Yesterday I got the urge to see exactly how un-creditworthy I am and applied for an auto loan through eBay’s Financial Center. I hit “submit” and was instantly rejected for my loan–and I only wanted to borrow $6,000. Here’s what I think happened:

1. I just declared myself bankrupt and this site is for people with credit histories better than mine.

2. My primary income (from the university where I work) is low–less than $2,000 a month in fact. Even though my part-time job pays well and brings my monthly income over $2,000 a month, I don’t think lenders give it as much weight.

3. I’ve applied for credit more than once in the last six months.

4. I applied individually. They mentioned that getting a car loan with a trusted co-signer would increase my chances of being approved.

Normally I wouldn’t hesitate to ask my parents to co-sign for me, but since I am not telling them about my bankruptcy, I think they’d find out by looking at the loan paperwork.

After pouting and thinking about my failure for a while, I decided that if I want to buy a car I should save up a hefty down payment so I can keep my interest payments down. Also, waiting to get a car loan will give me time to check and correct things in my credit report.

It’s still hard to believe I can’t get a measly $6,000 car loan. When I think about all the extra money I will have to spend on higher interest rates and annual fees it makes me angry at myself for getting into trouble with credit cards. But at least that debt is gone. And I don’t think I could have gotten that car loan with my credit history BEFORE I filed chapter 7 anyway.

I keep telling myself that this whole experience is an opportunity to really fix my finances from the ground up, one step at a time.

I should stop feeling sorry for myself and concentrate on the positive: my $30,000 debt is gone, and I am able to saved money now!

After a long absence, I am back to blogging feeling refreshed and ready to write. And there’s much to write about:

1. On December 15, I attended my trustees meeting, the meeting with the creditors which is required for discharging debts in bankruptcy. It was a painless–really!–process that took 4-5 minutes. Seriously, I waited in the meeting room longer than my meeting with my trustee. After 5 minutes, the trustee said I was done. My credit card debts are discharged!

2. I started a plan to rebuild my credit score. I don’t want to be passive and let this bankruptcy problem keep me down. Earlier today I ordered my free credit report from annualcreditreport.com. The web site wouldn’t process my request online, so I had to use the telephone service which mails a printed report about four weeks later. I’m not sure why they couldn’t process my request, but at least I can say I did the leg work.

I should have my first free annual credit report from Transunion in four weeks. Starting four months from then, I will order a free report from each of the three credit reporting agencies (Experian, Transunion, and Equifax) every four months. I intend to regularly monitor my credit report and correct any inaccuracies.

3. I finally accepted one of the many, many credit card offers I have been receiving since getting my bankruptcy discharged. They only gave me a $300 credit limit. BUT–they have a 0% APR until September, 2006 and only charge a $39 annual fee for the “privilege.” Even better–the variable rate APR is only 14.9% after that, about what my other cards were charging after my finances started tanking a couple years ago.

I’ve read that to maximize the benefit of this credit card on my report, I need to make small purchases every month and pay them off in full. That shouldn’t be difficult considering the maximum I can be charged is $300!

Reading the fine print of the offer, I noticed that the company actually charges me for requesting credit line increases. I suppose that should be a cautionary tale for debtors: Once you screw up your credit, it will cost you money to fix it.

Last week I decided to declare chpater 7 bankruptcy. I was talking with my sister on the phone. It was one of our many conversations about our money problems. i thought it would end in the usual way, with one or both of us saying, “we’ll get through this, we’ll find a way to pay our creditors…” But this conversation was different.

She told me she had hired a bankruptcy lawyer and was going to file for chapter 7 personal bankruptcy. She told me the bankruptcy law was changing October 17, and that if you get your court papers filed before then, all your unsecured debts can be wiped out, expunged, or what the government calls “discharged.” But after October 17th, a new law goes into effect which makes it harder to get your debts discharged, and which forces debtors to pay more of their debts back. So the clock was ticking.

It wasn’t an instant decision. I didn’t know right then what I know now–that bankruptcy would be the right solution to my money problems. At first I was merely intrigued by the idea. I thought, “hmm, I wonder if it would be right for me, too?”

So I went out to my local Barnes and Noble and bought the Nolo book entitled How to file for chapter 7 bankruptcy. I read the book voraciously, trying to get my head around what filing would mean for me and my financial life.

Chapter 7 bankruptcy can stay on your credit report for up to 10 years, though it is possible to get a competitively priced large loan after about 4-5 years of steady credit repair and perfect credit behavior. So it is most definately a mark on your “record” but it’s not a permanent mark. I realized I wouldn’t be able to get a credit card for a while–maybe a couple of years. But then I thought, “I can’t use any of my cards anyway. I’m months late and over the credit limit on several of them. I have already ruined my credit score. At least by filing bankruptcy, my debts are gone, leaving me with a fresh financial start, without the burden of having to repay those debts, which are cumulatively the worst mistakes I ever made. I am glad people are allowed to file bankruptcy. I needed a fresh start, a chance to prove myself, a new phase. Filing bankruptcy will allow me to write a new chapter of my life; it will be a story about a guy who was given a second chance, and who made better decisions the second time around.