Society smiles on “good” decisions– decisions that often follow certain rules– decisions that seem “right”, “correct” or “normal”.

These collective judgments are made on everything from nutrition to relationships to money.

But sometimes, the logical, sensible decisions just don’t work in real life. For some, conventional wisdom is anything but wise.

In this series, Financially Dumb, Personally Brilliant, we’ll meet many bold risk takers who went with their hearts/guts over their minds/wallets.

Today’s story comes from Good Nelly from My Way of Viewing:

Her Story:

Being a financial adviser and giving people suggestions about how to manage their finances effectively, doesn’t mean that I haven’t experienced debt problems in my life.  In fact, I ran into some problems with credit card and personal loan debt.

However, I have managed to overcome it and my journey built that passion to be a financial adviser.

I usually don’t suggest the financial moves I took to solve my debt problems, but somehow, it came into my favor.

Here is my personal debt story – my journey towards becoming debt free.

A little bit of background

I had quite a few credit cards. Whenever any credit card company approached me, I agreed to that offer and enjoyed the credit limit.  I made inconsistent payments.

Then, a financial emergency became my priority and I stopped paying attention to my credit card bills. Soon, the credit card debt became unmanageable. It was not possible to repay the credit card bills in full.

All told, I had accumulated $90,000 in credit card debt and personal loan (taken out for education).

Opted to settle 2 credit cards

I got a job, but I didn’t earn much and also didn’t save that much.

I could have managed to save some amount from my not so good salary, but I splurged quite a bit.

At that time, I was trying to make the minimum payments but missed some of them.  I had started receiving calls from the credit card companies.

As per the advice of my friend, Lisa, I decided to contact the credit card company and explain my financial situation.

Somehow, I was able to convince the credit card companies to settle my $6,000 and $5,000 debts for $3,000 and $3,500, respectively.

It took a couple of months for the final debt settlement agreement. By then, I had saved up enough to pay the cards off per the agreement.

Discussed with a bankruptcy lawyer and filed Chapter 7

I was skeptical about bankruptcy.

After all, I’d heard that it was a bad financial move and that no creditor or lender wanted to work with a person who had filed bankruptcy.  I also knew that filing bankruptcy would have a negative effect on my credit score.

However, my friend Lisa advised me to talk to a bankruptcy lawyer, so I reached out to one.

The lawyer told me that my credit score had already taken a hit and filing bankruptcy wouldn’t affect it much.  It would also be easy for me to qualify as I was laid off by then.

He analyzed my financial condition and explained some advantages of filing Chapter 7:

• I didn’t have so-called non-exempt assets that could be liquefied to repay my creditors. My assets (vehicle, necessary household goods) qualified under exempt assets.
• One thing I was worried about was that I was about to inherit a property within 7-8 months. I didn’t want to lose that. But filing Chapter 7 helped me because my credit card debt and personal loans were discharged within 4 months.

Deciding to file bankruptcy actually helped me financially. I had no idea that it would help me. But, thanks to my lawyer, he understood my financial situation and explained how it would help me.

So, that’s my debt clearing story.

The total effect on my credit score

Filing Chapter 7 bankruptcy helped me to get my debts discharged fast.  It helped me to start my financial life afresh.

But what about my credit score?

Well, by the time that I filed bankruptcy, my credit score had already taken a hit. So, filing Chapter 7 only reduced my score by about 70 points.

If your credit score is good, bankruptcy reduces your score more. Since my credit score wasn’t good at the time, it didn’t reduce it much.

Moreover, after getting the debts discharged, my credit utilization ratio became zero. So, in that way, it was beneficial for my credit score.

My financial moves after getting my debt discharged through Chapter 7

• Tried and failed and finally planned a realistic budget

I always used to run from planning a budget. But, my lawyer motivated me to plan one. I failed miserably in my first few attempts. But, then, I managed to plan a realistic one.

• Deliberately cut off extra expenses

I reduced eating out to twice a month.  I also cancelled my gym membership as I rarely visited the gym.

• Got a new job and this time I saved a certain amount

My budget helped me to set aside an amount from my monthly pay check.  I started an emergency fund, too.

• Ensured that I paid the credit card bills every month

I made a promise to myself to clear my credit card bills every month. If I had to buy an item, I used to wait until the next billing cycle.  It helped to clear what was due every month.

My experience with debt has taught me a good lesson in life.  It has also created my passion for personal finance, for which I am now associated with the Debt Consolidation Care Community.

So, all you people out there struggling to repay debt, don’t worry.  Take it as an important lesson in your life, which will teach you how to manage finances in a better way.

About Good Nelly

Good Nelly analyzes financial happenings and writes articles to help her readers stay aware and plan for their financial future. She has been associated with Debt Consolidation Care for a long time.  However, she has contributed her articles to other websites, too.

Visit Good Nelly’s Website: My Way of Viewing

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Stay tuned for the next installment of Financially Dumb, Personally Brilliant!

Did you miss the first two installments of the series?  Check them out here:

Income is Replaceable, Health is Not

My Race, My Rules