In 2004, Mark filed for bankruptcy. Since he didn’t have any assets to protect, he filed for Chapter 7 bankruptcy to get rid of the debt as quickly as possible. The catch was that it ruined his credit with a penalty that stuck with him for the next ten years.
You might think that hefty penalty would have made Mark change his ways. But unfortunately, the tough lesson learned didn’t exactly stick. Fast forward to a few years ago, and Mark was back in debt again.
But he decided he couldn’t endure another bankruptcy, so he looked for an alternative. Here is Mark’s story about the alternative to bankruptcy that he found.
Mark admits he had issues with overspending…
Mark filed his first bankruptcy in 2004—one year before Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). That act requires people who file bankruptcy to go through mandatory pre-bankruptcy counseling and post-filing financial education. The goal is to help people who file for bankruptcy learn how to avoid it in the future.
But Mark didn’t get any of that education. As a result, even though bankruptcy removed his debt, it didn’t fix the financial habits that caused it. He didn’t learn how to budget and admits he continued to live beyond his means with overspending.
“I probably had five or six credit cards and I had rung up a lot of debt—close to $10,000 dollars. I was getting in over my head, so instead of filing for bankruptcy a second time, I decided to look for an alternative.”
In his search for an alternative to bankruptcy, Mark found Consolidated Credit…
Nonprofit credit counseling offers a practical alternative to bankruptcy. A certified credit counselor reviews your debt and budget in a free evaluation. You work together to create a realistic budget. Then you discuss debt relief alternatives that can help you avoid bankruptcy.
In many cases, a debt management program can be a viable alternative. It’s a program that consolidates your debt into one affordable monthly payment. Then the credit counseling team works with creditors to reduce or eliminate interest and stop penalties. This allows people to get out of debt faster, even though their total monthly payments are reduced by up to 50%.
Mark and his counselor found that a debt management program would help him avoid filing for a second time.
Mark learned how to budget and use credit cards wisely while he was enrolled…
During the debt management program, Mark’s credit cards were frozen, meaning he wasn’t able to continue relying on the cards that had always gotten him by. He used the free financial education resources that Consolidated Credit offers to learn better financial habits. He learned how to budget, save up and plan for purchases, and even how to have a healthy relationship with credit cards.
“It felt like a brick lifted off my shoulders. I’m done and I don’t have to worry about it. I want to be more responsible as far as what I use on these credit cards.”
With his debt paid in full, his credit score also got a boost…
Had Mark filed for bankruptcy, it would have created another negative credit report penalty. Depending on the type of filing, that penalty stays with you for seven to ten years.
By contrast, a debt management program creates no negative credit report penalties. In fact, since your creditors agree to the program when you enroll, you build positive credit history as you pay off your debt. Each payment you make improves the credit history in your credit report. As a result, many clients see their credit improve as they complete the program.
Mark remembers the relief he felt when he finished the program.
“When we sent in the last payment I said, ‘Phew! This is fantastic’! I looked at my wife and said, ‘You know what, we are done! We have paid off our debt! And we’re going to be just fine now.
In the past, they would have done something extravagant to celebrate their freedom. That’s what they did after the first bankruptcy, taking a lavish vacation. This time, they went a little more low-key.
“We just looked at each other first and foremost and I said, ‘You know, let’s do something to celebrate this.’ So we went out to a nice dinner, came back home, relaxed and from there on its history.’
Mark continued building his credit strategically once he graduated. He picked up a side gig to make sure he could keep his debt under control.
Credit cards are now kept for real emergencies…
Mark says that the program has taught him how to have restraint. He and his wife save up for purchases and know that cash really is king.
“When my wife and I go shopping, we’re able to get what we want. We mostly use cash for purchases and only use those credit cards in an emergency, and that’s it. I do not want to experience what we had gone through before.”
Mark encourages anyone else considering bankruptcy to look for an alternative…
If there is one thing that Mark learned from his experience, it’s that there can be a practical alternative to bankruptcy. Instead of putting your finances in the hands of lawyers and the courts, you can pay off all your debt and avoid the credit damage that bankruptcy leaves you with.
“You don’t have to go through it alone. Find a program such as Consolidated Credit’s, and go through the program. Pay close attention as they explain the program to you, and you will discover how easy it is, how professional, and how personable they are. They were able to answer all my questions and we had no problems in going through the process.”
Get the brick off your shoulders…
If credit card debt is weighing heavily on your mind and shoulders you don’t have to carry that load alone. Do what Mark did and call Consolidated Credit for help at (844) 276-1544. You can work with a certified credit counselor to explore alternatives to bankruptcy and find a solution that works for you.
Get a free debt and budget evaluation to explore alternatives to bankruptcy.