If you’ve been struggling financially for years and have finally filed for bankruptcy, you might breathe a sigh of relief. However, if you want your credit to recover as efficiently as possible, there’s still work to be done. Here’s what to do after filing for bankruptcy to start moving toward a sounder financial future.
Filing for bankruptcy can create a clean slate, but the actions you take immediately afterward can establish the trajectory of your finances going forward.
Focus on Your Future
Declaring Bankruptcy Does Not Make You a Failure
Going through bankruptcy can be incredibly stressful. Unfortunately, many people who undergo this process view bankruptcy as a sign of failure. The truth is that declaring bankruptcy is an opportunity for a fresh start. If you have declared Chapter 7 bankruptcy, you’ve likely had all or most of your debts eliminated. If you declared Chapter 13 bankruptcy, you’re likely still repaying debts — you’re just following a new repayment plan that makes your debt more manageable.
To fully take advantage of this new start, you should do your best to learn as much as you can about financial management. Most people who declare bankruptcy are required to take a course to help them better understand personal finances, and that’s a great place to start.
Keep an Eye on Your Credit Report
When you declare bankruptcy, you should monitor your credit report to make sure any discharged debts are accurately reported. While it’s true that bankruptcy can have a negative impact on your credit in the short term, credit reporting errors can lower your score even further.
It may take a month or two for all discharged debts to be reflected. While the debts themselves will still appear on your report, you should also see a note that reflects the following:
- The debt was discharged in bankruptcy.
- You do not owe anything on the debt.
If after your bankruptcy case has been completed debts discharged in bankruptcy are still being reported as if you owe them, you may need to file a dispute with each credit bureau whose report is in error. Make sure you keep all bankruptcy paperwork after proceedings are over — you may need this paperwork if you have to dispute something on your report.
Consider a Secured Credit Card or Credit-Builder Loan
You shouldn’t rush to take on new debt after bankruptcy, but using credit strategically may help you rebuild your score faster. One way to do this is through a secured credit card. These cards pose less of a risk to the lender. They generally work like this:
- You open an account and make a deposit.
- The deposit is your credit line.
- You make purchases with the card and pay them off as you would with a standard credit card.
Many lenders will “graduate” your account to a standard credit card after a period of time. At this point, your deposit will usually be returned to you.
Are you considering bankruptcy? The affordable bankruptcy lawyer at Fesenmyer Law Office may be able to help. Call us at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) for a free consultation.
Watch Out for Predatory Lenders
You may receive offers for multiple loans and credit cards — some secured, some not — after bankruptcy. Because you’re generally considered to be a high-risk borrower right after you declare bankruptcy, many of these credit cards and loans will have high interest rates. That’s to be expected, but some of the offers you receive may cross the line between “high-interest” and “predatory.”
Predatory lenders are those that take advantage of consumers through extremely high interest rates, high upfront fees, and other unfair practices. These are some potential signs that a lender may be predatory:
- It doesn’t disclose the annual percentage rate (APR) of the credit card or loan.
- It approves you without checking credit or asking about debts and income.
- It has many complaints with the Consumer Financial Protection Bureau (CFPB) or Better Business Bureau (BBB).
- It doesn’t answer your questions.
Payday loans are one of the most famous examples of predatory lending. They often have APRs of 100% to 400%, and consumers who can’t pay them on time will usually have to pay a fee to extend them. Getting trapped in a payday loan cycle can easily lead to another bankruptcy. You should avoid these loans at all costs.
Pay All Debts on Time
Many different factors determine your credit score, but your payment history is the most important — it accounts for 35% of your score. You should pay all of your remaining accounts on time and in full. If something comes up and you cannot make a payment on time, you should reach out to your lender. Many lenders will be willing to work with you if you run into a temporary issue. For instance, if you recently switched jobs and won’t be paid for a month, your lender might let you make your next car payment late without a penalty.
Live Frugally and Stick to a Budget
Going forward, it’s important not to make the same financial choices that led you to file bankruptcy in the first place. Creating a budget and sticking to it can be helpful. So can saving money. If you declared Chapter 13 bankruptcy and will be paying off your debt for another three to five years, you might not be able to realistically save much. However, if you declared Chapter 7 bankruptcy, you can generally start saving immediately.
Struggling With Debt?
Our Affordable and Understanding Attorney Is Here to Help
If you’re having trouble paying bills and you’re dealing with harassing calls from debt collectors, bankruptcy may be an option. However, given the complexity of bankruptcy laws and the filing process, having the right attorney by your side is essential. The Fesenmyer Law Office team can help you understand your available options and determine whether bankruptcy is right for you.
The right bankruptcy lawyer can offer you critical support and guidance before, during, and after bankruptcy. Give us a call at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) to set up your free consultation today.
