Life After Bankruptcy

Life After Bankruptcy – Enjoy Your Fresh Start

Most people report a huge sense of relief as soon as their case is filed.  That is because upon filing your case, the Automatic Stay takes effect, and all the collection calls and letters stop.  Once your case is finished, and you receive your Discharge, it is time to enjoy your Fresh Start and start rebuilding your financial life.

Watch your Credit

After your Bankruptcy Discharge, your life after bankruptcy begins. The first thing you need to do is make sure the discharged creditors are off your credit report.  The discharged creditors generally have 60 days after your discharge to “zero out” the balance on their respective account, and close it.  They are allowed to report “Discharged in Bankruptcy” or “Included in Bankruptcy” if they want to.  But they must report that the balance is zero.  What hurts your credit is having delinquent balances.  If one of your discharged creditors is still showing a balance, contact a lawyer who does “Discharge Violation Lawsuits.”  That lawyer will usually sue that creditor on contingency to force them off your credit report and get you a small settlement for the discharge violation.  Sometimes a discharged debt will show up on your credit report years after your Bankruptcy, so keep an eye out for this, and do not let the creditor get away with ruining your Fresh Start!

Improve your Credit

Now you need to begin building your credit score back up.  It is not that hard as long as you now use credit wisely.  The idea here is that to have good credit you have to use credit or “exercise” your credit.  If you still have a house payment, car payment, or student loans on your credit report, and you continue to pay them on time, that will help raise your credit score.  You should also apply for 3 new credit cards.  They may have to be secured cards, and they will be high interest cards, but that is okay as long as you pay them off each month.  This site recommends that you charge a little bit on each card every month and then pay it off in full.  That way each account is showing activity and also showing that it is paid on time.

Employ new Financial Habits

In your life after bankruptcy, do whatever it takes to make sure that your monthly take home income is more than your monthly expenses (live below your means).  This might mean focusing on ways to increase your income, focusing on ways to decrease your expenses, or both.  But ultimately you want to be saving money every month so you can invest for your future and your retirement.

Avoid Bad Debt

What is Bad Debt?  Bad debt is credit card balances, personal loans, payday loans, lines of credit, or financing things you do not need such as boats, motorcycles, and four-wheelers.  This kind of debt is a monster that can get out of control and suck up all your monthly income with interest and fees.  What debt is okay to have?  A mortgage or car payment (as long as you get a fair deal), and student loans (as long as this education will help make you money in the future).  So avoid bad debt like the plague, and only use good debt if it is necessary (car, house, or education).

Can You Still Get Cars, Houses, and Credit Cards?

As long as you can convince a lender, you can get anything after your Bankruptcy discharge (there are no laws preventing you from obtaining new credit).  But practically speaking, you can buy a car and get credit cards immediately after your bankruptcy (as long as you can show some income), but they will charge you much higher interest rates than normal for about the first year.  And to buy a house after your Bankruptcy, you generally will have to wait 2 years after bankruptcy before you can obtain conventional financing.