Life After Bankruptcy: What Can You Expect When Your Chapter 7 or Chapter 13 Case is Over?
When you are going through the bankruptcy process, it can be easy to focus on the present. You are dealing with financial distress, and you need to work with your lawyer to make sure you get as much financial relief as possible.
But, as you go through the process, it is important not to lose sight of the future. After all, the prospect of a brighter future is why you filed in the first place. The process will end, and when it does, your financial situation will be very different from what it was when you got started.
So, what can you expect from your life after bankruptcy?
Ultimately, what you can expect depends on you. It is up to you to make the most of the bankruptcy process, and it is up to you to make sure that you are prepared to manage your finances going forward. While it’s okay to make mistakes, if you make too many mistakes, you may find yourself needing to file for bankruptcy again.
What to Expect After Your Chapter 7 or Chapter 13 Bankruptcy
1. Discharge (Elimination) of Your Eligible Debts
Whether you file for bankruptcy under Chapter 7 or Chapter 13, some of your debts (and potentially all of your debts) will be “discharged” during the bankruptcy process. This means that they will be eliminated—and you will no longer have to pay them once your bankruptcy is over. At the end of the process, your lawyer will go over the debts you are no longer required to pay so that you have a clear understanding of your financial flexibility and responsibilities.
2. Paying Your Remaining Debts
Certain types of debts are ineligible to be discharged under Chapter 7 and Chapter 13. Additionally, in many cases, it will make sense to keep certain debts (i.e., your mortgage) even if they are eligible for discharge. If you keep any debts after your bankruptcy, you will need to be sure to make your payments on time.
3. Managing Your Finances Responsibly
In addition to paying down your debts as your payments come due, you will also need to take other steps to manage your finances responsibly after your bankruptcy. You will want to have a budget that allows you to pay your bills while saving what you can—and you will want to stick to it. While opening a credit card can help you rebuild your credit (as discussed in greater detail below), failing to manage your credit responsibly can quickly lead to racking up unmanageable debt once again.
4. Rebuilding Your Credit
Once you’ve completed the bankruptcy process, one of the first things you will want to do is start rebuilding your credit. Going through a Chapter 7 or Chapter 13 bankruptcy will negatively impact your credit score, and you will want to quickly begin taking the steps that are necessary to get your score bank where it was before you started experiencing financial distress.
Two of the easiest ways to do this are: (i) pay your bills as they come due; and (ii) get a credit card that you pay off completely each month. Most likely, you will need to get a secured credit card from your bank. With a secured credit card, you make a deposit, and then your credit limit is between 50 and 100 percent of your deposit. While this may mean starting small, showing that you can make your payments each month will allow you to obtain a higher (and unsecured) credit limit in the future.
5. No More Harassing Phone Calls
For many people, one of the best things about life after bankruptcy is that they no longer receive harassing phone calls from their creditors. Filing for bankruptcy triggers the automatic stay, which prevents your creditors from contacting you directly during the bankruptcy process. Once your Chapter 7 or Chapter 13 bankruptcy is over, the automatic stay will expire, but at this point, either (i) your debts will be discharged, or (ii) you will be back on track to start making your payments without the risk of facing foreclosure, repossession or collections.
6. Addressing Financial Concerns Proactively
When you are in the process of rebuilding your credit after bankruptcy, you will want to address any financial concerns proactively. If you incur unanticipated expenses, do what you can to offset these additional costs by cutting your spending elsewhere. If you find that you need help managing your budget, seek help from a professional before your situation gets out of hand.
7. Weighing Your Options When Necessary
Despite their best efforts, some people still end up facing financial strain again after filing for bankruptcy. If you lose your job, get injured, get divorced or find yourself facing any other situation that puts your financial stability in jeopardy, you should weigh your options sooner rather than later.
If you address your situation promptly, you may be able to pursue various alternatives to bankruptcy. Refinancing, consolidating your debt and obtaining concessions from your creditors are just a few examples. Depending on your financial circumstances, filing for bankruptcy again may be an option as well. Just like the first time around, an experienced bankruptcy attorney will be able to help you make informed decisions with your long-term best interests in mind.
Request a Free and Confidential Consultation with Bankruptcy Attorney Georgette Miller
Georgette Miller is an experienced bankruptcy attorney in New Jersey who helps people regain their financial stability through Chapter 7 and Chapter 13 bankruptcy filings. She has helped many people successfully pursue alternatives to bankruptcy as well. If you have questions about filing for bankruptcy, Ms. Miller can help, and we encourage you to call 866-964-6529 or contact us online to get started with a free and confidential consultation.