in a very nice subdivision, on a corner lot with a pond behind it. When the seller met us at the door, we were again pleasantly surprised. The seller was not what we had expected at all. And he had his wife with him (I should mention that the home was for sale by owner, and the owner is an investor). And again, when we entered the home, we were even more pleased. I later told my wife that, upon entering the home, I immediately had the feeling that it could be "Home" for us. I haven't had that kind of feeling since moving out of the home I grew up in.

We toured the house:

• 2200 square feet on a quarter acre lot
• Four bedrooms
• Two and a half baths
• A large walk-in closet off the master bath
• A two car attached garage
• A large bonus room over the garage, accessible from within the house
• A formal living room with fireplace
• A family room
• A dining room
• A breakfast nook off the kitchen
• A laundry/utility room that passed into the garage
• Plenty of closet space

We were both thrilled with the home and all that it offered, and felt very comfortable speaking with the seller and his wife.

While my wife spoke with the seller's wife and my kids explored throughout the house, I talked business with the seller. I was completely open with him about our situation -- the recency of our bankruptcy and what led up to it, where we stood on making a down-payment and closing costs, everything that I could think of that might impact our ability to purchase the home and/or his willingness to sell to us.

We concluded our conversation by telling the seller that we were very interested in purchasing the home, and leaving with all of the paperwork we would need to complete in order to facilitate the purchase.

We completed all the paperwork over the weekend and emailed it to the seller. I spoke with a lender and a mortgage broker on the following Monday. I was surprised to learn a couple of things:

• My credit score is actually pretty high considering the recency of our bankruptcy
• Our attorney did a very thorough job (much of it due to the information we provided) of capturing and recording our debt in the filing
• It was very possible that we would be able to secure a mortgage in six to eight months

Six to eight months, however, would be too far into the future to purchase this particular home. But we didn't despair. The seller had mentioned in the past that he was willing to agree to a lease-to-own arrangement if we couldn't obtain a mortgage at the time.

This is where the story becomes even more amazing. Without detailing all of the events in the process, let me say that this particular seller has been unbelieveable to work with. As we dealt with him very openly, he was been very open with us, as well. He told us that he had three other interested parties: two investors and a person who wanted to open a daycare in the home. As the subdivision's covenant does not allow for businesses to be operated from within the home, that cut the considerations down to two.

Clearly, the seller could choose between dealing with our difficult situation, or closing a quick sale with one of the two interested investors. He could probably have even worked out a reasonable price with one of the investors to make it worth his while. Instead, he chose to sell to us. As shocking as that might sound, the deal has already been done.

And there's more. We will be moving into the home soon on a one-year lease. During that one year, we will be earning rent rebates toward a down payment on the home. We have no security deposit to pay, and the lease will include a one year home warranty that will cover the entire property with only a fifty dollar deductible toward any necessary repairs. In approximately eight months we will attempt to secure a mortgage again, working with the same mortgage broker that helped us at first. In order to facilitate the mortgage and make us more credit-worthy, we will be securing the services of a credit repair agency (more on that in a moment), as well as opening a couple of lines of credit to contribute to raising our credit score. The seller will also report our timely payment of the rent to the credit bureaus to positively impact our credit score.

While I don't normally believe that a credit repair agency is the best way to go -- because a determined person can achieve the same results as an agency for virtually no cost -- I have agreed to such terms because it provides assurance to the seller that we are taking the steps necessary to make ourselves worthy of a mortgage in the timeframe desired. The credit repair agency could cost us anywhere from $400 to $700, but the seller will know that we are as serious about home ownership as we portray ourselves to be, and it's a small cost to pay considering all of the concessions he is making to work with us.

At the time of securing a mortgage at some point over the next year, the seller will provide to us a rent rebate that will satisfy a substantial portion of the required down payment. He will then assist with closing costs and the remainder of the down payment. We will then become true homeowners.

So, all of this sounds too good to be true, right? I know. And much of it has been cause for long and serious consideration, and lots of prayer. My wife and I both feel that this is what God is leading us to do, and we feel that he has simply blessed us with a situation that is making it possible.

The seller isn't losing any money in the deal. He'll be making over $14,000 in rent over the period of the one year lease (before rent rebate). He will then be selling the home for approximately 94% of it's appraised value. There are certainly some tax advantages for him, and he has rented the property for the past two years for a total of over $30,000 in rent. While he isn't losing money in the deal, he is certainly making less than he could.

Now, I know that the skeptical reader might say that we're being taken. I can understand how one might have that point of view. But from where I stand, and with what my wife and I have said to each other, and with what I feel that God is telling us, I truly believe that this too-good-to-be-true situation is a gift from God. Only time will tell, for the skeptical, which is why you'll just have to keep checking back for updates.

Mortgage Update, And More

As I mentioned recently, my wife and I have decided to try to purchase our first home. This, of course, is an unusual thing so early out of Bankruptcy. We are learning that most lenders want you to be anywhere from one to three years AFTER Bankruptcy before they'll take a chance on a home loan.

We've spoken with one lender and one mortgage broker (sort of a lending agent who takes your credit info and shops around to see if he can find a lender willing to take a chance on you). The first lender was with Wells Fargo, and she was unwilling to take a chance on us so soon after discharge. She said that we didn't really need to worry about establishing any new credit at this time, but to just allow some time to pass before borrowing.

The mortgage broker gave us a different story. He said that our credit score actually isn't bad for being so early after Bankruptcy (more on that later). He said that the biggest concern he had was that we have not yet worked to reestablish our credit by opening a few new lines of credit (more on that later, too). He actually said that he felt he could get us signed up for a mortgage in six to eight months if we establish a couple new lines of credit and keep them current.

This mortgage broker actually provided us, free of charge, with a copy of the credit report that he ordered. He reviewed a couple things on the report with me that concerned him and referred me to a credit repair agency that can help me to correct them. Namely, there was a loan for the car that I surrendered back to the lender still reported on our report as open. This loan was indeed filed with the Bankruptcy and should show up as discharged. I contacted the lender and they claim that it is showing as paid off on their end, and that the error is with the credit bureaus. There was also a credit card still on the report as open that should appear as discharged. There is a prior auto loan on the report that was paid in full that still shows up as open. And then there's an item showing as open that I have never seen before. So I have four items on my credit report that need attention that are pulling down my credit score. I would not have known this without seeing my credit report.

Our attorney, as good as he was, never suggested that we pull our credit report again after the bankruptcy and review it for accuracy. You cannot sit still and just assume that everything will be correct on your report after your bankruptcy has been discharged. That is the most important time to become actively involved in ensuring that your credit report is 100% accurate and that you are taking the necessary steps to rebuild your credit. Again, this is something that our attorney did not tell us. Coming straight from bankruptcy, it's natural to think, "I'm never going to get a credit card again." However, that is exactly what you need to get -- get a credit card. One or two of them, three at the most. You get them, you use each one of them once, then you pay them off in full immediately. This will show them as active open lines of credit that will continually be reported as current, causing your credit score to increase.

The mortgage broker I spoke with actually suggested that I get a credit card, use it to pay the utility bill, then send full payment immediately to the credit card company. With most cards, if you pay it in full immediately you will incur no finance charges or interest. And since your just sending the money to the credit card company instead of the utility company, you aren't actually spending any extra money. He suggested we do this with two or three credit cards as soon as possible.

Bottom line is, it doesn't look like we are going to find anyone to finance us so soon on our home loan. What we did find, however, is a seller who is very much interested in helping people to realize their dream of home ownership, very interested in helping people in situations like ours to rebuild their credit, and very patient and flexible. He still has a plan to get us into this beautiful home that we have come to want so badly. We are currently working on a lease-to-own option that will allow us to sign a one year lease for the home, during which time we will open a few credit card accounts to increase our credit score, work with a credit repair agency and the credit bureaus to correct the errors on our credit report, and save up the necessary money for our down payment to purchase the home a year from now. At that time, we will once again contact the same mortgage broker, who we will stay in touch with throughout the year, and ask him to honor his word and get us financed for our first home.

So it looks like we will be moving very shortly into our very first home -- the first home that we will actually be able to call our own. Much closer to work. In a very nice community, with a very nice school district. And with all of the room we could possibly need until the kids are grown and move out.

So don't let yourself fall into the do-nothing trap that is so easy to fall into after a bankruptcy has been discharged. You must get active and make sure that your credit report is indeed correct, and take the steps necessary to begin rebuilding your credit. But open those credit card accounts with caution. Contact your bank first and see what they can do for you. Try to avoid secured credit cards and annual fees, if possible (I'll report on this as soon as we see what options are available to us). And, most importantly, DON'T spend any moeny that you don't have yet. Pay ONE bill with your credit card -- one bill that you would otherwise pay with cash or a check -- then send that same cash or check to the credit card company to pay it in full.

Be smart. Be aware. And be credit-worthy once again.

Post-Discharge Update

All has been quiet here since our bankruptcy was discharged on August 2. We received maybe a phone call or two from debt collectors, but once I notified them on the phone that we had just been discharged in a bankruptcy, they simply asked for the bankruptcy case number and left us alone.

This week we received on letter from a debt collector stating that the last they heard we were going through a bankruptcy. They asked for information about the bankruptcy and threatened to continue pursuing collection of the debt until they receive our response. My guess is that type of behavior is bordering on the limit.

The big news is, my wife and I have found a home that we are attempting to secure financing on. This is the biggest challenge of all, I think, for the recently discharged. Most mortgage companies insist upon anywhere from one year to three after a bankruptcy before they will give you any serious consideration for home financing. We have already had one lender tell us that the best thing we can do right now to secure a home loan in the future is to just wait.

But we got quite lucky this time, I think. The home we are looking at is for sale by owner. The owner is an investor, and he seems to be quite helpful in helping us to secure the necessary financing, etc., to purchase the home. In fact, if financing turns out to be impossible at this point, he is willing to sign a lease with us to rent the home for a year pending our purchase of it at the end of the lease.

This is a beautiful home with all that we have been looking for. While the deal hasn't been secured yet, it is looking very good.

So there is hope after bankruptcy. I have one thing to day: it's so nice not to be contacted by debt collectors anymore, and it's nice to actually have hope for the future that we didn't have when we were in financial ruin. I guess that's two things.

Freedom From Debt!

Received the following in the mail this week:

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF XXXXXXXXXXX


DISCHARGE OF DEBTORS

It appearing that the debtors are entitled to a discharge,

IT IS ORDERED:

The debtors are granted a discharge under section 727 of title 11, United States Code, (the Bankruptcy Code).

BY THE COURT

Dated: August 28, 2007

JUDGE XXXXXXX X. XXXXXX
U.S BANKRUPTCY COURT

It's that simple. Seems like a pretty plain letter for such a major event in our lives, especially considering that it cost us $1500 to get here.

Stay tuned for regular posts on the aftermath of bankruptcy, such as new car loan and home loan offers, etc. We are hoping to purchase a home next year, and have heard many tales of how difficult that can be with a bankruptcy. Check back for the real story.