I wrote about this in my diary, but I’d really like some feedback so I will post here as well (albeit an abridged version).
So, here’s the deal: I’m trying to figure out whether I should declare bankruptcy.
NOTE: I found an old thread here on OPM about bankruptcy, and people got pretty nasty toward each other, arguing about things. So PLEASE. If you post on this thread, BE RESPECTFUL! Thank you.
I don’t want to declare bankruptcy. (Then again, there are a whole host of things that have happened in the last two years that I didn’t want to happen … such is life, I guess.) But I feel a bit backed into a corner.
About a week ago, I got a packet in the mail. A thick packet. The gist was that my old house, which had gone into foreclosure (for very complicated reasons, which you can read about in my diary) had been auctioned off for cash. It sold for a paltry sum. My ex-husband and I now owe Bank of America (or whoever owns the mortgage now) a VERY large sum of money. Enough to buy a small house. Literally.
Would it be in my better interests to declare bankruptcy at this point? Especially since my credit has already been shot to pieces (so it’s not like I have much to salvage)?
My major concern is, of course, medical school. I spent some time online this afternoon looking into this issue, and most of the information related to bad credit, bankruptcy, and medical school had to do with loans. Specifically, credit-based (i.e., GradPlus) loans.
I am aiming for MD/PhD, which is fully funded (both tuition and living stipend) so I shouldn’t NEED any loans, not even Staffords.
I do know, however, that many medical schools require a credit check. What isn’t so clear to me is how this is used, and what the implication is for MD/PhD.
Then again, as I said, my credit is terrible as it is, so perhaps this post is a moot point anyway. sigh
Help? Anyone?
Even if you don’t have any financial advice a little encouragement at this point would be much appreciated. It’s been a rough few days.
Well
I have no solid advice, other than my neighbor declared bankruptcy and seems to be doing fine now (OK, a 6 fig job helps).
How far away are you from Med School? Of course the issue will be your credit score, but I don’t believe this is part of the info to get you in. Can you get BOA to restructure the loan, and perhaps keep paying until you get in Med School, at which time perhaps bankruptcy wouldn’t affect any chance?
It seems that you are going through tough times. These will make the happy moments worth living. Hang in there. As an aside, I grew up in a family where both parents never had a job, with 5 kids! My dad had to play with debt all of his life and he always told me: what is the worst that they (bankers) can do? They will not take my head off for that!. So life goes on."
In any event, I wish you the best of luck.
Is there some sort of agency or company that you can contact to talk about options? I know they exist in Canada so they’ve got to exist here.
Grad Plus loans are tricky. Can you talk to the financial aid office of a school, or a professional financial advisor? I think this is an area where professional advice is a good thing.
I have similar concerns. I had a VERY bad three year marriage during which my ex-husband fleeced me for thousands and thousands. Add to that two periods of unemployment, 5 major surgeries and accompanying medical bills, 2 repossessed cars, and at least three judgements garnishing my wages and I have a credit score of about 2. My husband and I make enough to live month to month. Believe me, there is no frivolous spending. I am trying to just pay what I can when I can, but it is doubtful that I will fully rise out of the hole prior to needing to borrow for med school. I have wondered about bankruptcy as well and how that would be looked at in terms of school loans and debt. I was told by the place that financed my current car that the blessing was that my credit file was THICK, indicating history, both good and bad, but at least history, and that is often favorably looked upon. Right now the only big thing I have going for me is the full payment of my student loans. Everything else is horrible credit wise. I am pretty accepting of this, as I have had a 756 credit score in the past, have paid off three mortgages, have paid off 5 cars, and know I CAN do well, it has just been life circumstances that have taken a toll since 2007. Social workers do not make great salaries, add crappy circumstances and you end up just one paycheck away…I am just happy to have a roof over my head, food in the fridge, the monthly stuff paid, and be able to just peck away at what I can, when I can. But I wonder what it does to your viability for student loans if you do file bankruptcy??? It would be nice to know…
For one, do not put all your eggs into the MD/PhD program. I don’t say that to be mean but just to say that you should go into this assuming that you will need some type of loan for med school. I would definitely seek out a financial aid professional or investment pro. I’m in a similar situation where I own a condo and I’m so upside down in it ain’t even funny.
Save bankruptcy/foreclosure till you’ve exhausted every single possibility. Once you’re into a MD/PhD program then have at it but till then tread softly.
Thank you all, for your posts. This is why I love OPM. 
To clarify - I have already been foreclosed on, and my house sold at a cash auction last month. So my credit is already in the dumps. Not much to do about that right now.
I’m pretty sure I would not qualify (on my own) for a GradPlus loan as it is, at least not without a co-signer. And finding a co-signer right now would be rather difficult. I had a family member co-sign on my post-bac loans, but he told me when he co-signed on the second year of loans that that was it. I don’t really have any other options of finding a credit-worthy co-signer.
To answer your question, Redo-It-All, I will be applying in June of 2013. And given my current job/income situation, I can’t really afford to pay anything to B of A. I’ve even had to put my post-bac loans into deferment (which I really didn’t want to do, since they will be accumulating loads of interest) for the same reason.
Croooz, as I said, I have already been foreclosed upon. So I can’t do anything about that. I understand what you are saying about not putting all my hopes on being accepted into an MD/PhD program. I have thought about that, believe me. That said, I sincerely believe that I am a competitive applicant for these programs, if I get my MCAT goal score (which I do know is no guarantee).
I completely agree with all of you who said that I should seek some sort of professional advice. (And not from a bankruptcy attorney, who is just going to tell me that of COURSE I should declare, so they can make money!)
Funny story, I ran into my old realtor on Tuesday morning at my polling place when I went to vote. She has worked with my family literally since I was 5 years old - she helped my parents buy and sell two different houses, and then my ex-husband and me buy our house several years ago. She’s one of those people who knows EVERYONE in the near-West suburbs of Chicago where I live. Plumbers, lawyers, contractors, you name it. (She recommended my divorce attorney to me.) I pulled her aside, told her my situation, and she gave me the name of someone to talk to. My realtor trusts this person, and I trust my realtor, so I think I will get some sound advice, at least from a financial perspective.
I left this person a message Tuesday evening, and hope to hear back soon. I’ll post an update when I do …
Do let me know what you find out!!
I spoke to a financial advisor at a medical school today and asked this specific question - “how does bankruptcy affects medical school admissions?”
His answer:
Bankruptcy has NO bearing on your admission to medical school. NONE. ZIPPO. ZERO. The admissions committee should have no knowledge of your credit.
Once you accept and start the loan process, this is where it will come into play. As already stated, the Grad PLUS is a federal loan that has a credit check, so you might have issues with that.
Each school is different with what loans are required to cover the costs, so check with your school. Some schools may have Stafford cover the whole cost, so you won’t need a credit check.
Some times you may need a co-signature with your loan if your credit is bad, but you’d have to find somebody willing to sign for 4 years.
And the biggest take home point - Private Loans = BAD for many reasons which I won’t go into here.
I hope that helps.
Ah okay. Well with Bankruptcy there are two the 7 & 13. I know they made it difficult to file the 7. The 13 is the debt repayment option. If I were to do it over again…I would have filed the 7. The 13 is not viewed any different…they are both bankruptcies.
How it affects loans…well it does have an affect but it’s kinda tricky. With the 7 some loaners figure you can’t file for another 7 years and you have all your money so they might take a chance. With the 13 they don’t. They know that you’re still paying back debt so you don’t have that much income. I don’t know about GradPlus and how difficult that is. I know for seminary it was a breeze so I think a lot has to do with the Financial Aid office and their aggressiveness. I would think a med school would have an aggressive office…I have been know to be wrong however, just ask my wife.
In the end there is always money for med school. The problem is the interest rate you will be charged…
Above all, just make sure you do talk to someone first before making a decision. The National Foundation for Credit Counseling is a good place to start. It’s nonprofit and recommended by the U.S. government (for whatever that’s worth.)
http://www.nfcc.org/, 1.800.388.2227
Hanging in there.
I was reading somewhere that you should not look at your personal bankruptcy using your emotions, but rather like the business would do. It is what it is … a business decision to cut the losses and move forward. To make the right decision, you need to talk to people who will be making those decision, i.e. financial offices of your target medical school. Call them and discuss your current situation and ask for an advise (do not disclose your name, of cause).
At the same time, this experience should be a great leaning opportunity for you. Hopefully you will not make the same financial mistakes in the future. I do not judge you, but would be uneasy trusting professional opinion of the doctor who does not make sound financial decision in their personal life.
There are some very good answers to these questions on the site Fin Aid…
I funded most of the lawyer’s fees for my parents to pursue chapter 7 after Sprint laid my dad off a few years from retirement (a class action lawsuit followed that infamous layoff). He cashed in his 401k, took the losses, and started a carpentry business with a partner…the partner turned out to be a scumbag (go figure…he was a trusted family friend) and left my dad high and dry (he left with company tools $$$). The business went under completely just as the housing bubble started to pop a few years ago. They’re struggling just to make it, and I mean balogna-for-dinner struggling. A lot of what they make goes toward maintaining the bankruptcy status (in the state of MO)…bankruptcy isn’t cheap, it’s broken them financially. Their credit is trashed, and all they have is their vehicles (paid for!!) and their mortgage. They fight really hard to keep what they can (barely) afford, but this was the last of the last options, and about 8 years in the making. Seeing what they struggle through, I would advise against it at all costs…even if it means delaying med school for a couple of years. If this is what you are facing, start cutting back now - I mean really cutting back - to avoid it later. We are (slowly) inching out of the recession, so lawyers, banks, courts, etc are not as willing to work with people as they were a few years ago when things started looking bad and it was more cost effective to give people leeway.
There is a bit more involved than just cutting your losses…your obligation will move from the owners of your debt, to the courts. Attorneys will appeal on your behalf, and it costs a ridiculous amount of money, effort, and it will drain your psyche. The state will do everything it can to ensure that you are legally eligible, and (in the case of chapter 7, at least) will demand everything you have as a liquid asset to fund the process. It is incredibly tough to go on as things are, but it is incredibly tough to go through with bankruptcy. After bankruptcy - and this is after the creditors quit hassling them - my dad literally looked at me one day and said “there is nothing in life that I care to do anymore. I’m just done.” This is someone who fought his way from burger king to a top telecom field tech for Missouri’s 3rd largest city, a guy that can point out to you a dozen cities on the west coast for which he built the data networks by hand, back when the internet was blooming out of the coporate telecom industry. It has crushed him and my mom.
It’s tough. Helping fund my parent’s bankrupcty put a huge strain on my new marriage, and it’s still a sore issue that we don’t bring up if we can help it. It hurts everyone involved, but do everything you can to, and focus everything have on, avoiding if you can. It may save you from debt legally, but it will cost you everything you have like you wouldn’t believe.
- Olivia Said:
It's a little hard NOT to hear judgment in those words. And I find it quite unfortunate, as well as troubling, that you seem to have jumped to conclusions about my situation without knowing any of the details of why I (like so many other people in this country) am at this decision-making point.
When my husband (now ex-husband) and I bought our house, we did so quite responsibly. We both had very good jobs, and did not overextend in terms of our mortgage payments as compared to our incomes. In 2009, I got laid off. If you will remember, the economy was (and still is) in an incredible amount of turmoil, and jobs were few and far between. That was especially the case in the field where I was working (publishing). Then my husband lost his job. I don't know if you have ever tried to make ends meet on unemployment, but it is quite difficult. It was literallly groceries or mortgage. Was it a mistake to choose the former? I don't think so. Then my husband decided he wanted a divorce.
This was not at all how I imagined my life would unfold. I pictured growing old with my ex-husband, and living in that house for some time (obviously paying the mortgage). But life circumstances - which were completely out of my control - turned things upside down.
It has been an intense challenge to turn my world right-side-up after all of that, but I have done so. And at the same time all of this was happening, I excelled in my post-bac classes and continued on my path to medical school. I believe my perseverance in this very difficult situation says much more about my future capabilities as a physician than my current financial situation.
Has this been a learning experience? Yes, of course, as all of life is. One thing I have learned is that bad things can happen to good people. When they do, you have two choices: to wallow in despair and let yourself be defeated, or to pick yourself up and move forward. I chose the latter. In reality, I think my recent struggles will make me a better physician, because I can empathize - honestly - with some very difficult experiences, which my patients will likely have experienced as well.
I realize I have gone on a bit here, but the comment I quoted here, and responded to, illustrates that there still remains in this country a great stigma, and tendency to assume and judge, toward people who have been battered by the economic collapse. I don't usually take up controversial issues like this on OPM, but in this case, I felt it necessary. Both for myself, and for others on this site struggling with financial issues.
Now that that’s out of the way, I want to respond to some of the other posts on this thread. (And to thank all of you, once again, for your comments.)
@Doc Gray - Thank you SO much for your post! Your words absolutely warmed my heart, and made my day. I really appreciate that you spoke to someone (and someone so qualified!) about this issue; that means a great deal to me. I feel much relieved.
@croooz - I have looked into both chapter 7 and chapter 13, and I believe with my income level I would likely qualify for chapter 7 (based on the Illinois median income level and means test). I would definitely go that route if at all possible.
@Tallulah Philange - I do indeed plan to talk to someone before I make a decision. I really appreciate your sharing that resource on this thread! I will look into it further, and perhaps give them a call.
@Vicki V - I will also check out that site. Thanks!
@Jfowler - I am so very sorry to hear of the toll that helping your parents file for bankruptcy took on all of you. Thank you for sharing your story here. I will definitely take your words into account. I think everyone’s experience is different; I have a friend who filed for chapter 7 a couple of years ago, and for her, it was painless. It seems there are many factors that are in play, which is why it is so important to talk to someone knowledgeable on the subject.
Thanks again, to all of you, for your comments, help, and stories. As I said before, this is why I love OPM. I will continue to look into this issue, and keep you posted …
There are other considerations that need to be addressed. Talk to a real estate attorney, even if you need to pay him/her for the visit. Is there a deficiency judgement allowed in your state? Does it require a judicial foreclosure to enforce it? Did you have a judicial foreclosure versus a NON juducial foreclosure? Is there going to be cancelation of debt causing you to owe taxes on the cancelled debt to the IRS? (accountant-CPA for this one) You need to look at the big picture and not just getting a loan or into med school but how deep in debt can this get you? If you end up owing the IRS you cannot even BK on that later. If you BK now then you will owe ZERO cancellation of debt. Alot to consider and no judgments by anyone here. Do talk to as many people who are proffesionals as you can and make sure they know what they are talking about and can show you in WRITING. I know too many who seem to spew out garbage and still hold degrees and jobs in supposedly aiding folks like you. Important is the laws of the state your house was sold in/owned and they type of foreclosure they used. The other is potential income tax debt from the difference. You have to handle this in the SAME year it was auctioned/sold–do NOT wait to find out about this. You may have NO choice but to declare BK. GOOD LUCK!!!