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Rebuilding Your Credit After Bankruptcy

rebuilding credit after bankruptcy

The end of your bankruptcy case, when debts are discharged, and you are released from liability from most (if not all) of your unsecured debts, it can be a major relief. While a discharge typically signals the end of a bankruptcy case (or at least the part of the case that directly affects you), planning your financial future post-bankruptcy is just beginning.

If you have recently settled a bankruptcy case and been given a bankruptcy discharge, knowing what steps come next can help you to avoid financial woes in the future.

Next Steps – Chapter 7 vs. Chapter 13

Depending upon the whether you filed a Chapter 7 or Chapter 13 bankruptcy case, the next steps that you take in order to close your bankruptcy case will be different.

  • Chapter 7 debtors. For those who have recently received a Chapter 7 discharge, the next step is cooperating with creditors to surrender the assets you chose not to keep and pay for.  If you have nonexempt assets that you were required to give to the trustee to sell to pay your creditors, you will have to surrender those assets to the trustee.  If you have signed any reaffirmation agreements to keep and pay for property, you must continue to make those payments directly to the creditors.
  • Chapter 13 debtors. Chapter 13 debtors must make regular payments to creditors as a part of a payment schedule that is intended to pay off debts typically over a period of three to five years. While the process may be different, the duty is the same:  you must cooperate and make your payments in full and on time. Once you have made all of your payments, your case will finally be discharged and closed.

Rebuilding Your Financial Health after Bankruptcy

Once you have officially been discharged and closed your bankruptcy case, it is important to understand how the bankruptcy filing affected your credit score and what you can do to improve it in the future..

A bankruptcy can remain on your credit report for up to 10 years. This means that it will be more difficult obtaining credit when applying for a credit card, taking out a loan, or securing financing.

However, there are some simple things that you can do to begin the process of rebuilding your credit and credit score.

  • Focus on paying all of your bills on time. Perhaps the most important thing you can do following a bankruptcy discharge is to make sure that you pay all of your bills, whether a large credit card bill or a home electricity bill or something else, on time and in full. Falling behind on payments can lead you into treacherous waters financially and may put you back into the same precarious financial position you were in prior to bankruptcy. If you are having a hard time figuring out how to make payments on time, sit down and make a budget that prioritizes your debts or work with a financial professional.
  • Consider a secured card after approximately one year. Chances are that post-bankruptcy, you won’t have a credit card. This may be a good thing temporarily, but in order to rebuild credit, you’ll want to open another card. One option may be a secured card, which is when you put money in an account and then the bank offers you a credit card with a set limit. If you make payments on time, you’ll have the option to switch to an unsecured card.
  • Simplify and save. If part of the reason you accumulated mountains of debt in the past had to do with your inability to prioritize spending or live a simple lifestyle, it might be time to think about adopting a different approach. Focusing on the basics, like shelter, food, and clothing, can help you to be more aware of your spending habits. What’s more, when you only spend what you have to, you’ll have more money to put into savings. Starting a savings account nowis strongly recommended.

Have More Questions About Bankruptcy? A Lawyer Can Help

If you have more questions about bankruptcy, how to file, how the discharge process works or what to expect after discharge, The Dansby Law Firm, P.C. can help you. We have in-depth knowledge of the federal bankruptcy code, when it makes sense to file for either Chapter 7 or Chapter 13 bankruptcy, and how to get your financial life back on track after the case has been discharged. Call us today at 334-834-7001 or send us a message directly for a case evaluation.

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