Bankruptcy Survival: Your Future Or Your Credit Score?

Daniel Martinez Galan and his wife, Janice Blackmore struggled to keep their heads above water as their dreams of building a stable of investment properties shattered when the real estate bubble burst in 2008. They exhausted their cash reserves even as the incomes from their properties plummeted. Shortages from their investment homes were as much as $700 per month on the difference between the rental income and what they owed on the mortgages.

The couple refused to admit defeat, maintaining their debt payments even in the face of overwhelming evidence that their was no quick fix to the national housing catastrophe. Their overriding focus on maintaining their perfect credit score was the barrier between financial survival and becoming penniless.

The saga of Daniel and Janice is well chronicled in this article from the Seattle Times. Many would debate whether the story has a happy ending, because in late 2011, after weighing the financial — and emotional — pros and cons of stopping payments on their investments, the couple stopped paying on their properties and filed bankruptcy.

The couple struggled with their feelings of failure and the stigma that remains in bankruptcy. However, their crisis and the bankruptcy process forced them to focus on the elements in their lives that were most important. They learned that his personal career development, reducing the cost of her commute and obtaining a bilingual education for their young daughter were all being sacrificed for the benefit of their credit score.

A good credit score is certainly a desirable status in our consumer and credit driven culture. There is no debate that the easy availablity of credit enhances one’s options in many areas of our lives. However, a credit score is ultimately an abstract concept that bears little relationship to the survival of a business or a family when faced with critical cash shortages.

Having allowed their egos to cloud their judgment for too long, Daniel and Janice now hope that telling their story to the Seattle Times will help to “destigmatize” the bankruptcy process for other struggling real estate investors. They have overcome their own long-held beliefs about the importance of maintaining status within the credit world. The couple have learned that these beliefs can cause a crippling delay in the necessary, sometimes frightening first steps towards shoring up cash and finding financial security.

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