Recovering After Filing for Bankruptcy
Filing for bankruptcy may be the only alternative before you, but it’s important to understand that you can recover from it, and go on to build a good credit history. There are steps you must take to find the right kind of bankruptcy filing to go with, however, and rebuild your life. This article looks at how the process works.
Life can sometimes conspire to make it impossible for you to meet your financial obligations. It can happen to even the most capable people – Henry Ford and Walt Disney went through bankruptcy before they were successful, for example. If you’ve lost your employment, depleted your money, taken your credit cards to their limit, and can now no longer make your car or mortgage payments, getting in touch with a bankruptcy lawyer could be a rational move to make.
What comes after bankruptcy?
Once you enter bankruptcy proceedings, getting your financial life back in order can be a demanding process. To begin, you and your court-appointed bankruptcy trustee get together with your creditors, and work out which of your assets need to be used to meet your debt. While you will get to retain your automobile, and to a point, your belongings, any cash in the bank, and any savings that you own must be handed over to the trustee to pay off your creditors.
Post-bankruptcy, you may find it very hard for a year, or longer, to win approval for a loan of any description. You may still qualify for some types of credit in a few months if you work hard on rebuilding your credit score, but those loans are likely to be very expensive to service. Car loans or mortgages may be particularly hard to come by.
If you go with a Chapter 7 bankruptcy, you pay off all you can with the assets you own, and are forgiven the remainder. The bankruptcy reflects on your credit history for a decade. With a Chapter 13 bankruptcy filing, you aren’t forgiven your debts; instead, your debts are restructured so that you get a few years to pay them off. This type of bankruptcy stops showing on your records after only seven years. Filing for Chapter 13 is preferable if you can pull it off, because this way, your home doesn’t go into foreclosure.
It’s important to know that you have six different options when it comes to filing for bankruptcy. Talking to a dedicated bankruptcy lawyer is the best way to choose one that gives you the greatest set of benefits in your specific case.
Getting back on your feet after a bankruptcy filing
It’s important to go on with your life after you file. You can get your old life back by focusing on putting out an image of dependability and stability. The following ideas can be of help.
Aim for stability: Finding and keeping a job is a good way to communicate to your creditors that you are now a sure bet. It’s also important to signal residential stability. Building such a history demonstrates that you have a new way of life now. Your credit history may make it hard for you to find a place to rent, but you should be able to get your credit up with a few months of timely bill paying.
Be on time with your bills: If you’re serious about raising your credit score, paying your bills on time without the slightest amount of delay would be critically important. If you aren’t used to watching every expense and making sure that you can afford it, this would be a good time to start, so that you always know you’ll have enough by each pay-by date, to make every payment necessary.
Leave money in the bank: Leaving money in the bank demonstrates stability, and it’s an important step to take. It may be hard to open a new bank account when you have charged off accounts in your past, but many banks have second-chance programs for just this kind of circumstance. Opening such an account, and retaining a reasonable balance can help show stakeholders that your cash flow situation is under control.
Build up your credit again: Obtaining a credit card can be an excellent way to begin rebuilding your credit, even if the only ones you’re offered come with a steep interest rate. It’s important to be responsible with your spending, however. If you find yourself rolling balances over and building up debt again, it would be important to make yourself stop, and focus on paying off what you’ve charged to the card.
Find a cosigner for a car loan or a mortgage: You may find it impossible to obtain financing for larger purchases like a car or home, unless you bring on a cosigner with reliable credit. If you determine that you are able to make the payments, finding a cosigner to get approval for such a loan could help build up your credit further. You might even find that once you declare bankruptcy, auto insurance is hard to come by. There are high-risk insurance providers, however, who may be able to work with you.
While the BAPCPA law of 2005 raises the bar for those trying to declare bankruptcy, you can still try taking this step if you need to. There is life after bankruptcy, as many people have demonstrated. All you need to do is to make sure that you have a good bankruptcy lawyer to guide you down this path, and change the habits that may have landed you in trouble.