Life After Bankruptcy

If you are dealing with collection calls, harassing letters and are worried you could lose your job due to a wage garnishment, bankruptcy may be your best option. However, if you are like many people, you are hesitant to take the step because you worry what life after bankruptcy will be like.

You may worry you will never be able to borrow money again or that the court will make you sell everything you own. You may be afraid it won’t stop the collection calls or that you will be evicted from you home.

After bankruptcy, there are some things that may change for short time, but you will be able to breathe a sigh of relief as the collection calls stop, you find you may be able to retain much of what you own and you can begin down the path of a fresh financial future.

Lifestyle Changes

After filing bankruptcy, the trustee will only allow you a set amount of money to live on each month with the remainder being divided among your creditors if you choose to file Chapter 13. If you don’t have the income to file Chapter 13, you may need to file Chapter 7 with no repayment plan as all of your unsecured debt is eliminated.

A Chapter 13 payment plan can last between three and five years. During that time, you may not take on new debt without the court’s permission and you may need to make some changes to your lifestyle, including your housing, utility or food budget. Even though you paid back at least a portion of what you owed, the bankruptcy will appear on your credit report for ten years.

Obtaining Credit

There is a vicious circle in life after bankruptcy. Because overextending yourself with credit may have led to your bankruptcy, you need credit in order to improve your credit rating. After your bankruptcy is discharged, it is possible to begin rebuilding your credit score through responsible use of credit.

If you were able to remain in your home and keep your mortgage payments current, you may find that your credit rating improves more quickly than if you were renting or lost your home to foreclosure. However, it is important to be sure that you reaffirm your mortgage while your case is active or the lender will not report future payments.

Using Credit Responsibly

Although there may have been many valid reasons why you were struggling to pay your creditors, it is important to understand how to use credit wisely in order to prevent financial problems in the future.

The first step is to create a budget that includes all income and expenses you have each month. Because your debts have been reduced or eliminated, you may find that you have more disposable income available. It may be tempting to spend the additional money, but experts recommend placing any additional money you have in savings to build an emergency fund.

Once your bankruptcy has been discharged, talk to your bank about a secured credit card. The bank will require a deposit of between $100 and $500. In exchange, you will be provided a credit card with a credit limit of between 50 and 100 percent of the deposit. Most banks pay interest on the deposit while you use the card as long as you make payments as agreed. After you have been paying on the card for six months to a year, talk to the bank about converting it to a traditional credit card.

There is life after bankruptcy and, with careful financial management, you will find yourself in a much more secure position than before you filed. If you or a loved one is dealing with creditor calls or harassing letters, contact Georgette Miller and Margolis Edelstein today to learn whether bankruptcy is right for you. Arrange for your initial consultation online or by calling us today.