Life After Bankruptcy – An Interview with Sam Parker of MyCreditGuy.com
Bankruptcy Can be a New Beginning if When You Know How to Recover Gracefully.
I had the pleasure again of interviewing Sam Parker of MyCreditGuy.com about life after bankruptcy. With student loans looming over so many folks, and credit card delinquencies and auto loan delinquencies up, this seems like a relevant conversation to have.
When the market crashed in 2008, ambulance chaser bankruptcy attorneys came out of the woodwork in full force. I have talked to hundreds, and probably thousands of folks that were misinformed about what Bankruptcy means, and how to recover gracefully.
I am hoping that this conversation will help prepare anyone that finds themselves in this precarious situation.
In this interview, we cover:
- Protecting Consumers
- Meet Sam Parker – MyCreditGuy.com
- Life After Bankruptcy
- Rebuild Your Credit After Bankruptcy
- How Secured Credit Cards Work
- Fix Inaccuracies on Your Credit Report
- What is a MOP Rating?
- Options are Limited to Loan Officer Experience?
- Credit Scores After Bankruptcy
- Buying a Home After Bankruptcy
- Buyer “Be Aware”
- Working with Professionals
I hope you enjoy this conversation as much as I did!
Scott Schang: Well, thank you everybody for being here. I’m Scott Schang, branch manager of BuyWise Mortgage, a California mortgage broker and founder of FindMayWayHome.com.
The reason I started Find My Way Home 10 years ago is really to have conversations and to talk about the insider stuff that consumers don’t always get to hear.
I run into this situation quite a bit lately where some of these big companies, I’m seeing all of these things where consumers, I feel like they’re being taken advantage of. Sam, you see this all the time.
It seems like it’s buyer beware, but I hate that term because I think it’s ignorant because smart companies can always outsmart uninformed consumers.
This is about buyer “be aware” and that’s what we’re trying to do here is to help you be aware of these things. That if somebody is trying to sell you something, they’re not going to tell you the truth. They’re going to tell you what they want you to hear in order for you to write them a check and do business with them.
Sam Parker is a friend of mine. He runs a credit restoration company and the reason I make that distinction is because there’s a lot of companies out there that call themselves credit repair companies.
I think 99.9% of them are scams. I’m not in the business so I can say that without a lot of fall back. Sam’s business is a family run business and they absolutely care about consumers in a crazy, crazy way. I guess, let me introduce Sam, welcome. Good morning and thanks for being here.
Meet Sam Parker – MyCreditGuy.com
Sam Parker: Yeah, absolutely. Thanks so much for having me. I appreciate it. I love the mission that you’re on and the passion that you have for educating consumers so that they can make an informed decision and not be taken advantage of. I’m always happy to participate in any way I can Scott, thank you.
Scott Schang: No, I love it and it’s great because you give me stuff to talk about. Sam sends out, so Sam’s primary business in the past has been working with mortgage lenders and loan officers like myself to try to help consumers get their credit where they need to be in a short period of time in order to qualify for a better loan.
What Sam has created here is the complete opposite of every other business model for credit repair out there because their whole goal is to get you on the hook for $75, $95 a month for as long as they possibly can, and that’s their business model. Sam does not operate that way.
He’s just a straight up legit small business owner looking out for the consumer. That’s all the more reason why all of us entrepreneurs got to get together and try to have a louder voice than what these people that can spend millions and millions of dollars try to convince consumers to things are other than what they are.
Life After Bankruptcy
Boy, it’s probably been, it was 2011 when I started writing about bankruptcy, going through bankruptcy, having foreclosures, short sales. It was right after the crash and I really dove into that topic a deep and I’ve been working on this stuff a lot.
Now Sam sent out a video the other day about life after bankruptcy and I think we’ve had this conversation but you brought up some really good things.
I want to have this conversation again because we’re starting to see in the news now, it’s not necessarily inflationary, but we’re kind of back to a normal market, like a normalized market and we’re not experiencing the inflation now, but in a typical economic cycle you’ve got inflation and it’s followed by mild recession, and then it’s up and down.
It’s cyclical and we’re starting to see auto loan delinquencies go up, we’re seeing credit card delinquencies go up, and we know that we’ve got student loans that are lingering out there. That’s basically just a tsunami of debt that nobody knows what they’re going to do with.
Sam sent out this video about life after bankruptcy and I wanted to get him on here, pick his brain, share this stuff with you because it’s absolutely relevant and I think the most important, probably the most valuable or the most important piece of this is the life after part because I think actually, Sam, why don’t you start?
Because you really, I like the way that you try to remove the stigma. That’s the most important thing.
Sam Parker: Well, and that’s the unfortunate part of it is that everybody is so worried about the way that they look to their neighbor or to strangers. For some people that’s the reason that they got into this situation where they need to file a bankruptcy is that they were trying to keep up with people that really at the end of the day don’t matter.
Right? It’s your family that matters-
Scott Schang: Joneses?
Sam Parker: What’s that?
Scott Schang: The Joneses?
Sam Parker: Yeah, exactly.
Scott Schang: Keeping up with the Joneses?
Sam Parker: Always getting us in trouble and what most people don’t know is that the Joneses are about to file a bankruptcy also because they were trying to keep up with the Smiths. You know what I mean? The thing about a bankruptcy is that it’s a fresh start.
Some people need that because their kid got sick and they couldn’t keep up with medical bills. Some people need that because their business went under unexpectedly. Some people need that because they made really bad decisions too.
What it all comes down to, I believe, and not to get too philosophical here, but at the end of our days who’s going to be around you? It’s your family, right? It’s your close friends. What I ask people is how productive of a family member are you being right now?
How productive of a community member are you being when you’re drowning in debt? What’s your marriage like? Most marriages end in large part due to financial problems, arguments, misunderstandings.
Scott Schang: Stress.
Sam Parker: Yeah, stress just created by that. I want to normalize getting back on your feet and in some cases that to bankruptcy. Now, just to kind of go into a little bit more depth for those people that don’t have that much experience, there’s a chapter 13 bankruptcy, which is a restructuring of your debt.
That’s basically if you make too much money to wipe out all your debt. Okay. Then there’s a chapter 7, which is the more common option. What that is is you go into a bankruptcy attorney for anywhere from $1,500 to $2,000.
They file some court motions, they include the debt that you owe that are bankruptable, which are non government back debts like student loans and tax liens you cannot file bankruptcy on, but besides that most debt, if the numbers add up or don’t add up, then you can file bankruptcy on that.
Usually in a matter of a total of a two to four month process you can go from being drowning in debt and not knowing how you’re possibly going to pay your bills or get food in some cases if it’s that extreme, to being basically debt-free, learn your lesson, and we’ll go into more depth on that, but then start over and really be able to focus on the things that are important.
It’s a get out of jail, not free, but very cheaply option for you. You could only do it every seven years so it’s not like you can do it every year or anything like that and you shouldn’t do it every seven years, but it’s there for ya for a number of reasons.
Scott Schang: Yeah, it’s an unbelievably valuable social safety net and it’s incredibly valuable and you can’t abuse the system. There’s a judge that determines whether or not you’re financially insolvent.
Sam Parker: Right.
Scott Schang: Actually I have an interview coming up in a couple of weeks. I have an attorney friend of mine that’s getting student loans wiped out and we’ll go into that a little bit. In bankruptcy it’s not what you think exactly, but this lady is amazing and we’re going to talk about that.
Yeah, no, you’re absolutely right, Sam. I mean, people get, you named a lot of reasons why people can get into bankruptcy. The most important thing I think is that crummy things happen to good people all the time.
It’s not like you just get hit upside the head with it. Sometimes it’s a slow roll. It takes a long time to get you into that situation. You needed a little help here. You stumbled along the way here. Kind of charged up your credit cards, couldn’t get them paid off. Something else happened.
You needed another credit card because you had a family emergency. Next thing you know you turn around you got tens of thousands of dollars in debt and things aren’t great. Family life isn’t great. Like most things that we fear, the fear is far worse than the reality.
Sam Parker: Right.
Scott Schang: Right.
Sam Parker: In this case because what are you afraid of? Not being drowning in debt, being able to start to save for retirement, being able to teach your kids fiscal responsibility?
What is it, the end result is if treated the way that it should be is amazing. Just learn your lesson or plan a little bit better for those worst case scenarios and then just live a great life. You probably have quite a while to live. Why spend a lot of your great years just digging out from mistakes when there are other options?
Scott Schang: Obviously we’re not advocating bankruptcy here, but what we’re saying is if you get into a situation where bankruptcy is an option it’s a very good and it’s a very safe option and you should not have any emotional reservations about filing bankruptcy.
Okay, Sam, so you built up my courage. I feel great about filing bankruptcy now. I pulled the trigger, I got it done, now what? Am I just automatically perfect? Not really, right?
Rebuild Your Credit After Bankruptcy
Sam Parker: No. A number of things. First you need to rebuild credit, you need to reestablish credit, and you need to learn your lesson. Let me first and foremost learn your lesson because like you said, we’re not advocating bankruptcy. It shouldn’t be something that somebody has in their life plan of, I’m going to do this and then, hey, I can file bankruptcy.
Again, what Scott and I are trying to say is if you’re in this position, either through no fault of your own or through bad decisions and you’re ready to lead a different life, it’s there for you. Now, first and foremost, when I say learn your lesson, it means do a budget.
Okay? You need to go through and see what you actually make and what you actually spend and then make adjustments if necessary. You might say, my gosh, for the life I want to live, even for the basic stuff I don’t make enough money.
Okay, well then you need to make some career choices. Either a different job, or an additional job, or if you don’t like the way that sounds then you’re going to have to cut back on the other side of things, on the spending side.
There has to be a give and take somewhere and you gotta put it on paper. When you put your goals on paper you’re exponentially more likely to achieve those goals. The same thing goes with a budget. You have to have a goal of what you’re going to bring in, what you’re going to spend, and what’s going to be leftover.
Okay? That way you don’t get back in the same position.
You also need to reestablish credit. Once you’ve wiped out all your credit you can’t do the thing where you go, okay, well that was scary. I’m just going to do cash the rest of my life because you’re going to need an awful lot of cash.
If you’re in California where Scott is and you want to get, I mean some of the houses I’ve seen in California that I see like $1.1 million on them I’m just like, oh, my gosh.
Scott Schang: That’s a first time buyer home in California.
Sam Parker: Yeah, I mean, that’s the reality there.
Scott Schang: It’s stupid.
Sam Parker: Yeah, it is what it is and you’re gonna, if you want, unless you’re going to have $1.1 million to buy that house you’re going to have to borrow from a bank and the bank is going to want to see that you can use credit and use it responsibly. You need to reestablish credit.
Now when I say that, trust me, I will give you plenty of marching orders to go along with it. I’ll tell you what credit card to open, how much money to use, how to use it, how often do you use it, that sort of thing, because we need to get your brain a little bit different.
Credit cards are not money, credit cards are tools to build your credit. Okay, so you’ve got to reestablish it.
Scott Schang: Yeah, I highly encourage, Sam and I did a whole series of videos and I think we talked a lot about the credit cards. I believe we talked about credit cards and managing that data, and how many credit cards, and the balances, and things like that.
Real quick, just so that you don’t get a million calls from all over the country. I would like to think that we could get this much exposure for this message, but real quick how do you, you said the right kinds of credit cards and using them the right way. Super quick. What does that look like?
How Secured Credit Cards Work
Sam Parker: I like to start off with secured credit cards, okay? They have a safety net built into them and you just kind of, walking before you.
Scott Schang: Secured is you send them $500, you get a credit card with a $500 limit.
Sam Parker: Here’s the one that I like. We have a card that we promote called the credit builder card. The reason that we love it is that a reports to all three credit bureaus, it’s only $200. You can get up to two of them at the same time so you can really start to build credit quickly.
Scott Schang: Wow.
Sam Parker: Yeah, and then it reports to credit really quickly too. Where most credit cards can take anywhere from one to three cycles to report, so up to anywhere from 30 to 90 days to report, this thing is usually on credit anywhere from two to three weeks.
We can start establishing credit faster, building credit faster, and then the reason I like these is that they’re stepping stones because what a lot of clients do after bankruptcy is they set themselves up to be taken advantage of because they’re desperate. Who will give me credit? With this you don’t need to be desperate.
You go out and you get a $200 credit card with not a ridiculous interest rate like you’re going to get hit with by the regular credit card companies or credit building companies when you’re trying to get what’s called an unsecured card, which means you didn’t put any money up.
For just 200 bucks you can get just a much better, less predatory deal where now you use this $200 card as a stepping stone.
You make sure you’re making your payments on time cause there are still payments with secured cards. Okay. Then you make the stepping stone. Now I have a $650, so now I have a $680. Oh, I get it. I make these payments every single month.
This is easy. Okay, cool. Then let’s talk to a more traditional bank at that point where you can get that credit card at 8%, have $1,000 limit, and now you’re learning your lessons and rebuilding credit, and you’re using these cards with a truth game plan in mind strategically instead of just, oh, I have $1,000 on this, that means I can buy $900 worth of stuff I don’t need.
It’s just a totally different mindset that needs to be established when dealing with credit cards.
Fix Inaccuracies on Your Credit
Scott Schang: That’s a little bit of moving forward. Let’s take a step back though, because one of the things that I see over and over again when we’re working with people that had bankruptcies and things like that, two things I see very, very common.
The first thing is all of your creditors, while you’re falling behind, they love to report the lates. They’re super quick to report the lates and all the derogatory stuff, but sometimes after you file the bankruptcy and they know they’re not going to get paid they’re not always reporting accurately.
Sam Parker: Yes.
Scott Schang: There’s stuff, there’s just junk on your credit report that shouldn’t be there. You’re encouraging, well, the first, in addition to building new credit you’re also kind of going back and looking for some land mines and trying to clean up your old credit report as well too. What does that look like?
Sam Parker: You really have to, otherwise, as you’re trying to build credit you’re going to be being judged on, basically like a pre bankruptcy credit report and I’ll explain, okay?
Scott Schang: Inaccuracies.
Sam Parker: Yeah, exactly. Once you file a bankruptcy the dollar amount of the debt that you owed should be zeroed out. Right? Sometimes that doesn’t happen, but most of the time it does.
Scott Schang: Right.
What is a MOP Rating?
Sam Parker: There’s going to be a note that says account included in bankruptcy. Then there’s going to be something that consumers never see and that’s called an MOP rating system. Lenders will see it on their credit reports if they’re set up to from their credit vendor.
I have a whole video on the MOP rating that I can provide also. Anyway, it’s this kind of secret rating system that goes zero through nine. Zero means it’s unrated, an item is unrated or not impacting your credit score. One means that it’s on time.
Two means it’s 30 days late. Three mean 60 days late up to a seven is a bankruptcy, an eight is a repossession or foreclosure, and then a nine is bad debt, charge off, collection, profit and loss, things that you would file a bankruptcy on. Right?
What happens is that the wording and everything to the untrained eye looks fine.
Zero dollar balance account included in bankruptcy, but then you see over there it’s a nine rated account still, which means that even though the dollar amount wise yeah you won’t have to pay anybody any money right now, but credit wise because of that one little tiny inaccuracy that’s not even present on a consumer report for a regular person to see, you’re still basically being scored as if that item was an unpaid negative debt hurting you as much as it ever has.
What you have you do is either go through there yourself or have a professional like myself help you out and what we would want to do is get all those bankruptcy items either removed, updated to an unrated status, or at the very least updated to reflect the proper seven MOP rating as opposed to nine.
Scott Schang: Sam, is MyCreditGuy.com working with Consumers Direct now?
Sam Parker: Yeah, absolutely. We’ve always had our doors open to consumers. It’s just that the mortgage industry and the mortgage professional luckily has seen what we’ve built and appreciated it so much that percentage wise we were probably 95% off of referrals from the mortgage industry.
Then we have hundreds of clients that come from the consumer, but we don’t fight the fight online for them with ad spend like the big kind of boiler room companies and so we do lose consumers to them just because we’re not willing to out shout them online, you know?
Scott Schang: Right. Okay, good. No, that’s super valuable. Yeah. From my perspective as a lender, or as a loan officer, that number that you’re talking about, that MOP rating, that goes directly into the underwriting system.
Sam Parker: Right.
Options Limited to Loan Officer Experience?
Scott Schang: What I used to see and actually how we ended up helping thousands and thousands of people is because untrained loan officers, inexperienced loan officers would get this, they couldn’t get it approved, they didn’t know what they were looking at, and they were giving consumers the wrong answer based off of misinformation because of a lack of experience.
If you try to get one of these approved and you send it to an automated underwriting approval and that nine is sitting there, that could throw off your entire approval even though you’re looking at the credit report.
It’s really, really important that you work with somebody or you have somebody for that second opinion. Going back, reviewing your credit report, looking for those things they should probably, now is there any way a consumer can get their MOP ratings?
Sam Parker: Really just to work with an educated lender. Like you said, there are some companies out there that they’re advertising online, they’re advertising at the super bowl.
They’re built like a rocket but they have no customer service at all. No experience. So when you’re talking to one of these companies that you’re maybe clicking an app on you’re speaking to somebody who was literally a waiter last week, and I’m not joking.
I’m just saying literally they were a waiter last week and so you can’t ask them to dissect and credit report when you compare it to somebody like Scott here.
I’m not just trying to promote you, I’m just using you as a shining example of somebody who has decades in the industry, somebody who has a passion for their craft and for helping people, and who knows things like the MOP rating system, which sound boring and boring to us, but they’re so, so important in the biggest purchase you’re ever going to make.
Credit Scores After Bankruptcy
Scott Schang: Yeah. No, 100%. Well, let me, real quick let’s talk about my favorite subject, which is buying a home after bankruptcy.
Sam Parker: Yeah.
Scott Schang: This is called life after bankruptcy and this is kind of, this is what I want to be able to show people is that it really isn’t that bad. You think bankruptcy, well, I think you would imagine a home, buying a home, probably the largest investment you’re gonna make in your life.
You’re probably borrowing at the bare minimum, tens of thousands, more realistically hundreds of thousands of dollars and you just filed bankruptcy. If you do all of the best practices that Sam is talking about here, go back, you clean up your old credit report, you start building new credit.
Real quick, Sam, what is the normal timeline you’re seeing? Let’s just talk credit scores. Let’s make it super simple. Let’s talk credit scores. How quickly are you seeing credit scores improve after a bankruptcy?
Sam Parker: I will say that our clients who have filed bankruptcy, especially a chapter 7 or a fully completed 13, because a 13 can be an ongoing process, which complicates it a little bit. We can still work with a client during a 13 but anyway, a finalize bankruptcy, statistically are home runs. We see huge increases.
I have to be careful as an ethical credit restoration person, all results are not typical and blah, blah blah.
Anyway, those are the ones where it’s not uncommon to see the 70, 80, even 100 point increases sometimes in as little as one to two months because once you reestablish credit and introduce a positive trade line, or trade lines where there were none and remove usually double digit negative items, moving those to either deleting them or updating them to the correct status, it’s going to have a tidal wave type of reaction to your credit score.
People who have filed bankruptcy, as long as we look through there and especially if those inaccurate MOP ratings are present, which we’ll do that free review before we start, they can definitely expect a nice healthy boost in that time frame as long as they’re not falling back into old habits.
Scott Schang: Yep.
Sam Parker: No new late pays, no new collections, that sort of thing. They can be very optimistic about what could happen if they’re working with a good credit repair company. Usually two to four months in process, something like that for a post BK client.
Honestly, if they’re paying a lot of attention to us, doing the things that they need to, we can really keep that more towards that two month total process because it’s plain and simple. There’s no debt settlement. There’s no deletions that need to be done.
It’s plain and simple, clean up the bankruptcy items, establish some new positive trade lines. Do you understand what you need to do going forward? We’ve done the budgeting with them. They’ve had their credit coach work with them and should be a nice new life for them financially.
Buying a Home After Bankruptcy
Scott Schang: Yeah, again, that’s the great thing about this bankruptcy and it’s not just the bankruptcy, it’s surrounding yourself with people that are gonna help you get to the next point. The credit score part.
Once you file bankruptcy you can get your credit score back up. Now buying a home has to do with more than just a credit score. The most, the important thing is when you hit a bankruptcy there’s a waiting period.
Anytime you have a significant financial hardship, whether it’s just lates or something major like a bankruptcy there’s a waiting period before you can buy again.
During the time that you filed a bankruptcy, you’re working on your budget like Sam’s talking about, you’re cleaning up your credit, you’re working on moving forward, you’re getting yourself into that position.
How long do you have to wait in order to buy? You might be shocked. FHA and VA is 24 months. 24 months.
Chances are if you’ve got yourself, if you ended up in a position where you had to file bankruptcy, you’re going to need some breathing room anyhow to kind of get back on your feet. Your life is upturned a little bit as you’re going through this, but 24 months is nothing, Sam.
Getting your down payment, which is almost nothing, no down payment for VA, three and a half percent for FHA. Now, if you’re buying out in a more rural type area and you’re eligible for USDA 100% financing that’s only a 36 month wait, that’s three years.
The longest wait is going to be conventional Fannie Mae, Freddie Mac. That’s going to be four years from the discharge of the bankruptcy or from the discharge of the chapter 7 bankruptcy.
These are not long waiting periods. What I usually recommend to people is baby step that thing. Hit your FHA in 24 months, pay down that thing, earn some equity.
Take that equity out, sell it, turn it into a rental, then buy your dream home with conventional, maybe if it’s above the FHA loan limit for the area that you’re in. A lot of different ways to do this.
Man, it is definitely not the end of the line after you file a bankruptcy. I hope that we were successful in helping consumers be aware of the fact that bankruptcy is not a scary thing if you find yourself in that position, however you got there.
Surround yourself with good people, get back on your feet, get back out there and get going again, and you’re going to be right on track in absolutely no time.
Credit scores will recover right away, but don’t, I guess this is the important thing is because when those credit scores go up you start getting credit card offers like crazy as soon as you file bankruptcy, right Sam?
Sam Parker: You do, you do, and be selective but at the same time on the flip side of that, just because Scott said two years, please do not wait for 22 months to start getting ready.
You want to start rebuilding credit now but you just need to do it in a way that you have never done before probably, which is to be very well thought out, very strategic. You have tons of free information available to you through Scott and through my credit guy, and just be very deliberate about how you’re going to live financially from now on.
Scott Schang: Cool. Could you send me … I’m going to put all your contact information in here so that people can reach out to you. You also said you had an MOP video or something. We can throw that in there as well. I want to thank you for being here again.
Taking time out of your day is super, super valuable. I love the way that you share, I love the way that you run your business, and I love the way that you’re a consumer advocate, and I think that’s probably why we’re such good friends.
Thanks for being here, Sam. I really appreciate it and it’s not going to be long before we do this again I’m sure.
Sam Parker: It’s been a pleasure, man. Thank you so much and anytime. Have a good one.
Scott Schang: Thank you, buddy. All right. Bye bye.
Buyer Be Aware
Buyer beware does not adequately describe the arrogance of high overhead business models that spend millions of dollars on advertising and public relations to try to convince you, the consumer, that there’s no point in shopping around for a home loan.
I hope that with the help of this article, you can Be Aware of your options. Empowered with this knowledge, I hope that you can now make informed financial decisions based on expert advice and facts, not funny TV commercials.
Working with Professionals
I can not emphasize enough the importance of hiring a professional, experienced Realtor and loan officer when selling or buying your first home.
When you call a lender from a TV or radio commercial, or click an ad you saw on the internet that has a catchy headline, you are playing competence roulette.
I personally have been in the business for close to 20 years, and started this website 10 years ago to educate and empower consumers.
We have had over a million consumers visit this website and I have answered many thousands of questions from folks all over the Country.
If you are outside of California, I can introduce you to a loan officer from our Expert Network that I personally know and trust.