What to Expect After Bankruptcy

Bankruptcy can offer a new lease on life by discharging unsecured debts and making monthly living expenses more affordable. But bankruptcy is nothing to enter into lightly or to choose without first considering the long-term consequences of filing. For many people, the lowered credit score is a small price to pay for being debt-free, especially when they’re well-informed about how to move forward and rebuild their credit after bankruptcy.

Starting Over

Most people who file bankruptcy have credit card debt, so the thought of having a credit card again can be scary. It’s of course best to live within your means and save up to make purchases in order to avoid debt. However, your credit score is important, and it won’t improve unless you take steps to rebuild your credit. Immediately after you file bankruptcy, your credit report will show the bankruptcy itself, plus any late or missed payments from your past. By making timely, full payments on any bills you have, this positive history will soon overshadow the negatives. It’s wise to apply for a small credit card, even if you have to start with a secured account with a high interest rate. Make small purchases and pay them off completely each month, and you’ll see your credit score improve. Soon, you’ll be able to negotiate a better interest rate, which can make a difference when you use credit for larger purchases in the future.

Future Purchases

If possible, it’s best to wait a while after bankruptcy to finance a car. If this is not an option, (for example, you lost your car in the bankruptcy and do not have enough money saved up to make a purchase with cash) be prepared to pay a high interest rate after making a large down payment. The longer you can wait to do this, while using your small credit card, the lower payments you’ll end up with. Just like taking on any debt, make sure you closely review your budget to ensure that the payments will be easily manageable.

You could be in a position to purchase a home within a few years of filing bankruptcy. The lender will review your credit score and history prior to filing, as well as your current income and situation. Most lenders will require a hefty down payment, and you may need to jump through more approval hoops and paperwork than other purchasers, but home ownership is definitely an option.

Making a Move

Each bankruptcy is different, but sometimes filers also have to deal with eviction or foreclosure as part of their case. Others may choose to move into a more affordable rental to make monthly expenses more manageable or want to upgrade after their debt is discharged. Regardless of the reason for moving, a new rental always includes a credit check. A bankruptcy won’t necessarily disqualify you from renting a home, but this depends on the landlord or rental company. It’s best to tell your potential landlord ahead of time so that they are prepared when they pull your report. Some people even attach a letter explaining their circumstances and proving that they are now able to make their rent payments.

No Need to Delay

It can be disappointing to file bankruptcy, but for many people it’s the best possible choice. Instead of having a credit report that shows staggering debt and late payments, you could have a bankruptcy followed by clean credit. If filing is inevitable, the sooner you file, the sooner you head in a positive direction.

How to Prepare for Your Bankruptcy Filing

There is a deep despair that creeps into a person’s life when they can’t meet their financial obligations. Don’t let the feelings of failure, anger, or hopelessness take hold of you. Oftentimes, unexpected twists and turns in life happen. Events that you simply couldn’t have planned for may be unaffordable, even if you had an emergency fund, especially if the emergencies all happen all at once.

When you come to the realization that you simply cannot keep up, there is hope. Bankruptcy offers relief for people just like you. Bankruptcy Attorneys can walk you through the process and make sure you don’t have to endure any more stress than needed.

First Steps

You may know what course of action to take, but taking the first step is the hardest part. Every person has a unique situation, so meeting with a Bankruptcy Attorney can help you work through the process. They will conduct the means test, and that will help you know which chapter of bankruptcy to file. From that point, you can make a plan and talk through all the steps so that you will be comfortable with the process.

You will need to complete some worksheets and gather your documentation, such as tax returns, pay stubs, bank statements, current bills, and loan paperwork, all going back six months. You’ll also need to show what your current expenses and debts are, as well and what income and assets you have. The court trustee will need to see these documents to get an idea of why you need the relief of bankruptcy.

Another task you’ll need to complete is an online credit counseling course.This is a required course that is easy, affordable, and will hopefully be a good educational tool to help you rebuild your finances.

When you have finished gathering your documentation and have a course completion certificate, you will be ready to file. When you file, you’ll receive your case number and your automatic stay goes into effect. The automatic stay allows you to give your creditors your case number and my information, and they will no longer call you. The relief of filing for bankruptcy will have started, and now you can focus on rebuilding your life and future.

In the Home Stretch

Bankruptcy does take some time, and although it won’t be finished at this point, most of the work will be done. Just a few more simple steps and you will be able to relax as your Chapter 7 discharges all your debt or your Chapter 13 repayment plan will be structured with affordable payments. No one can stand under the weight of debt forever. When you simply run out of resources and the ability to pay, a Bankruptcy Attorney can take that weight off your shoulders and provide relief for you.

Using Your Bankruptcy Experience to Help Others

It can be a humbling experience to file bankruptcy. You may have always had your finances under control, but an unexpected event or series of financial choices may have resulted in debt that you just can’t ever pay off. There is nothing to be ashamed of; many people file bankruptcy each year, and it’s designed to give you a new financial start. This is a good time to evaluate your spending habits and reconfigure your budget. You’ll also want to make some plans to help avoid debt in the future. An additional benefit of filing bankruptcy is that it makes you a resource for others who are struggling financially. Once your bankruptcy is resolved, you’ll most likely feel relief and know that it was the best possible decision.

Encouraging Friends and Family

Bankruptcy is an experience you’ll learn from, and you can use what you’ve learned to help others. Your friends and family will see the financial choices that you make, such as saving for purchases rather than using a credit card. They’ll see the freedom and stress relief that comes with being free of debt payments and interest. If you have friends who are struggling with debt, you may be able to help them create a new budget that will keep them from going bankrupt. Or they may be at a point where bankruptcy is their best option, and you can help them as they prepare to file. They’ll see how you came out better off on the other side of bankruptcy, and this can give them hope for their future, too.

Children Learn by Example

Whether you’re a parent or not, we all want the next generation to be successful and happy. That starts with education and encouragement, and most people learn best by watching others’ examples. When children see adults working to save money and being disciplined in their spending, that becomes their norm and sets them up for a future with less debt. If you have children, you can help them to create a budget or decide how they’ll save or spend any financial gifts they receive or money they earn. You can also teach them to shop wisely and compare prices when you shop together.

After your family experiences a financial setback, it’s possible to come out stronger and more united on the other side. You may not choose to share all of the details of your finances with your children, but this is an opportunity to reassure them that you have things under control and are taking the necessary steps to make sure they’re taken care of. Money isn’t necessary for a childhood full of love, and all of the lessons that you teach your children now will shape who they are and what they value.

Make the Best Choice

Bankruptcy is nothing to jump into without first considering alternatives, but for many people, it is the new start they need to get their finances back on track. This choice not only affects you, but can be beneficial to the people you love and interact with. If you’re feeling uncertain about how to handle your debt, give me a call so that we can make the best plan possible.