You’ve filed bankruptcy and gotten your discharge. Now what? Bankruptcy is meant to give debtors a fresh start. You need to focus on three things after a bankruptcy: making sure your credit report is correct; re-building your credit; and making sure you don’t get in financial trouble again.
When you file a bankruptcy, your attorney will give you a copy of the petition, schedules, statements and related documents that are filed with the court. These papers should be kept forever as a part of your permanent records, like your birth certificate or social security card. Also, be sure to keep a copy of your bankruptcy discharge. You will need these papers to make sure debts that were discharged are reflected correctly on your credit report, and you may need them later to prove that a debt was included in your bankruptcy and discharged.
Keep An Eye On Your Credit Report
About 3 months after you get your bankruptcy discharge, you should pull your credit report. You can get a free credit report from each credit reporting agency (Equifax, Experian and Transunion) one time each year by going through www.annualcreditreport.com. Only get one report to start; then three months later, get your second report; then three months later, get your last report.
You need to make sure that all the debts listed in your bankruptcy papers are marked on the credit report as having been discharged in bankruptcy. If a debt that was on your bankruptcy papers does not say that it was discharged, you need to dispute that item with the credit bureau by following the instructions on your credit report. You will need to do this for each item on your credit report that is not correct.
If you have reaffirmed a debt (agreed to keep paying) in a chapter 7, make sure that the creditor is reporting those payments on your credit report. These payments will help to re-build your credit score. If the creditor is not reporting, you will need to dispute that item as not reporting.
If you filed chapter 13 and are making mortgage payments, the mortgage company should show that your mortgage is current and that you are making the payments. This is especially important if you were catching up mortgage payments through your plan. Mortgage payments can be a big help in re-building your credit.
You will need to go through this process for each credit report.
Rebuilding Your Credit
A bankruptcy filing will lower your credit score. The most effective way to rebuild your credit score is to properly use credit after you get your discharge. If you have a mortgage or a car payment that you are continuing to make, these payments will help rebuild your score, as long as you make the payment in full, on time, each month.
You will get credit card offers almost immediately after filing bankruptcy. Be very careful before deciding to get a credit card. If you do get a credit card, it should have a very low limit, about $500.00. Often, the card will have to be secured. The card account can be attached to a savings account that is used as collateral for the charges on the card or you can deposit the amount of your limit with the creditor. You use the card like a regular credit card, and it reports to the credit bureau. Make sure to shop around for the best terms for the credit card, lowest interest rate and fees possible. You want to use the card, but not up to the limit, then pay it off in full each month.
If you have debts that were not discharged in your bankruptcy, such as student loans or taxes, you want to make arrangements to pay those debts. Student loans have many repayment plans available, especially if it is a loan from the Department of Education. Private lenders may have options as well. Tax debts can often be put on a payment plan, or you can try an offer in compromise to pay the debt off. These debts were not discharged and are not going to just go away.
Preventing Future Financial Problems
How do you prevent some of the problems that likely put you in bankruptcy in the first place? Start with a budget. If you were in a chapter 13 plan, you have been living on a budget for your whole case. If you filed chapter 7, you had to formulate a budget with your filing, adjust it to reflect your expenses after your bankruptcy filing.
Saving for the future is key to your future financial security. You should save enough for 6 months of living expenses. If you have this amount saved, when you have an emergency, such as a car repair, home repair, or unexpected medical expense, you have some cushion to fall back on. To make sure you save, have part of your direct deposit put in a separate account each time you get paid. This way, you are paying yourself (your savings) first. Don’t get a debit card for the account you put your savings in so that it is harder to spend that money.
Make sure that you are saving for your retirement. If you have a 401k, 403b or other retirement account at work, maximize that savings. (It will also save you money on your taxes by putting money in a retirement account.) If your employer matches your savings, put in no less than the match because the employer’s money is free savings to you.
Use your bankruptcy filing as a time to get your other affairs in order too. If you don’t have a will, it is a good time to prepare one, as well as a living will, health care power of attorney and general power of attorney.