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Thread: Almost laughable... bank

  1. #1
    AudreyLeigh
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    Default Almost laughable... bank

    So... I go into the bank and ask about a secured credit card to start building my credit. I told them that my Ch7 just discharged and will I be able to get one. She said of course... and that Im taking a great step towards re-establishing credit... blah blah blah...

    So, I get a cashiers check and the paperwork and send it off. Happily waiting for my new shiny card.

    Nope. Today I receive my check back with a letter stating I cant get a SECURED card because of my bankruptcy.

    Isnt the freaking point of my getting secured is so that they have a security blanket in case I screwed up. I mean, geez, if I cant even get a secured card it looks like my trying to build my credit will be a LOT harder than I thought...

    So, since the chick at the bank was obviously a moron - is there a set amount of time after a discharge I should wait before trying again...

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    Featured Member former_LV_dancer's Avatar
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    Default Re: Almost laughable... bank

    I filed bankruptcy in 2001 after my divorce. I got a credit card last year. First one since the bankruptcy. I got a $300 limit and it's been increased to $600. I actually didn't even want the card, I filled out the app at a Yankees game to get the free blanket thinking....bah, they'll never send me a card......and then I get it in the mail! So....it was about 4 years till I got one. But prior to that I didn't even try and get a card because I got used to living life without credit cards and it was better.
    It's through HSBC Bank, they appear to be easy to get a card through if I got one without even really trying.

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    Default Re: Almost laughable... bank

    I'm not sure what the 'rules' are for credit cards, I know with mortgages, it was typically 1 year before clients qualified out of a chapter 7 bk. Banks are also often more difficult to get cards, secured or not, from than other sub-prime credit card companies. Hell, I had perfect credit and my bank wouldn't offer me a card for almost 3 years. I would think maybe 6 months to 1 year to get a card, and a store card or capital one (or other subprime card) might be easiest to get.
    I believe you Dottie and you have my support

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    Banned Melonie's Avatar
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    Default Re: Almost laughable... bank

    This is probably an 'unintended consequence' of the new bankruptcy laws which were passed last October. From the standpoint of a bank/credit card company, in the past if a cardholder went chapter 7 they could write off the loss after the bankruptcy was granted and it disappeared from the company's books in future years. However, under the new law, if a cardholder goes chapter 13 the company must carry the 'non-performing loan' for the 5 year period (or whatever) that the cardholder is required to continue making tiny payments.

    So while the tiny Chapter 13 payments provide a tiny bit of extra revenue, the 'downgrading' of the company's debt portfolio due to a stack of 'non-performing' Chapter 13 loans could increase the company's borrowing costs to provide credit to ALL cardholders, and could lower the price of the company's stock as well. Keep in mind that about 2% of American households filed for bankruptcy last year, so that over a 5 year period a bank/credit card company could potentially accumulate 10% 'non-performing loans' on their books (even higher if the company caters to the sub-prime market) if they just kept issuing new cards to everybody.

    To 'defend themselves' from accumulating too many 'non-performing' Chapter 13 loans in the future, and therefore seeing the company's 'cost of money' increase and profit margin decrease as a result, many lenders are unilaterally tightening their credit standards. One easy way to do this is to simply turn away new customers with a history of bankruptcy. Again, this is not about the bank risking losing money on one particular cardholder's future bankruptcy or not - it's about the 'downgrading' of the company's overall loan portfolio by having to carry 'non-performing loans' on their books for the 5 year duration of a Chapter 13 bankruptcy, and the peripheral effects that could have on company borrowing costs and stock price.

    Undoubtedly there will be some companies who are still going to specialize in 'high risk' credit cards ... like Providian and Capital One. I'd give them a try.
    Last edited by Melonie; 02-11-2006 at 05:13 AM.

  5. #5
    AudreyLeigh
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    Default Re: Almost laughable... bank

    Yea but this is a SECURED CC - I give them $300 - I get a $300 limit card... even if I do screw up they have the money to cover the costs... I dont see the problem...

    I just thought because for the last 2 years Ive deposited between $5-$7K in my account and NEVER bounced a check, overdrawn, screwed up at all that Id be in good standing. But that means nothing anymore. Doesnt matter how much money the money makes off me in interest they dont want my business... kinda pisses me off...

    I think Im going to go close my account at the bank and open one at a credit union - does credit have any validity on getting an account at say - Golden 1 Credit Union?

    I think Ill wait a few months and try Capital One. Im just so discouraged. Yea, I screwed up but now I want to build credit the right way and I have no patience to wait!

    Ill bet I could get a home loan before I could get a damn secured CC... LOL... its so ridiculous.

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    Banned Melonie's Avatar
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    Default Re: Almost laughable... bank

    Yea but this is a SECURED CC - I give them $300 - I get a $300 limit card... even if I do screw up they have the money to cover the costs... I dont see the problem...
    As I said, the problem has nothing to do with the fact that the bank might lose $300 (or break even on a secured credit card) because of one particular cardholder goes bankrupt (again). The problem has everything to do with an overall statistic that the bank's total loan portfolio has such and such of a risk rating. If one particular cardholder goes into Chapter 13 bankruptcy, it incrementally drags down the bank's risk rating for the next five years because that account must be kept on the bank's books for the duration of the bankruptcy. When the bank borrows more money from a 'bigger bank' in order to make future car loans, credit card loans etc to new customers, the existance of a higher risk rating could force the bank to pay a 0.1% higher rate of interest to the 'bigger bank'.

    However, having to pay 0.1% of extra interest on say 100 million dollars is nothing to sneeze at, nor is a decline in the market price of the bank's stock shares. Thus in the absurd case, that one extra $300 bankruptcy which puts the bank's risk rating into the next 'tier' can wind up costing the bank $100,000 in extra annual interest charges by the 'bigger bank' plus a $1,000,000 loss in market capitalization due to a stock price decline. Welcome to modern global finance.

    Ill bet I could get a home loan before I could get a damn secured CC.
    You're probably correct, and here's why ! Fannie Mae and Freddie Mac are both operating under directives from the FHA to encourage first time home ownership for the financially 'underpriveleged'. Thus if a bank writes you a mortgage loan, they can turn around and 'resell' your' mortgage to Fannie or Freddie thus taking that mortgage off the bank's books and transferring it onto Fannie's or Freddie's books. Thus the fact that the new homeowner winds up going bankrupt won't affect the bank at all, it affects Fannie or Freddie. But since Fannie and Freddie are gov't chartered, their financial 'ass' is covered (or at least they want investors to think that their 'ass' is covered).

    credit rating ... opening an account at a credit union
    Will a bad credit history affect your ability to open a new account at a credit union - no. Will a bad credit history affect your ability to obtain a loan or credit card from a credit union - you betcha. When it comes to risk factors, regulations, etc. the NCUA is even more adamant about managing credit union overall loan portfolio risk than commercial banks and S&L's. The problems for credit unions is lack of diversity i.e. most credit unions are overly affected by the financial health of a particular hometown industry which affects a disproportionately high number of credit union customers/loans. With some tragically large layoffs having occurred in certain plants/industries, more than a few credit unions have found themselves being hammered by say 15% of their total customers suddenly being all thrown out of work at the same time, with no way to make payments on their credit union mortgages and car loans. Thus the NCUA has stepped in big time to force local credit unions to 'resell' mortgages and to raise creditworthiness standards for future borrowers on all loans (presumeably including credit cards).
    ~
    Last edited by Melonie; 02-11-2006 at 10:23 AM.

  7. #7
    God/dess Deogol's Avatar
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    Default Re: Almost laughable... bank

    Quote Originally Posted by Melonie
    As I said, the problem has nothing to do with the fact that the bank might lose $300 (or break even on a secured credit card) because of one particular cardholder goes bankrupt (again). The problem has everything to do with an overall statistic that the bank's total loan portfolio has such and such of a risk rating. If one particular cardholder goes into Chapter 13 bankruptcy, it incrementally drags down the bank's risk rating for the next five years because that account must be kept on the bank's books for the duration of the bankruptcy. When the bank borrows more money from a 'bigger bank' in order to make future car loans, credit card loans etc to new customers, the existance of a higher risk rating could force the bank to pay a 0.1% higher rate of interest to the 'bigger bank'.
    You are missing the "secured" part Melonie. She can't leave them holding the bag because the money to pay for and close the account is already there.

    I would write the bank manager/president. Explain you keep thousands of dollars in your checking account and have been a customer for a long time. That yes, you did go bankrupt but where is the risk in giving a secured card? (It could be the bank doesn't do that too.) Ask him if it is better business sense to give someone a 300 or 500 secure card with no risk or to loose a deposit of thousands of dollars. Be sure to hand write this note.

    It might take a while to happen, but I bet it would.

    With that bankruptcy looming over you, you are gonna have to fight twice as hard as everyone else.

    I lived without credit for a long time. I think I came out the better for it looking around me at people who are up to their ears in debt. I learned ho w to lead a nice debt free life. The only thing that pissed me off was not being able to rent apartments from commercial companies.

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    Featured Member former_LV_dancer's Avatar
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    Default Re: Almost laughable... bank

    I'm not too keen on Capital One.....my bf has a Capital One card....well recentely we're online looking at the latest charges...there are 2 we did not charge. So after going through everything and knowing it wasn't anything we bought he called Capital One. Someone got his info...fraud. So he immediatly cancelled the card, they are investigating....we put a fraud alert on his credit reports, he called about protecting his SSN. Then he called the 2 mystery companies....well one agreed to put the money back in his account. OK cool. They other.....lets' put it this way....he never gets angry like this and he ended up hanging up and his last words were "fuck you". So one company is refusing to believe he was a victim of fraud. And this is even after a 3 way phone call between my bf, Capital One and the place the charge was made. So the charge has already cleared and he has to pay it as far as we know now! So Capital One doesn't fully protect you if you're a victim of fraud! It's not a huge amount of money but he's contemplating taking this company to small claims court. The company that the charge was made on is ccbill.com. They will not refund his account and are treating us like morons. Even though everything has been reported as fraud.

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    Banned Melonie's Avatar
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    Default Re: Almost laughable... bank

    You are missing the "secured" part Melonie. She can't leave them holding the bag because the money to pay for and close the account is already there.
    No I'm not. Secured or not only means a $300 difference to the bank. This is not about $300 and one cardholder. Having the bank's portfolio risk rating deteriorate because the bank must carry yet another 'non-performing loan' on their books for the 5 year duration of a Chapter 13 bankruptcy proceeding might mean a $100,000 a year difference in the bank's cost of funds, which is what this is really about.

    It's also questionable whether or not the bank could unilaterally sieze the $300 'deposit' and close the credit card account when a chapter 13 bankruptcy is filed first under the new bankruptcy law. Technically the $300 is an asset of the bankrupt person, such that a bankruptcy judge would have to decide whether the bank's credit card contract entitles them to 'preferred treatment' in the distribution of assets process, versus having to share the $300 asset with the bankrupt person's other creditors, and having to accept tiny monthly payments from the bankrupt person for the next 5 years like the other creditors. No matter what happens, the legal fees to the bank will vastly exceed $300, and the account can't simply be closed and forgotten about until the bankruptcy proceeding is finished 5 years down the road !

    The financial world gets more and more complicated every day. Being extended credit by banks is not a legal right. When faced with the prospect of maybe earning $50 a year on a new credit card account for a person with a poor credit history, versus facing possible increased costs of funds on all of the money the bank borrows, plus legal fees, plus accounting etc. many banks will now simply opt to send that person's business elsewhere.
    ~
    Last edited by Melonie; 02-11-2006 at 10:46 AM.

  10. #10
    AudreyLeigh
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    Default Re: Almost laughable... bank

    Quote Originally Posted by Melonie
    Having the bank's portfolio risk rating deteriorate because the bank must carry yet another 'non-performing loan' on their books
    I dont understand. I just filed Ch7 and theyre worried about me filing a Ch13 in what, 10 years?! And I dont get it. Why does it carry for 5 years? Is this because secured or not it doesnt 'show' as secured on credit filings? Confused...

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    Banned Melonie's Avatar
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    Default Re: Almost laughable... bank

    I just filed Ch7 and theyre worried about me filing a Ch13 in what, 10 years?!
    I'm not an attorney or a CPA or a bank board member (although I was once on the board of a Credit Union). All I can tell you is that it matters to the bank's risk rating whether or not an account is 'current' or an account is 'delinquent'. It also matters whether or not a bankruptcy judge will allow a secured credit card account to have its assets siezed by one creditor and erased from that creditor's books, versus whether that secured credit card account will have to 'go for the ride' along with every other type of account a person lists on a new bankruptcy filing. A chapter 13 bankruptcy proceeding now typically takes 5 years, with the person filing for bankruptcy being required by the court to make tiny monthly payments to all of the creditors listed in the bankruptcy filing - which is the reason all of those accounts cannot be 'written off' of the creditors' books until the 5 years of tiny payments are completed thus will continue to show up year after year when the bank's portfolio risk is reassessed.

    ... showing up as being secured
    In reference to a bankruptcy filing under the new law, this is a legal question without a lot of precedent. Bankruptcy law says that all of the bankrupt person's assets are supposed to be divided among all creditors. In the case of a 'secured' credit card, the $300 deposit or whatever is in legal limbo. Is it an asset which must be shared among all of the bankrupt person's creditors, such that the bank is only entitled to sieze a fraction of that amount ? Or does the bank's previously existing secured credit card agreement supersede bankruptcy law, allowing the bank to sieze all of that amount and close the account while other creditors get nothing ? If the $300 was say deposited in a savings account at the same bank, there is no doubt that it would have to be shared among all of the bankrupt person's creditors even if that person owed the bank on say a car loan, versus the bank being allowed to sieze the $300 out of a savings account and apply it to the person's car loan balance with nothing left to be split up among the person's other creditors.

    Again the biggest factor in the bank's mind probably has nothing whatsoever to do with breaking even versus losing $300. It has to do with the potential legal costs of dealing with a future bankruptcy and the potential higher costs of funds if/when the bank's portfolio risk rating deteriorates, versus the amount of profit likely to be generated for the bank on a credit card account with a $300 limit (with or without an extra $300 in an escrow account to secure the credit card).

    For the 3rd time this is not about your personal situation, it is about new bank policies which are supposed to be uniformly applied to all bank customers. Deogol is correct that your own personal situation, if conveyed to a bank manager, may result in the bank 'bending' their general policy on your behalf.
    ~
    Last edited by Melonie; 02-11-2006 at 11:16 AM.

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    Default Re: Almost laughable... bank

    Quote Originally Posted by former_LV_dancer
    I'm not too keen on Capital One......
    I agree with you that these cards aren't the 'best' as far as service, rates, or anything else for that matter. Unfortunately bankruptcy is used as a warning sign for creditors, so in order to get the 'better' cards, first she will probably have to get the crappy rate cards, cars loans, etc, and 'prove' that you can handle them. Then after her credit is built back up, it will be easier to get a better card, rate, etc.

    Audrey I love my Credit union, though I have never used golden 1. I'm not entirely sure whether it would be easier to get a card with a CU instead of a bank or not though.
    I believe you Dottie and you have my support

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    Banned Melonie's Avatar
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    Default Re: Almost laughable... bank

    I'm not too keen on Capital One
    Again playing devil's advocate, Capital One, Providian and the other 'sub-prime' lenders have to deal with much higher losses and much higher legal and accounting costs than your typical bank does, for the obvious reason that they cater to customers with lousy credit histories who are statistically much more likely to be delinquent in the future. Their cost of funds is also higher because of their lousy portfolio risk rating. So the way that these 'sub-prime' lenders are still able to make money is to charge as high of an interest rate as they can get away with, plus add every fee or penalty or surcharge they can get away with, plus deny every claim or chargeback they can get away with.

    These 'sub-prime' lenders get away with 'shafting' their customers for one simple reason as well ... if the customers don't like the way they are being treated they have very few realistic options open to them to take their business somewhere else. This is even more the case since the enacting of the new bankruptcy laws and new, stricter creditworthiness policies at 'top tier' banks and lenders.

    bankruptcy is used as a warning sign for creditors
    Under the new bankruptcy laws this is absolutely the case. Under the old bankurptcy laws, where people were routinely allowed to wipe out all of their old debts and where lenders were routinely allowed to wipe delinquent accounts off their books, it is arguable that persons seeking to re-establish credit after a bankruptcy were actually one of the most attractive 'markets' for credit card lenders. Unfortunately, that was then and this is now.
    ~
    Last edited by Melonie; 02-11-2006 at 11:40 AM.

  14. #14
    AudreyLeigh
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    Default Re: Almost laughable... bank

    I just went to the bank and took that money I was going to get the secured card with and opened a 4.25% CD... figured thats better than shoes...

    The lady at the bank said when someone files bankruptcy the secured cc $$$ is given back to the person. It is still their asset. It is then added with their other assets and may be used to pay off creditors in a Ch 13...

    I just looked at her like... duh - I cant file for 10 years and she said itd be easier for me to get a home loan then secured CC...and open a line of credit on the house (if i wanted) uh... ok...

    So I can secure a debt with a $300K house but not $1000 cash... OOOOKKKK

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    God/dess sxybrat07's Avatar
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    Default Re: Almost laughable... bank

    Well, part of the problem is actually that you CAN'T file BK again for 7 years. With new bk laws, it's fair to say that there will be a higher number of chapter 13 bk's than 7's. With a chapter 13 bk, at least the bank receives some of the money back. However, if you can't file, AND can't pay, then they bank is left 1. without the money they lent, 2. having to shell out money for collectors etc. While it seems ridiculous to be able to qualify for a house and not a card, if you default on the house, they sell it, and in an ideal situation, receive the funds back in a fairly short amount of time, with a possible loss. If you default on the card...well....there's not much they can do but ding your credit and annoy the shit out of you by calling/collections.

    Though, in all common sense sake, it does sound dumb lol.
    I believe you Dottie and you have my support

  16. #16
    AudreyLeigh
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    Default Re: Almost laughable... bank

    ^^ no. If i default on the card they have the $1000 deposit I had to put down and can take it back....same as with the house. Thats the point of it being secured so they must be looking at the long run because theyd be able to do that (close out the card and keep my $1000) WAY before I can file bankruptcy again (if i happened to default on payments)

    Its the same as having a house as 'security'... they have the $1000 for the $1000 card as 'security' or they have a house worth $300K for the $300K loan I took out on the house...

    I think youre looking at it from an UNsecured CC standpoint where if I dont pay they get nothing... but thats not what it is...

    I think they see it from a different standpoint than i see it... like Mel said

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    Banned Melonie's Avatar
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    Default Re: Almost laughable... bank

    If i default on the card they have the $1000 deposit I had to put down and can take it back
    Understanding that your specific case with a time limit on a subsequent bankruptcy filing might be different, but for people with poor credit histories in general ...

    Every other creditor besides the bank will be yelling FOUL to the bankruptcy judge if the bank attempts to do this ! Every other creditor will be arguing that any money belonging to the bankruptcy filer which is being held in an escrow account is an asset, which should be proportionally divided between all creditors the bankruptcy filer owes money to. Every other creditor will be arguing to the bankruptcy judge that any previous agreement between the bankruptcy filer and one particular creditor to deposit money in an escrow account as a security deposit does not give that one particular creditor greater rights to the bankruptcy filer's escrow account money than they have as fellow creditors once bankruptcy is filed and all previous agreements/contracts are in default. The point is that once bankruptcy is filed, all of the 'automatic' assumptions that a bank can seize escrow accounts or collateral in satisfaction of the bankruptcy filer's debts now become matters that the bankruptcy judge has jurisdiction over, and which the bank no longer has 'guaranteed' rights to.

    The lady at the bank said when someone files bankruptcy the secured cc $$$ is given back to the person. It is still their asset. It is then added with their other assets and may be used to pay off creditors in a Ch 13...
    thank you lady at the bank for confirming that escrow account security deposit money is considered an asset of the bankruptcy filer and 'fair game' for all creditors named in the bankruptcy proceeding. This also confirms that the financial institution that issues a 'secured' credit card actually has no additional security whatsoever if the cardholder goes bankrupt, since they can't simply seize the money held in the escrow account and may in fact only wind up getting 5-10% of that money on a pro-rated basis with other creditors as a result of the bankruptcy proceeding. This also explains why the creditworthiness of a new 'secured' credit card customer matters to the lending institution even though money will be deposited in an escrow account to apparently 'secure' the credit card debt.


    Your house example doesn't necessarily fly either under the new bankruptcy law. If the mortgageholder attempts to foreclose and keep all of the auction proceeds to satisfy the delinquent mortgage, every other creditor is going to be arguing before the bankruptcy judge that they deserve a pro-rated percentage of the auction proceeds in satisfaction of their own outstanding debt balances. Odds are that the mortgage holder is going to get first crack at the property or auction proceeds though because they are first in line with a lein on the property, plus additional real estate laws apply. A bankruptcy judge is going to have to specifically decide that the house will be auctioned though, as well as how the auction proceeds will be directed.

    This is actually a key 'behind the scenes' difference in real world effect between the old and new bankruptcy law. Under the old law, where all of the creditors could immediately write off 'delinquent' accounts as a loss and take them off their books, such things as escrow accounts generally weren't worth the legal fees to argue over. But under the new law, where lawyers are going to wind up in front of the bankruptcy court in any case, and where creditors have to 'take their lumps' and carry delinquent accounts on their books for the next 5 years, they might just as well take a shot at collecting every dollar they're legally entitled to.

    Again, I'm not referring to your specific case of a previous bankruptcy where you have a time restriction before you could file for bankruptcy again. I'm referring to people who have a bad credit history in general, and who could potentially file for bankruptcy tomorrow, which is the scenario most banks are now looking at when they formulate their new tighter creditworthiness policies.
    ~
    Last edited by Melonie; 02-11-2006 at 01:23 PM.

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    God/dess FrustratedBunny's Avatar
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    Default Re: Almost laughable... bank

    I got a credit card from Household Bank right after my Chapter 7 discharge and it's unsecured. I also got one from Merrick Bank. The interest rates are awful so I pay them off in full or keep only a small balance but they are both unsecured. Try reading on the www.artofcredit.com message boards. There is a whole section on there for rebuilding credit after bankruptcy.

  19. #19
    AudreyLeigh
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    Default Re: Almost laughable... bank

    Oh - Mel - I get what youre saying... when I mentioned the Secured CC vs. Mortgage I wasnt really talking about bankruptcy per say - just delinquency... and forclosure of property or them taking the deposit to put towards the non CC payments.

    The new laws seem to be screwing a lot more than people just wanting a clean slate... I didnt realize it went so deep into businesses and banks too...shoulda known tho - everything affects everyone in the long run...

    Thanks for the link Bunny - Im gonna check it out!

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    Default Re: Almost laughable... bank

    The new laws seem to be screwing a lot more than people just wanting a clean slate... I didnt realize it went so deep into businesses and banks too...shoulda known tho - everything affects everyone in the long run..
    Again not meaning to aim any bankruptcy comments towards you personally, but ...

    The previous bankrupcy law, which DID allow persons to be financially irresponsible, which allowed persons to burn through tons of borrowed money and then walk away with a 'clean slate' (financed of course by forcing financially responsible people to pay higher prices / interest rates to cover these losses), and which often allowed persons to wind up better off 5 years after a bankruptcy than financially responsible people who lived within their means the whole time (i.e. buying a million dollar house in Florida with borrowed money, going bankrupt with the house being exempt, and then later selling the house !), created a whole bunch of 'wrong' incentives for both individuals and businesses.

    The intent of the new law is to make both the individual, and the businesses that lend money to the individual, live with the pain of bankruptcy for several years after the fact, as well as creating a permanent disincentive to financial irresponsibility by making it impossible for the bankrupt individual to ever be treated the same way (or better) than if they had never gone bankrupt in the first place. Thus as you just discovered in regard to a 'secured' credit card, there is no longer such a thing as a completely 'clean slate' after filing bankrupcy.

    You are lucky in one sense though that you filed before the new law went into effect such that you were able to 'wipe out' all of your debts via chapter 7. Had you waited and filed under the new law (as all future filers must), then you'd be saddled with a court mandated monthly payment schedule to all of your old creditors for the next 5 years under chapter 13 instead.

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