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Rebuilding Your Credit


In the typical Chapter 7 Bankruptcy case, you receive a “discharge” of your debts from the Bankruptcy Court approximately ninety (90) days after you file. What that means is that you are no longer legally obligated to pay those debts that existed on and prior to the date that you filed.  The main exceptions to that, however, are most taxes, student loans, court fines and personal injuries you may have cause to someone if you were driving while intoxicated.  Generally speaking, credit card debts, medical bills and personal loans are “discharged.” In a short period of time, therefore, you receive your “fresh start” in your financial life. From this point forward, you have the opportunity to establish a secure financial future for yourself and your family.

What Can I Do After I Receive My Discharge to Improve My Financial Future?

I often tell my clients that starting with the filing of their bankruptcy case, that they think about how they can get the best possible value from every expenditure they make including the fees they paid to my office and the bankruptcy court for their bankruptcy case. What I mean by that is that people should try to get the “biggest bang for their buck” in all their purchases and expenditures. A person who, after filing for bankruptcy, is over their head in debt again within a few years after filing for bankruptcy, did not, in my opinion, gain significantly from the experience and did not obtain the maximum benefit they could have gotten from their bankruptcy discharge. On the other hand, someone who, after bankruptcy, avoids the temptations of easy credit, avoids the pressures of aggressive sales people, and who is not ashamed to drive a car that is a little less showy than their neighbor’s, but who lives within his or her means, pays their bills on time and refuses to let themselves get “ripped off,” are happier, I think, than people who are straddled with debt, who are afraid to answer the phone, and who are stressed out at home and around family members due to financial pressure. The simple answer is to NOT FORGET what it was like before bankruptcy, before the calls stopped, and before you got your “fresh start.” Little things that you can do, like eating out a little less often, spending a little less during the holiday season, watching the “big game” at home instead of at the stadium, bringing your lunch to work instead of eating out, helps. There are things you can do outside the house that don’t cost a lot of money that you might discover are just as rewarding as expensive outdoor events. You can watch your kids, nephews or grandchildren at their soccer or lacrosse games or go for a hike at Letchworth State Park before the season starts…so you don’t have to pay!  Be creative with your time and efficient with your money, but not necessarily “cheap.”

What Else Can I Do?

The second obvious answer to what you can do after your bankruptcy is concluded is to pay your remaining bills on time. That is easier said than done, but if you follow the principles I mention above, paying your bills on time should be easier. Paying your mortgage or rent on time, paying your car, phone, electric and other utility bills on time, all of that will contribute to rebuilding your credit positively.

Without exception, AVOID “secured” credit cards, AVOID doing “rapid tax refunds,” AVOID pyramid marketing schemes (also known as “get rich quick schemes”). Rarely, if ever, do you receive a return in excess of your “initiation fee” which usually runs between $250.00 and $500.00 in these pyramid marketing schemes. If it sounds too good to be true, it likely isn’t true. Use a debit card instead of a credit card. Use cash instead of a debit card. Keep good receipts for tax purposes and hire a good accountant (instead of a cheap tax preparer), who should prepare a tax return in which you pay the least amount legally possible. BE VERY CAREFUL when buying a car. You should know more than just how much the monthly payment is going to be.  DON’T BE AFRAID TO ASK QUESTIONS in any transaction: “How much am I paying for this?”, “What is the interest rate?”, “Is there a pre-payment penalty?”. If you smoke cigarettes, keep track of how much you spend on the cigarettes and gasoline going to the reservation. Set realistic goals. Reduce your cigarette smoking by ten percent (10%). Use the Resources page on this website to find cheap gas, find a place to rent, look for a home, etc. If you have a question after your bankruptcy case about whether I should buy that car..whether I should buy that refrigerator, etc., e-mail me. I will get back to you. I believe doing these things will help you rebuild a positive credit history, even if many of the things you do won’t show up on your credit score. This process does not happen overnight, but if you take steps in the right direction, your credit will improve over time. One of the biggest benefits going in your favor, is that after your bankruptcy is concluded, credit card companies and lenders will know that you have received your bankruptcy discharge, so you are viewed by them as a person with little or no debt (meaning lower risk, ability to pay, and ineligible for bankruptcy again for up to eight (8) years), which makes you a candidate for predatory lending. Don't let that happen to you. In the future, be skeptical about "east credit financing..." 

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