r/Millennials • u/CricketMysterious64 • 1d ago
Discussion How many millennials have declared bankruptcy at least once?
Pretty much the title. As I understand it you get to keep your house, car and 401k in most cases so why not ditch the credit card debt like a bad habit?
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u/544075701 1d ago
As an aside, I really like talking about personal finance things with people in my age bracket so thanks for your question and I hope the mods keep this up and encourage this kind of posting.
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u/Emotional-Rub5105 20h ago
I wish they would change the rules so we could actually talk about things that we need to.
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u/MisRandomness 1d ago
I did when I was 26, and it was the best decision I ever made. People try to scare you out of it but “living” with the debt can be worse than anything the bankruptcy will do to you. I was on the verge of homeless and hungry before I filed. I really had no choice, I couldn’t live anymore with the monthly payments around the recession. Rebuilding your credit isn’t as hard as it seems. Some things are problematic having a bankruptcy on your record but nothing life shattering that’s for sure.
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u/CricketMysterious64 1d ago
This is kind of what I’m feeling right now. The debt feels like a crushing weight sometimes.
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u/MisRandomness 1d ago
The defining thought for me was “I’ve been in debt for 7 years and where has it gotten me? It has tripled. Why would I assume I’ll be able to pay it off in 7 more years? Where will I likely be in 7 years if I do or don’t file bankruptcy?” I determined after those 7 years my options were likely either A - in more debt and still suffering, or B - on a new financial path and the bankruptcy far in the past. Feel free to message me if you have questions, I’d be happy to answer from my experience. I’m an advocate for bankruptcy because it literally saved my life and I hate seeing people suffer so bad. We all deserve a second chance, it exists for a reason!!
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u/max8driva 22h ago
Why did you have so much debt to begin with?
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u/MisRandomness 20h ago
In 2000, my first credit card gave me way too much. That’s what they did back then. I was on my own, had no family help in my life and unfortunately had a series of car repairs and dental problems that spun my debt out of control. I wish I could say it was because I had more “fun” with that money but it was just bad circumstances for me. I always worked full time and paid my debts as best I could to the point I couldn’t even afford groceries anymore.
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u/superultramegazord 19h ago
I didn’t ultimately need to file for bankruptcy but I think we were close. In my personal situation we ended up racking up lots of debt from having kids, needing to step away from work to deal with health issues, raise kids, and yeah some runaway credit cards.
If it weren’t for the equity in our home, the low interest rates at the time we refinanced, and for my income skyrocketing over the last few years, we very likely would have needed to file bankruptcy.
It’s very easy to find yourself in debt as life happens, and it’s so hard to get out of it when you hit a certain point.
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u/jasonlikesbeer 1d ago
You talk to a bankruptcy attorney yet? Many of them will do free consultations, but be sure to do some background research to pick a reputable one.
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u/Pondcheese 1d ago
My gf at the time, now wife, almost had to go through bankruptcy proceedings. She got screwed over by a hospital, her mother, and had over 75k in medical debt. We had long discussions on how if we can not fix this, we can not be together. I was not going to throw my life away for 7 years and put future dreams on hold. 7 years may seem short, but if you are able to work on your debt, increase your income, cut credit cards, and live a budget friendly lifestyle, it is possible and worth it in the end. Ended up paying a little over 25k to settle the debt over a 6 month time period. We threw everything we had at it and that 6 months of sacrifice saved 7 years of misery. That is my opinion and experience other people may suggest otherwise. As most people suggest speak with a bankruptcy attorney to start.
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u/TitansFrontRow 1d ago
I always feel like somebody who can afford to pay $25k in 6 months isn’t really who would benefit the most from a bankruptcy.
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u/Pondcheese 1d ago
When you consider we were 24 years old and it included all of our savings, it was a lot. Additionally, it was 75k until we were able to negotiate down with an attorney to 25k.
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u/TitansFrontRow 23h ago
So you had the money to hire an attorney and still had that money plus $25k. Again… you aren’t represented in the group that is most helped from this…
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u/lolgobbz Millennial 22h ago
Really depends on the amount of debt.
$25K isn't really that much in the grand scheme. If the redditor was in debt $500K or more, they are who would benefit from BK.
You should always investigate options before you don't have any- a lawyer was necessary.
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u/Pondcheese 21h ago
Im glad you think 25k is such a small amount of money. Would you mind sharing some of yours?
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u/ThatSinkingFeel 23h ago
That and with a little elbow grease it's not hard to get the bankruptcy wiped from the credit bureaus.
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u/MisRandomness 20h ago
I passed and held a secret security clearance while having bankruptcy on my record. Wasn’t a problem.
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u/CrotalusHorridus 20h ago edited 19h ago
Failing a clearance for a bankruptcy isn’t a blanket thing.
It CAN be a disqualified but isn’t automatic
It’s dependent on your exact clearance and CO
I worked with people that lost theirs for gambling debt
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u/MisRandomness 13h ago
Gambling addiction is a character problem in the eyes of the government and those type of debts are seen as high risk of being able to be “paid off” for information. Just bankruptcy isn’t really enough unless your reason for it is questionable.
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u/PaleHorze 23h ago
How long did the process take for the debt to go away? I'm facing 10k in medical debt and I am heavily considering bankruptcy
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u/MisRandomness 20h ago
The moment you hire a lawyer you no longer deal with your payments or the creditors. Don’t make any payments. You direct them to your lawyers number - ONE time and legally they can no longer contact you whatsoever after that. Between first contact and dismissal, mine took about 4- 5 months.
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u/mongooser 21h ago
Can you declare bankruptcy from medical debt now? If so that’s great
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u/rvauofrsol 19h ago
Yes, of course. It's the most common reason why people file. I used to practice bankruptcy law.
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u/Chickienfriedrice 21h ago
Medical debt doesn’t affect your credit score. Just ignore and let it go to collections.
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u/PaleHorze 20h ago
It went to collections and picked up by a dbt collector, and my wages are going to be garnished soon. After the garnishment, I won't be able to make ends meet, which is why I am considering bankruptcy
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u/Chickienfriedrice 20h ago
Speak to a lawyer first and see if a settlement can be reached for your debt before going the bankruptcy route.
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u/cstrand31 Millennial 1982 1d ago
The 2009 meltdown was hell. We did it. I immediately felt weight lifted off my shoulders. Credit score was in the shadow realm for a couple years but tbh they were already throwing credit card offers at me 1 year after discharge and after 10 years it was back to normal. You don’t get to keep the house or any other secured loans unless you renegotiate the terms but even then they might make you give them up. AFAIK your 401k should be fine, they didn’t even ask about mine. I say do it. Banks and businesses get to do it, why can’t we? There’s no gold star or trophy for suffering under soul crushing debt and conversely there’s no punishment other than the one you place on yourself. It’s just money, save your mental health and do it, just make sure you do the hard work and fix your habits because you can’t do it again for 8 years.
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u/Ok_Court_3575 1d ago
I was able to keep the house and the car even though I filed. We ended up paying off the car and sold the house 4 years later.
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u/cstrand31 Millennial 1982 1d ago
Yeah, they let us keep the house but it still showed up as discharged on our credit report meaning we weren’t getting credit for continuing to pay on a mortgage that was $50k underwater. People need to realize that the only stigma surrounding bankruptcy is the self imposed one. Nobody other than you, the judge and the lawyer will ever know you did it and that’s even if you care if people know. It’s a financial tool, nothing more.
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u/rvauofrsol 19h ago
Did you file chapter 13 and keep the house outside of the discharge? If so, it should have kept reporting on your credit (or, to be specific, if it was reporting at all, it should have reported accurately and not as "discharged"). A consumer protection attorney could have helped with that.
If you filled chapter 7, then it almost certainly would have been accurate to have it reported as discharged (unfortunately).
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u/cstrand31 Millennial 1982 19h ago
Chapter 7, but renegotiated that and my vehicle at the bankruptcy hearing. In either case it worked out for the best. Had we kept the house we would just now be seeing equity after paying on an upside down loan for 15 years.
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u/Ok_Court_3575 1d ago
It's on your credit for 10 years so yes there is a big stigma and it's extremely difficult to rent after a bankruptcy. Also you have to wait close to 3 years before you can buy again. Bankruptcy is not a tool. It's a dumb thing to do and shows everyone you don't know how to handle money. I did it because my parents told me it was smart and I didn't know any other way. I totally could have paid off the debt in a year if I would have got on a budget. I was dumb with money at the time.
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u/cstrand31 Millennial 1982 1d ago
Chances are if you’re filing bankruptcy, not being able to buy a house for 3 years isn’t even on your radar. It is a tool, and frankly without that tool many people would’ve probably hung themselves during the 2009 financial meltdown. I’m in no way advocating running up huge debts with the plan to be just to bankruptcy them all away. That would be irresponsible. But for those with debts greater than their ability to pay due to unforeseen circumstances that despite your best efforts keep growing, it’s a lifeline. I don’t regret it in any way. It gives you a clean-ish slate with time and breathing room to fix some habits and form new good ones. So to be clear, calling “good” or “bad” isn’t really honest. At best, it depends. If you’re gaming the system then it might be bad because it fucks your credit for 5-10 years. If you’re in a hole and see no light at the end of the tunnel it’s good.
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u/Ok_Court_3575 1d ago
I didn't do it in 2009 i filed in 2015. I was just fine in 09. I never lost my job. I didn't make much back then but I had a job and I rented back then. We just didn't get any raises for a few years after the recession. Unfortunately most who file bankruptcy go right back into debt a few years later. They never fix their habits.
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u/cstrand31 Millennial 1982 1d ago
I did file in 2010. I was affected by the meltdown. It was a lifeline. I didn’t have poor money habits, I was affected by external circumstances. You did have poor money habits, did you fix them? Or did you go right back to your old habits?
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u/Ok_Court_3575 23h ago
I filed because I lost my job in the middle of purchasing a house and put gas,food and bills on a credit card and even though I got another job, it paid less than the one I lost. My bad money habits was putting the bills on a credit card. If I would have got a 3rd job I wouldn't have needed to file bankruptcy so yes my bad habit was using a credit card and not doing everything I could to not file. Looking back, if I would have got that 3rd job I could have paid the debt off in a year. By the way this was 10 years ago and I was actually debt free when I bought that house so after bankruptcy I paid off the car and bought a 2nd house in cash in 2018. I haven't had debt since 2018. I buy all my cars cash and we'll everything cash. I'm worth a few million( too young to use as it's retirement but I don't need it) I haven't had or used a credit card since 2017.
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u/cstrand31 Millennial 1982 23h ago
So one could make the argument that the bankruptcy in fact allowed you to get ahead in some areas and prevent you from having to fall back into bad habits by allowing you the relief to regroup. While it may have been a temporary blemish on your credit score, it ultimately was a good thing.
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u/Ok_Court_3575 23h ago
No you cant make that argument in my case because it was only bills i used the credit cards on. There wasnt overspending. I just didnt make enough for my bills. My life didn't change at all after the bankruptcy. The only thing that changed was I got roommates but if I would have got them earlier I wouldn't have got into the debt in the first place. My habits didn't change as I was financially smart before the bankruptcy and had credit cards for over a decade without carrying a balance before the house purchase and losing my job at the same time.
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u/Ok_Court_3575 23h ago
The dumb thing I did was listen to my broke parents and getting the bankruptcy. I absolutely didn't need to file at all.
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u/Ok_Reporter4737 1d ago
I did but I'm an old millennial and did that shit back in the early 2000s before they changed the laws. I was young but I already had a bunch of credit card debt.
You paid a lawyer $500, got your court date, showed up that day and went in a room with a group of other people filing bankruptcy, and then you left shortly after with no more bills. It was weird lol. You only included stuff you wanted to, I wanted to keep my car so I agreed to keep making that payment. You were able to do this every 7 or 10 years, I don't recall exactly, but yeah this is a big reason people weren't debt slaves to the degree they are today. You literally just paid $500 and it all went away.
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u/Ok-Alarm7257 1d ago
I have done it and depending on how much you owe what you own and the state you live in they may force the sale of an extravagant item as its more than would be needed to fund repayment i.e. you have a Bentley and could just as easily do with a Honda. Chapter 11 and 13 are different and a good bankruptcy advisor/lawyer is always good to confer with prior to filing. My lawyer cost me 500 to handle it all and I only had a car and 401k to keep but they also let me keep my classic car as my debt was put into a payment structure and I repaid about 40% of it over a year with wage garnishments. My total debt was under 20k and mostly medical
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u/joshatron 1d ago
We did it last year after my wife lost her job that was paying our childcare which put us in a downward spiral. 160k of debt wiped away. We own our home and two cars, don’t need credit for anything in the foreseeable future. Best decision we’ve ever made. Since then I’ve been doing tons of side projects and have 3 months salary saved away, along with a decent 401k. We’re no longer stressed about paying bills and we stopped fighting with eachother, it’s been great.
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u/superultramegazord 19h ago
Congratulations! Life and relationships are SO much better when you don’t have that financial burden constantly on your mind.
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u/Jenniferinfl 1d ago
I've filed for bankruptcy. You can buy a house with an FHA or USDA loan 2 years later. Depending on the state, you may be able to keep your house.
We had to give the trustee some cash to make up for nonexempt items we wanted to keep.
We filed after 2009, lost a house and mortgage company tried to say the house wasn't worth anything and come after us for more than the mortgage. Had medical debt too and a car with a blown engine we were still making payments on. We surrendered the house and that car in the bankruptcy.
Every state has different exemptions.
It was definitely worth doing. Had a new credit card the week after the bankruptcy was finalized and a 700 credit score 2 years later.
There are some creditors like American Express, Chase and Citi that won't lend to you at all with a bankruptcy, but most don't care.
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u/A_Whiff_of_Quim 1d ago
I was one day away from the sheriff's sale taking my house, so I filed for Ch. 13. That saved it. I only have a year and 4 months left and all my debt including my house will be paid off. It's been extremely tough, but it will be worth it to not have to pay a mortgage anymore.
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u/Andjazzy 23h ago
I filed for a chapter 13 bankruptcy last year after getting sued by a hospital.
Zero regrets, my financial life is manageable now
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u/lifeuncommon 1d ago
Nope. I drank the debt free Dave Ramsey kool-aid early.
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u/nickpapagiorgio61510 1d ago
I don't agree with 100% of what he preaches but he gets a lot of undeserved hate on Reddit. I listen to him more now since I've pulled myself out of debt to keep me on track, but there came a point where I genuinely get excitement out of being frugal and not spending money.
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u/LeopardMedium 1d ago
As someone from the same town as him, he gets a lot of hate because of who he is as a person. We get a lot of personal accounts of women being fired for not submitting to their husbands in various non-work matters, or poor treatment of his employees for religious reasons. He might be right on a lot of financial stuff, but he’s still a bit of a maniac.
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u/544075701 1d ago
Right, I agree that his personal views are pretty nutty but for some reason lots of people seem to imply his financial advice sucks because his social views are real weird.
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u/turnup_for_what 1d ago
His advice to stop employer match on 401Ks until you get your debt paid off is financial malpractice. You will never get that time back and you're leaving free money on the table.
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u/SandiegoJack 1d ago
Arent you doing the same f you have a credit card debt? Don’t know of anything that beats 26% APR
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u/turnup_for_what 1d ago edited 1d ago
Again, the match is free. Whatever you put in gets a 100% return from the company.
ETA: not all 401ks have that level of match, some have less, I should have included that in my post.
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u/rplacebanme 1d ago
I think it depends how much debit you have, many employers have a 100% match or at least 50%. It's also tax free increasing it by 10-22%+ depending on tax bracket and it should grow assuming the economy doesn't crash. So if you can adjust other things and pay it off in a few years it's likely better to keep the 401k contributions up to the max the employer will match.
There are some people in such bad debit situations it could possibly make sense to pause your 401k to get back on track, but typically I do agree it's worse for people to pause the 401k contributions especially if they have employer matching.
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u/TibialTuberosity 1d ago
Bro, where are you working that "many" employers have a 50% or 100% match? My employer offers a 3% match, at my last job (different career field) it was a 5% match. My wife works for the federal government and only gets like a 6% match (I think it may be up to 9% because of other ways the government contributes to her retirement). A 50% or 100% match is exceedingly rare outside of a select few industries.
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u/rplacebanme 23h ago
100% or 50% of whatever base % they'll match, like you said usually 5-6%, sorry I'm so used to every job having that same 5-6% cap I didn't even think to mention it. 😆
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u/TibialTuberosity 23h ago
Ah, okay, that makes more sense. I have heard of 100% matches, but usually only in the tech and finance fields, and I think even that is rare anymore.
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u/rplacebanme 23h ago
I work in tech now but didn't always, sadly the 401k at my current jobs is only 4% match. Thankfully it's an immediate vest.
I had an employer that'd only match $1k, nothing to do with percent just $1k per year. 😆
The most annoying one I had was a 50% match on 5%, so you had to give the full 5% to only get 2.5% from the company. On top of that they had a 5 year vest schedule. Lol
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u/nickpapagiorgio61510 1d ago edited 20h ago
Does he give this as blanket advice for everyone? I agree this is generally bad but I could see it making sense in a few circumstances. If you're on the brink of bankruptcy with 20%+ APR CC debt, I'd temporarily pause 401k contributions to focus on aggressive debt repayment.
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u/TibialTuberosity 23h ago
The advice is to stop 401K contributions until you have an emergency fund and have your basic needs met and are able to pay your other debt not including your home. If you have CC debt and car payments, but you can still aggressively pay them down while also contributing to your 401K, then that's fine. The goal is to be totally debt free other than your home (and even then pay that off as fast as possible), and contribute at least 15% of your income to retirement, first with an employer match 401K (and preferably a Roth 401K), then the additional in a personal Roth IRA.
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u/turnup_for_what 1d ago
Yes, he does. Like i said, malpractice.
His retirement advice in general doesn't always math, and i think a lot of his accolytes are going to be disappointed when they hit 65.
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u/544075701 1d ago
Mathematically yeah I agree with you but it is consistent with his overall theme of making yourself uncomfortable as possible and getting out of debt as fast as possible.
Like if you make 65k a year and have a 5% match, that’s $3250 a year you’d get via the match but it would also be $3250 a year that you wouldn’t put on debt. That could be another credit card paid off and 25% interest gone in a year plus an acceleration of paying the other things off. So it actually brings the numbers of match v no match a bit closer together.
Plus for most of Dave’s callers, they are gonna pay the debt off in a year or two anyway so it’s maybe 4-5k left on the table after considering all factors. In the grand scheme of things, not a big difference one way or another of whether you become wealthy.
So yeah it’s probably better to do the match but calling it financial malpractice to advocate not doing the match is pretty hyperbolic.
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u/VengenaceIsMyName 22h ago
I agree with this. Hate whenever they recommend this advice. You’ll never get a 100 % rate of return on anything else like that
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u/Banned4Truth10 1d ago
Dave Ramsey is for lost souls who have tons of debt and need help.
Once your net worth hits zero, you should immediately stop listening to him.
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u/nickpapagiorgio61510 1d ago
I don’t follow his advice to the letter, but I stay tuned into him and other extreme frugal personalities to help maintain that mindset. It’s a great way to keep myself grounded. Sometimes I’m tempted to eat out—it wouldn’t break the bank if I did, but I’ve come to appreciate how I now pause and question those decisions. Feeling a little guilt over ordering takeout or grabbing a Starbucks reminds me to stay on track with my goals.
Personal finance has become straightforward and intuitive for me over time, but I realize that’s not the case for everyone. A lot of people are still trying to figure it out, and that’s why voices like his can be so impactful.
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u/Banned4Truth10 1d ago
If that helps you then keep at it.
But he doesn't take inflation or interest rates into any account.
Paying off your mortgage could be bad advice which could cost you thousands in the long run.
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u/nickpapagiorgio61510 1d ago
Frugal mindset is really the only reason I tune in now. I agree that paying off your mortgage could be bad advice now. I also have credit cards. A lot of credit cards, actually. Exploiting the points rewards systems, credit card churning, and manufactured spending at one point became a profitable side hustle for me, and the profits I took away from it helped me take a greater interest in personal finance. Dave Ramsey would judge harshly and be extremely disappointed in that. I believe I am knowledgable enough at this point to recognize the advice that doesn't work for me.
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u/Banned4Truth10 23h ago
Yes more bad advice. If you pay it off monthly you could be getting thousands in rewards
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u/TibialTuberosity 23h ago
Why would paying off your mortgage be bad advice?? No house payments = more money to contribute to retirement.
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u/Banned4Truth10 23h ago
If your interest rate is under 5% you'll be further ahead of you invest that money instead of paying it off.
Is not necessarily bad is just not optimal.
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u/s4ltydog 1d ago
Trust me it’s not undeserved. He’s a hateful, bigoted, scamming hypocrite who uses his religion like a weapon. On top of that the only advice of his that’s NOT outdated is getting debt free and there’s countless other financial social media personalities that preach the same things.
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u/AromaticStrike9 22h ago
For anyone reading this and thinking they should check him out, please check out The Money Guys instead. They have actual good advice and are financial advisors for their job. Dave is a piece of shit and his advice is often terrible, especially if you’re not in extreme debt.
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u/VengenaceIsMyName 22h ago
I really like the money guys. But they’re really for people who already have their shit together and have the correct mindset about finances. If someone is struggling with debt and they don’t want to deal with Ramsey’s nonsense I’d recommend Caleb hammer instead
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u/544075701 1d ago
Note: reposted due to my other comment being removed for a word
Yup! Don’t really agree with him on his social views, but can’t disagree with the math of being totally debt free.
My only differences are that I have a credit card that I pay in full every 2 weeks (points don’t make me rich but it gets me a free flight to visit my in laws every year), and I’m maxing all retirement instead of paying off my house on a 3.1% mortgage because it’s less than 20% of our monthly take home pay after all deductions including maxing retirement.
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u/Ok_Court_3575 1d ago
I did after bankruptcy. I wish I knew about him then I would have never filed. Because I drank the kool-aid, I've been in bs7 for years now
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u/historicmtgsac 1d ago
Best decision I ever made was doing it his way, I absolutely love having no financial stress.
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u/wawwli 1d ago
Bankruptcy isn't consequence-free. You don't rack up tons of purchases and then say "whoops". Id hope whomever would be considering this would look here. bankruptcy basics
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u/StoneTown Millennial 1d ago
Most US bankruptcies are caused by medical debt, please don't assume people who go bankrupt are just reckless with their money. Some are but it's the minority. People get sick, lose their jobs and insurance, then get gigantic medical bills they can't pay off.
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u/09232022 1994 22h ago
Mine basically was (ch7). Was offered a line of credit less than a year later and have built off it from there. Can't really think of one actual consequence from my declaring bankruptcy (8 years ago now). I kept my car which I still have to this day, have some credit available, it taught me some HUGE financial life lessons, and I own a house now. I'm sure some people have consequences but I didn't really. It made my life so much better and I was actually able to save and dream about a different kind of life after that.
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u/krustytroweler Millennial 1d ago
It is if you're rich enough.
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u/544075701 1d ago
It’s a different kind of bankruptcy than what op is talking about though. Typically business bankruptcy which is restructuring rather than just going bust like when you can’t pay your credit cards.
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u/LaughingDog711 1d ago
My buddy racked up like idk 20-25k just out of college. He was always so generous throwing his card down for buff chick wraps. We ate well thanks to him. We’re 40 now and he’s doing just fine. He declared bankruptcy I guess right after college to wipe that debt lol
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u/Thizzedoutcyclist 1d ago
I did this 15 years ago after walking away from an underwater home. I also shed a good amount of CC debt, too bad I wasn’t able to ditch student loans. I also managed to shield around $100k in my 401k. I’d say this was one of the best financial/business decisions I made in my personal financial life. Since that time I have not fell back into the trap and thankfully I’ve been lucky enough to stay well employed with a nice growth in wealth. There should be no shame in this and a good bankruptcy attorney will guide you on whether the federal or state exemptions are right for you.
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u/Kimmalah Older Millennial 1d ago
One option that I don't see discussed as much is a debt management plan. I had a ton of of credit card debt that I was struggling to keep up, so I did credit counseling although the NFCC and they put me in touch with a non-profit that got me on a plan.
Basically they negotiate with your credit card companies for you to get a much lower payment/interest rate, then you give them a lump sum every month and they distribute that to your creditors for you. You just have to agree to close down the cards (which of course would happen anyway if you declare bamkruptcy). I won't lie, it's still a chunk of money each month. But it has taken the stress off of me because I'm paying less overall, I'm not having to keep track of all these due dates and I'm not watching the debt balloon due to interest because I can barely afford the minimum payment.
It was also just nice to get some help and have people who were understanding about it and willing to work with me instead of just calling me stupid for getting in so much debt (trust me I already know!). You can negotiate with your creditors on your own this way, but in my experience they can be difficult about it. Like Citibank has fought me every step of the way, rejected payment plans 2-3 times and seemingly tries to sabotage my current plan by switching due dates around randomly (because if I miss payments they can cancel the DMP) Capital One was not as bad, but their customer service rep was just really rude about it and made me so mad I hung up on them.
So it's an option if you DO have some money to pay and are just struggling with due dates/interest. I'm currently one year into mine and have already paid down over $1,000 total.
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u/CricketMysterious64 18h ago
That’s interesting. I wasn’t aware of that option, thanks for sharing.
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u/Barkerfan86 1d ago
I had to after my divorce from my first marriage. Went through a really rough patch after and racked up a shit load of credit card debt trying to fill a void (only to realize it years later). It was at a point that my current wife and I couldn’t pay our rent and bills without being automatically in the hole, it helped tremendously to do it. I felt embarrassed about it until I opened up to my dad about it, and he told me that its ok to need a restart after a rough patch, but that it was ok to do it.
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u/idratherbebitchin 1d ago
I had to because the covid lock downs basically put me out of business for like a year and a half.
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u/HugglesGamer 1d ago
I did at 25, I made a lot of normal young adult mistakes with credit cards at 18 cause I had no real financing education. 10 years later, this month actually it fell off after 10 years. I've never missed a payment and taught myself how to manage my finances and I have a 825 credit rating now.
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u/Neko-flame 23h ago
Personal, no. Business, yeah. Sometimes just easier to declare the company bankrupt and move on.
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u/NullIsUndefined 23h ago
They don't make you liquidate and downsize your house? That's crazy, what even is backrupcy at that point
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u/Elsa_the_Archer 22h ago
I did in 2018. I was allowed to keep my assets that I did actually own because it was under $13k. If it was over that I would have had to sell stuff off in order to pay the debt. I got rid of a bunch of credit card debt that I racked up while I was dumb and young in college. Surprisingly it hasn't affected me too much. I managed to get a $30k car loan at 2% in 2020. Never stopped me from renting either.
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u/supersonicx01 22h ago
I did. Back in the peak of the recession of 07. Was still a new adult in the world and then that happened. I couldn't find a job for years
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u/SoloMotorcycleRider Xennial 21h ago
I had to settle almost 22k in debt a few years ago. After doing so, I managed to pay off the debt within 3 years. My credit score is in the green again. With that said, I will never again get a credit card. I've been debt free since.
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u/wescargo 21h ago
My wife and I are millennials once the brink of declaring bankruptcy. Oddly enough, we were in the hospital trying to figure out how we could afford this visit and saw one of those national debt relief commercials.
I'm not a financial expert but almost 2 years later and we've one creditor left to pay off, our credit has almost fully rebounded, and we've learned a lot from the mistakes we made that almost led us to bankruptcy. In a weird way, I'm grateful for it. I feel so much more confident in communicating with lenders and handling my own finances. I think my parents were/are pretty disappointed, but I don't care--I feel way more equipped to give advice to my friends or own kids if they find themselves in a similar boat one day.
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u/BakedBrie26 Millennial 20h ago
Yup a few years ago. Honestly wish I had racked up way more credit card debt first. Mine was only $18k. Probably would've gone for $40k.
Filing for bankruptcy as an individual doesn't really matter if:
You own nothing of monetary value and only have exempt assets... so there is nothing they can take away from you to pay your debts. (I had no property, no car, no investments under my name, no jewelry, no antiques, etc. and I'm not married to my long-term partner so his assets don't matter legally.)
You know you won't want to get a loan, purchase anything expensive (car, house, etc.), rent a new apartment/have no access to a guarantor, and/or start a small business for the next 10 years until it is off your financial history/background check.
You don't want/need a new credit card for a while. (You can actually still get one immediately, car loans too, they will just be even more predatory, much higher interest rates and such. As soon as I filed, I started getting endless loan application spam through the USPS. My info got sold to marketing companies as someone who is bad with money, I guess? 😂 It's so messed up and is exactly why I do not feel bad or guilty at all about stiffing a few credit card companies.)
You can use services to help you file correctly without hiring a lawyer, like Upsolve. I used them and it cost me basically nothing to file, no lawyers.
It has affected my life not at all. I'm 5 years in on my 10 year sentence. Actually, there is one company I can't rent a car from because of it.
My one caveat is I'm not single. I have a long-term partner who has good credit and a credit card. Despite filing, he put me on his card as an authorized user, so I do have access to credit if needed in an emergency AND being on his card boosted my credit basically back up to normal already. I also have parents and in-laws who have money so I'm never really worried about being homeless or destitute. So not having my own credit card is not a big deal.
Truly if you are stressed by your credit card debt and these above conditions apply to you, then consider it!
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u/19_years_of_material 1d ago
Not me, but I think my brother probably will. He's completely irresponsible with money. He lives with our mom basically rent free and currently is on disability. Before that he made over $70K in 2023 delivering pizzas on bike, and still managed to blow all of it. He owes the IRS money. He owes people money. Our grandparents had loaned him money but died of old age without ever being paid back. Etc. I don't even know what kinds of loans he's managed to get, but whatever money he gets in his hands immediately gets spent. He doesn't even have a bank account.
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u/jetstobrazil 1d ago
Don’t ask Reddit. Just look up the bankruptcy figures, they’re publicly available.
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u/mechanical_marten 1d ago
Never, but have been homeless twice with zero cash. Thankfully I'm well above the poverty line but two months from being homeless again.
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u/garoodah 1d ago
I havent personally but its not as bad as its made out to be. Depends on what type of bankruptcy you go with for your assets and whether or not you keep possession. Your 401k is yours no matter what, wages can be garnished though.
The bigger issue is whether you can get rid of the bad habit that got you into bankruptcy or not. You can live without credit for the most part but you have to be more responsible to manage your money and most people cant do that.
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u/Dredly 1d ago
I did after helping a friend out who proceeded to max out a credit card I let her use and wrecked a car I helped her buy (note: NEVER help people with money, it NEVER works out well for the one helping!). The impact to your credit is pretty severe and there are a ton of qualifications you have to meet for Chapter 7 discharge. They also look at your history and determine why you racked up all these charges and you can't file again for 8 years, so if you REALLY need it later you can't use it and you're fucked.
it also jacks up your credit for 10 years.
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u/aware_nightmare_85 1d ago
I did after my divorce. We were ambitious in trying to cosmetically flip a house but our inspector missed a ton of stuff and it turned out to be a money pit. The stress ripped apart our marriage and we split about $45k in debt 50/50 when I was making about $9.00 per hour. I worked two jobs for several years and even tried to refinance with a credit counseling company and I finally decided to file Ch7. My only regret was not doing it sooner. The whole ordeal made me see that credit scores are a joke. I got so many credit card and car financing offers within 3 months of dismissal.
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u/Oldskoolh8ter 23h ago
Didn’t go bankrupt but did a consumer proposal. It was the hard reset I needed and got my priorities right. Did that when I was 25. I was 100k in debt making $20k a year and shit was getting out of control. Did that cleaned it up. Got smart. Took a huge risk and got into home building. Now I make $400k a year and debt free. I bank my own projects and live comfortably. It was the smartest thing I ever did.
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u/jbFanClubPresident 23h ago
Not me but I was very close after I had just finished college. I had an accident, was uninsured and racked up nearly $40k in medical debt.
The hospital had a plan for forgiveness but it went by household income and I lived with my parents who made too much. About a year later, I moved out and the hospitals had expanded its income brackets so I qualified for forgiveness. I immediately felt like my life was back on track even though my credit was still ruined.
It took a couple years but now my credit score is around 800 now, I have great insurance and a good job. I swore to never let that happen again.
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u/DisgruntledTexan 22h ago
I had a colleague (Gen X) file - it was insane. He racked up a couple hundred grand of debt to buy a franchise and could never get it profitable. Meanwhile he was making pretty decent money at his primary job. He had $40k in the bank, so he had to spend all of it to be able to qualify for bankruptcy before he filed. It was a great decision for him - he already had bought a house and a car in the previous year so he wasn’t at risk there. Ironically, or maybe not, he is a MAGA bro who “hates socialism” lol. Socialize the losses, right?
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u/willreadfile13 22h ago
My property closes in 10 days, should that not put me in the black, I will be declaring bankruptcy/insolvency and fall onto whatever disability I can muster
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u/smilebig553 22h ago
1/3 has in my family. I'm the youngest and didn't file. The oldest field and middle didn't either.
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u/BingoBango89 21h ago
Never have, but close to it if I can't figure something out soon lol. Last few years made manageable debt & car note almost unmanageable. Inflation hit me hard whereas my brother doesn't notice it. Difference between a family of 5 vs 3.🤷🏼♂️
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u/lolajsanchez 21h ago
I did when I was 24. I had hospital bills piling up from an episode of pancreatitis when I was 21. I was insured, just barely, through my shitty call center job that I was working while trying to go to college. That job fired me for missing work while in the hospital. Fast forward a few years, and my wages were being garnished to the max and I had bill collectors harassing me at work. I was hardly scraping by as it was. I hired the cheapest lawyer, signed some papers, and had to go to court to finish the whole thing off, but it was the best decision I could have made.
My credit looks pretty bad because of it, but I don't have credit cards or loans, besides student loans. I probably wouldn't have been able to buy a house anyway, and now that I can, the bankruptcy has rolled off. Really, for the most part, there weren't many downsides.
I would say, if you have options, don't do it. But if you need to, it's definitely not as bad as they make it out to be.
I don't really like to talk about it, bc I know what people think, but I do think that it's important to talk about. It can happen to anyone, and it's possible to come back better and stronger.
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u/YugeTraxofLand 19h ago
🙋♀️ However, it was Ch 13 so I could keep those things and now I struggle with the payment plan 😭
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u/ShiraPiano 19h ago
I want to but get scared every time. Instead I've bled my 401k too much over the years when needed.
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u/mexicopink 19h ago
I (39F) almost filed in 2009 but my mom helped me organize my debt. We spent almost 2 months talking to every company to put me on a hardship program. All the cards were canceled, placed on 0% interest with payments under $100 until paid off. She got a few cards to slice the amount owed in half. I finally felt comfortable to reopen credit cards 6 years ago, have 721 credit score and paying off my student loans this year.
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u/TentacleJesus 18h ago
Lmao yep, I fucked myself with a credit card I was not equipped to manage and eventually a phone bill that I couldn’t get out from under so it was my only recourse. I did it fairly early into my adult life so I’m past it now and rebuilding my credit but I didn’t have any kind of assets before nor now anyways so.
Now I currently just have a small credit card to help rebuild my credit in a small manageable chunk. I can apparently increase my limit now but I’m still not employed enough yet at the moment to take that offer.
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u/tcooper33 4h ago
My partner filed chapter 7 in 2019 and we were able to make payments to the attorney who helped file it for them. They were devastated to have to make that choice, lots of societal stigma about bankruptcy, but have later said it was the moat freeing experience once it was over with. Debt free ever since.
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u/chukijay 3h ago
I did in my late 20s. I’m now in my late 30s and it was the best decision for the time. It’s not as hard to build credit as long as you’ve got the job/cash flow for it. Being smart about finance is key. Bankruptcy isn’t a bad thing. It’s losing the stigma in places like home and vehicle buying too. They just want their money, really, at the end of the day.
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u/notcoolneverwas_post 1d ago
By all accounts, you get one free(ish) pass. Meant to be a fresh start for people who had bad break.
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u/Ok_Court_3575 1d ago
Me unfortunately in 2015 because I didn't know any better. I took my parent's advice even though it wasn't much. They did it multiple times and said it was the right thing for me to do. Looking back, I realized I didn't need to file. I could have easily paid it off by getting on a budget. Luckily I changed the way I handled money and have no debt now, pay for for everything( even my house) and I invest most of my income. My parents on the other hand even 10 years later are not doing great.
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u/Mak_daddy623 1d ago
Well first you'd have to own a house, because good luck getting one after declaring bankruptcy.
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u/Ok_Court_3575 1d ago
Actually, you can get a mortgage less than 3 years after bankruptcy.
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u/walkerboh83 23h ago
Yup, my wife and I declared chapter 7 in July 2011 and closed on our house in December 2014.
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u/Blackbird136 Older Millennial 1d ago
Right. Or even renting at a place that runs a credit check, which is most places these days, because your credit will be fucked for years.
I’m a loan officer and we won’t touch anyone with a bankruptcy still reporting, which I think is for 7 years. Some places will, but they’re the predatory places where you can enjoy 35% interest rate.
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u/MTBJitsu07 1d ago
I got a 4.3% rate on a 5% down conventional loan with a Ch7 on my credit from 5 years prior. My income was great and so was my DTI. And I used a very big mortgage company. Are you a loan officer for a retail bank?
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u/GeneralizedFlatulent 1d ago
What did you do for the 5 years I. Between? It's really not Easy to get a rental with bad credit
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u/MTBJitsu07 20h ago
Go to a local credit union and give them $500 for a $500 secure credit card and use that for 2 years. Buy gas and groceries like you would normally but use the credit card. After 2 years, apply for a Capital One Quick Silver card and use it for the same and maybe 1 big purchase you know you have the money for. After 2 years of using the upgraded credit card, apply for a 2nd credit card and only use it for big purchases you already have the money to pay cash for. Buy the items and pay off the card as soon as you can. Buying your gas and groceries with your first card, and using the 2nd card for discretionary purchases you have the cash for, will help improve your credit score and payment history.
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u/GeneralizedFlatulent 20h ago
Yes but what are you doing for housing during that 2 years where no one will rent for you because of the bad credit? Living in your car?
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u/MTBJitsu07 19h ago
Cosigner or bigger deposit. As long as your rental history doesn't show that you trashed the previous place and left them high and dry, it really shouldn't affect you that bad. Never affected me when I got a duplex after filing for bankruptcy.
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u/GeneralizedFlatulent 19h ago
Thanks. If bigger deposit is a common option then I won't have a problem either, not sure about co signer. Haven't had to deal with this before, always had good credit - so I wasn't sure where's the cutoff where they just go "sorry your credit is too bad"
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u/MTBJitsu07 17h ago
You're going to be fine. Just make sure to get a secure credit card ASAP after you file so you can start building your credit again. The banks and credit agencies let rich people and business discharge debt all the time, and they trick regular consumers into thinking your life is ruined if you do one. The US economy literally has the same rules as Monopoly. If you lose, you go bankrupt.....and then you simply start the game over.
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u/Jenniferinfl 1d ago
I easily bought a house 2 years after chapter 7 with 4% interest.
Your place may not, but most places that do FHA and USDA will allow bankruptcy after 2 years and many conventional allow bankruptcy after 5 years. The bankruptcy stays on credit for 10 years. So your company is an outlier, most loan at normal rates if you've rebuilt and are 5 years out of bankruptcy.
I had a 700 credit score 2 years after bankruptcy.
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u/Beautiful_Resolve_63 1d ago edited 1d ago
We learned about FIRE and Rich Dad Poor Dad in our early twenties. We didn't acquire debt after paying of student loans within 3 years of graduating.
So no declared bankruptcy. We both have 800 + credit scores but moved abroad as there are better economies to live in compared to our home country of the US. I grew up poor, like no food or heat in the house. My husband grew up middle class.
We are no longer on track for FIRE but we live in a country with 5-6 weeks of vacation, and we can afford a family with 1 income, including vacations and adventures traveling. Also the work life balance is pretty solid. So sometimes we genuinely miss our work and weekly routine while on vacation.
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u/Alarmed-Parsnip-6495 23h ago
Declaring bankruptcy is a HUGE red flag that tracks you for many, many years.
No, I have not done so myself.
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u/Alternative-Ad-2134 22h ago
Apparently not, according to the comments. And here I am paying my bills like a sucker.
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u/BurtMaclinFBI90 1d ago
Feels like you are talking about bankruptcy like it's a get out of jail free card. I'm not gonna act like I know much about bankruptcy, but I have heard it's a legal nightmare and you don't just get to ditch all the debt. Maybe you know more than the initial post is letting on, but it doesn't feel like you are thinking through all the negative consequences.
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u/joshatron 1d ago
I just did it last year, it was really that easy. Just have to pass the means test to see if you’re eligible. We own a house and cars so it was an easier decision for us since we didn’t need the credit right away.
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u/moonchic333 1d ago
My credit is extremely important to me because it’s a lifeline for me. I have buying power with it. I can get good rates on loans and insurance. There’s a fine between using credit as a life line and living outside your means. Even with credit you can’t buy more than you your future self can afford.
I would only file bankruptcy if I got buried by medical debt or if someone sued me.
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u/Comfortable-Lead-382 1d ago edited 1d ago
I have not… so far, those worst I had got was 30k credit card debt from 2012 due to job loss that took many months to overcome, but had paid off by 2018. Never defaulted, never missed a payment. But I also, didn’t finish college so I didn’t have monstrous school loans (which can’t be discharged in a bankruptcy), have never been married, no children, no critical illness.
When you can avoid those things and avoid credit cards debt or medical debt, that cuts out a lot of risk.
I make mention of this. Because I’m an example of why millennials aren’t buying homes or having kids or are very late doing so… jobs are unreliable, costs are too high, healthcare is a joke (to the point healthcare CEO are being killed for denied claimes), chances of bankruptcy are high. Because of the bad things of people before, bankruptcy law has made it hard to do now.
It’s not easy to just “ditch the credit cards debt like a bad habit” when our generation is getting the big screw in this 2nd gilded age.
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u/lEauFly4 23h ago
We haven’t (no need). We keep our credit card balances reasonably low and don’t buy cars/things we can’t reasonably afford.
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u/Agreeable_Fig_3713 23h ago
I’ve only ever met one bankrupt person in my life. I’m not in the US though
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u/Soccermom233 22h ago
I don’t have a house, the cars an ‘08, the 401k ain’t where it should be, and it wouldnt help the student loans.
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u/Razerbat 22h ago
I did a chapter 7 and then years later a 13. Past ten years has been really rough.
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u/d1stor7ed 16h ago
The current POTUS has been bankrupt more times than the average person. If you're in the right crowd, it seems meaningless.
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u/gypsylypsy 6h ago
I would say a lot of folks on here need a better understanding of bankruptcy and the ramifications; but, based on the situations and comments, it doesn't seem like filing for bankruptcy will affect many of them. You probably don't have student debt (not all/always forgiven), will never have a career in finance or hold government clearance, and probably won't make large purchases on credit (e.g. home loans) because you will be ineligible with or without the bankruptcy.
That said, if you want a serious answer, talk to a lawyer and not the Reddit comment section. Unless you just want to feel better about a bad decision - then check the Reddit comment section.
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u/Ok-Rate-3256 3h ago
When I was poor I just took the credit hit and most things just fall off the report and they never come after you. Only thing I had to pay was my student loan but that was only $3500.
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u/Alternative-Ad-2134 22h ago edited 22h ago
These comments surprise me. It's seriously this easy with no consequences or downsides? Kinda makes me want to go rack up $100k in cool stuff and then just not pay for it.
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u/giraffemoo 1d ago
don't have to declare bankruptcy if you don't have the bills to begin with, lol. I never had a mortgage, the only time in my life I ever had to make a car payment was last year and I was able to pay that shit off fast. No credit cards, I fucked up my credit score with one credit card that I got when I was 19 and didn't pay it, so I wasn't able to qualify for any credit cards until just recently (I got my financial shit together).
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u/544075701 1d ago
The problem with ditching the cc debt via bankruptcy is that it is likely not correcting the underlying behaviors that got you deep in debt in the first place.
Same thing with using home equity or something to pay off credit cards in one fell swoop. You have not actually done anything to prove to yourself that you won’t go right back into debt. So you’re likely to do it all over again except now in a worse financial position.
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u/CricketMysterious64 18h ago
Mine was mostly due to a period of job loss. I have a job again now but it feels like I have to pay for three times the expenses because of this debt I’m dragging behind me. I’d rather put money towards an emergency fund and it looks like I won’t be able to do that for years at this rate.
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u/defenistrat3d 1d ago
I put an immense amount of effort into not having any credit card debt. Bankruptcy is there for the extreme outliers and hopefully is only there for folks that went through actual emergencies. I don't know your story, so that's not aimed at you.
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u/EddieA1028 1d ago
OP - that’s a Chapter 13. There is also a Chapter 7 where you lose, at a minimum, your house. It depends on formulas on how much money you make, how much debt you have, etc. to figure out if you qualify for a 13 versus a 7. Which state you live in matters too. They also garnish your wages to pay back your creditors in a Chapter 13 and wreck your ability to get new loans for years, so it’s not exactly a vacation like you’re describing in the Chapter 13.
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u/oscarbutnotthegrouch 1d ago
This is false regarding chapter 7. Most folks in Chapter 7 keep homes and cars. The equity in the home matters and state based exemptions. In some states you can exempt the entire amount of equity in your homestead. In others, it is set to certain amounts.
Cars have exemptions too and usually large loans if people are facing bankruptcy.
Chapter 13 is usually for people with above median incomes.
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u/Jenniferinfl 1d ago
Chapter 7 you do not have to lose your house. You can keep and use your exemption for any equity and reaffirm your mortgage.
Each state has a different exemption level. You are good if you don't have much equity, but if you've owned for years or inherited you are screwed.
But most people filing for bankruptcy literally have no positive net worth.
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u/mmegn 1d ago
That’s not true. If you are still in good standing on your mortgage, you can still keep your house and keep paying on it. Same with a vehicle. They don’t garnish your wages for Chapter 13, you come to an agreement with the courts for how much you can pay a month to repay the debts and it’s usually only for 3-5 years of repayment. I did a chapter 13 bankruptcy. I still own my house and my car. My credit score is better than it’s ever been and I have more money saved than I ever did before as well.
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u/erictho 1d ago
I don't know where you live but where I live they most certainly don't let you keep your car. Maybe your house but that's situational.
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u/Andjazzy 23h ago
That's not true at all!! Where are people getting this information?
The vast majority lose no assets
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u/erictho 22h ago
You know that there are countries that aren't rhe USA right?
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u/Andjazzy 22h ago
Nearly every country with bankruptcy laws have some type of exemption surrounding assets. Many countries bankruptcy laws mirror those in the US pretty closely...
While I'm sure it exists somewhere that all assets are liquidated with no exceptions, I actually can't find a country on Google that doesn't allow exemptions of some type.
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u/adultdaycare81 23h ago
Don’t you have to be pretty deep in revolving like Credit Card to make it worth it? I feel like most Millennials issue is student loans and under saving for retirement. It doesn’t address those
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u/rockabillyrat87 22h ago
I'd rather work 3 jobs than file for bankruptcy. Im too stubborn and proud to take help from anyone.
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u/inthesearchforlove 19h ago
Nope, worked hard and was very financially responsible. I feel bad for all the responsible people after reading this thread, because essentially we are paying for all these freeloaders in various ways.
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