An Interview with Mr. Cris Shale relative to his thoughts Post-Bankruptcy/Divorce
Valuable Advice For Others Facing The Same Bankruptcy Dilemma Post-Divorce
Several years ago, I posted an article to the Ohio Family Law Blog about my son and one of my clients who had both elected to file a Bankruptcy proceeding following a divorce and following a marital residence being “upside down” with the total mortgage liability. In layman’s terms, the value of the marital residence, as appraised, was way below the mortgage indebtedness associated with the home. Cris, with a high child support obligation and other associated bills, could not afford to keep the mortgage current on his former marital residence. So, he sought counsel and filed a Chapter 7 Bankruptcy.
Before meeting with Cris, I sent to him several questions to stimulate our Bankruptcy discussion:
- Were there any negative outcomes or effects from taking the Bankruptcy?
- Were there any positive outcomes or effects from taking the Bankruptcy?
- What advice would you offer to others contemplating a Bankruptcy action?
- If you had the same set of facts today, would you again take the Bankruptcy?
- What steps have you taken to re-establish credit and improve your credit score?
Question 1: The most negative effect of taking the Chapter 7 Bankruptcy is that Cris does not qualify for loans to assist his two oldest children with college expenses. That being said, he has borrowed money from both of his parents to meet the needs of Courtney (BGSU) and Collin (Marquette). If his parents were not in the position to be lenders, his children might not remain in college at this time. Cris also said that he was forced to distinguish between the costs of necessities and the costs of any and all luxuries. He is basically concentrating on paying for the costs of essentials…housing, food, and gasoline to get back and forth to work. Luxuries or “extras” for clothing and entertainment are “out the window” except for essential items of clothing. Going out to dinner, going out to a movie, splurging on something fun to do, or taking a vacation are totally out of the question.
Question 2: The most positive effect of filing the Chapter 7 Bankruptcy proceeding was getting to discharge $225,000 in the mortgage liability associated with the home that had lost so much value in the 2008 housing crisis. Like many other in Cris’ position, he was able to remain in his home for nearly one year while the Bankruptcy was taking place and while the foreclosure action was being taken relative to his home. Of course, he had to maintain the utilities to the home to include gas, electric, water and sewer services. The mortgage holder actually reaps benefits by having the homeowner remaining in the home as the home is maintained and is not subject to decline by not having utilities or by being vandalized by persons seeking copper pipes from the home. Cris also says that he has learned so very much about financial planning and how to manage monies to prevent this post bankruptcy event from ever happening to him again.
Question 3: What advice would he give to others facing the same dilemma that he faced in 2011? His post bankruptcy advice is as follows:
- See an attorney who specializes in bankruptcy to explore all options with you. You want to be sure that you qualify for a Chapter 7 Bankruptcy to be certain that all indebtedness can be discharged. If your income is too high, you might have to file a Chapter 13 Bankruptcy wherein you would be subject to a six (6) year repayment plan.
- Be prepared and ready for the fact that you are not going to be able to borrow money from financial institutions (banks and/or credit unions) for a seven (7) year period of time.
- Be prepared for the fact that your credit score will be negatively affected. Cris had a credit score of 802 before the Bankruptcy. His credit score is now 640. How does this affect him? If he tried to get a credit card, he would be subject to interest in the amount of 25%-28% compared to the low interest rates offered to others.
Question 4: Given the same set of facts in 2015, would he elect to take the Chapter 7 Bankruptcy today? The response was an unequivocal “yes”! He could not realistically hope to sell the home to pay off the mortgage indebtedness associated with the home as the home had lost so much value in the housing crisis. He tried to speak with persons in management positions with the mortgage holder. They were not willing to negotiate at all with him (which is contrary to what you read and hear in the newspaper or the news on radio and television).
Question 5: What steps is he taking to re-establish credit and to improve his credit score? He has opened a Kohl’s credit card and an American Express credit card and makes small purchases with same and pays them off each month to re-establish a good credit history. He maintains a checking account to be certain that it can be verified that he is paying his bills to include credit cards on a timely basis. And, he is being certain not to borrow more than one-third (1/3) of the available balance on each of his two (2) credit cards.
Cris lives in the State of Illinois. In 2011, he paid $800 for his Chapter 7 Bankruptcy proceeding. His indebtedness was totally eradicated in just four (4) months of time. In 2018, he will be able to borrow monies once again. Until that time, he will live frugally and plan to pay for necessities with cash or checking account during bankruptcy. He will be much more careful about expenditures for housing in the future.
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Anne Shale is of counsel to Dayton, Ohio, law firm, Holzfaster, Cecil, McKnight & Mues. She is a former registered nurse and concentrates her practice in Family Law and Divorce cases.