Buying a New Car After Bankruptcy (and Foreclosure) – Part 1

This is not a sponsored post. All information and data is from my opinion and experience.


I filed for bankruptcy last year and was officially discharged in October 2011. It was a heartbreaking decision but was something that I needed to do to protect myself from an unwanted foreclosure. Doing a lot of research on the repercussions of the bankruptcy and foreclosure on my credit, I knew I was in for some pain points in my life in terms of getting new credit, loans, etc. for years to come. Even applying for a new apartment application hurts the pit of my stomach as I wait to be rejected due to my credit history.

What I think is the most frustrating is that I have great employment history, being at my company for over 11 years, I make a decent amount of money and now have limited debt (just my car and student loans) so I have a great debt to credit ratio. You’d think with all that positivity, that my chances of being granted some form of loan or credit would be good, but when you have a bankruptcy in your recent history, that’s just not the case. The good news is that I no longer have credit card debt or unsecured loans. I live on the cash I receive from my paychecks and am able to put a good amount of that in savings every month.

The bad news is that I kind of need a new car. (I’ll explain “kind of” in a little bit.) And because of that, I’m unable to qualify for a loan for at least another 14 months. Just to try and start the process, I contacted a local credit union that was running an awesome APR rate for new car loans…just to see what they would say. After running my credit (and I even slapped JP on the application, hoping that would help) an answer of “No” came 3 business days later…mostly due to the bankruptcy on my credit history. My credit score rose a bit from my October 2011 discharge from 597 to 623 so that shows some good progress, but even the credit union said I would need to be two years out from the discharge and prove that I established new and positive credit history. The only way to do that right now is to pay a lending institution to give me a credit card. Check out Option #4 here. It’s called a secured credit card where you give the lending institution your money (essentially proof that you will be able to pay back debt because it’s a form of a deposit), and then can build your credit from there. Downfall is that you have to front your own money before being able to use “theirs”.

Here’s another article on the “best” cards out there to rebuild your credit. And by “best” we’re talking high interest rates, high annual fees and some of your own money up-front. The good news is that they will report your spending habits so if you stay on top of your credit card, your positive spending history will get reported to help boost your credit score and show other lenders that you’ve changed your spending ways which could help you qualify for a loan in the future, especially if you’re looking to get a home loan. The best home loans for those that have went through bankruptcy or foreclosure are FHA loans which can help people with low income or terrible credit get a home loan within 2-3 years of their bankruptcy or foreclosure, with a minimum down payment.

So that’s the jist of what I’ve been dealing with … the next part will be the Pro-Con-Pro of buying a new car and keeping the old, followed by “Was I able to get a new car?” and the outcome of everything! Stay tuned!!


Sallie Mae is under 40K!

Does anyone else have ridiculously high student loan debt? I do. I went to a private 4-year university, hoping to play softball, and ended up quitting the team my junior year. That’s a whole ‘nother story. But I loved the school and I grabbed a Bachelor’s degree in English (which I’m thankful everyday for my great job in HR to help pay the bills). I had over $46,000 in student loan debt (in actually may have been closer to $48,000) and cringe every time I make a $400 payment per month. Ouch.

Well, with my last payment, I am now officially under $40,000! Oh yeah, I’m at $39,829.77! What, What! I thought I’d never see the day! Now my eye is on that under 30K mark! I have a long ways to go!

Makin’ Moves

Woo hoo! My last month’s car payment has put my balance under 9k! Yes, I have a long ways to go but it feels great to have that number down from it’s original balance of $17,000. I’m hoping to have the car paid off by February 2013 which would be super awesome! I’m hoping that double payments will edge me closer and closer to that goal. You can track my successes by checking out my Debt Diary.

Have you ever paid off something big? I’d love to hear about it!

Sallie Mae is still the devil.

Awhile back (a WAY while back) I wrote on why Sallie Mae is the devil. It still is, but I did get a little reprieve for awhile. Going through bankruptcy all of my loans were put on hold. ALL of them. My mortgage (which I couldn’t pay anyways), my car loan, student loans, personal loans … it was all on hold. The way that student loans are actually put on hold though is that they switch to your co-borrower if you have one. Thus, my 75+ year old grandmother was pulled into the mix with constant nagging and phone calls from Sallie Mae attempting to collect on my account. I would contact Sallie Mae to let them know that my grandmother wasn’t going to pay and their own representatives told me that we shouldn’t pay on the account anyways.  Apparently their bankruptcy department and their collections department are never on the same wavelength.

Months and months went by as they tried to strong arm my grandmother into paying. Eventually the rep trying to collect was conveniently named “Ashley” so my grandma thought it was a ploy by Sallie Mae to trick her into thinking it was me. I think it was actually a rep named Ashley. Anyways, after my discharge went through on my bankruptcy I was told by Sallie Mae (only after contacting them directly) that to get the loans to switch back to my name and responsibility, that I needed to have my attorney write a letter with proof if discharge. Then it would take 30-60 days to approve and switch over. More waiting.

Finally, the loans switched back to my name and the calls to my grandma stopped. Hallelujah! But then I noticed that my balance was MUCH lower than it originally was. I was panicked because I knew they missed a $14,000 loan (the biggest one) and didn’t completely switch it over to my name. I was worried that the payment was going to just keep adding up until one day I would have like a $20,000 monthly payment included incurred interest. Yes, I’m a constant financial worry-wart. Wouldn’t you be? Two months worth of payments went by at a comfortable (a VERY comfortable) combined payment of $271 per month…a far cry from my almost $400 a month payment. I asked JP if I should contact Sallie Mae and let them know that they had forgotten my big loan but she said I was insane and to just enjoy my reprieve from that loan…it would show up eventually.

And it did. This month actually. B@$t@rd!! At least I had a good 5 months without any payment and even a 2 month break on the big payment but boy! was I surprised when I went to pay Sallie Mae today and saw that I owed them $398.03 for a balance of $41,185.18.  My hands flew to my head as I realized that they aren’t kidding when they put you in 20 year loans…it seems like it will take much longer than that to actually pay off.  So, my Debt Diary has changed to reflect the new balance. Good News? Well, this month I was able to apply for my first double payment on my car! Sweet! It was very worrying letting that much money go but also very exciting to feel that balance get paid down! I’m hoping that I’ll demolish that payment by January 2013. Also … it’s tax time! I’ve filed my taxes … have you??