You have finally received your bankruptcy discharge. Your creditors have been notified that they can no longer sue you, garnish your wages, attach your bank account, call you or send you mail. You have been given a fresh start. So, how do you make the most of it? Focus on three things to make the most of your fresh start: correcting your credit report; rebuilding your credit score; and building your financial future. Make sure you have and keep a copy of your bankruptcy papers. You will need these, and a copy of your discharge order, to start off on the right path after bankruptcy.
Your Credit Report Is Key
Your credit report tells creditors, employers, insurance companies and landlords about your finances. It is up to you to make sure that your credit report accurately shows the status of your accounts. It takes a few months for the credit reporting agencies to update your report after a bankruptcy, so wait about 3 months after you get your bankruptcy discharge, and then pull your credit report. There are three credit reporting agencies, Equifax, Experian and Transunion. You can get one free report from each agency once each year by going through www.annualcreditreport.com. You will want to get one report at a time; wait three months, get the next report; then wait three more months and get the last report. It doesn’t matter what order you get them in.
Check each account on your credit report to make sure that all the debts you listed in your bankruptcy are marked on the credit report as “discharged in bankruptcy”. If a debt doesn’t show that it was discharged, follow the instructions on your credit report to dispute that item. You will need to dispute each item on your credit report that is not correctly reported.
If you filed Chapter 7 and reaffirmed a debt (signed papers saying you agreed to keep paying), that debt should be reporting your monthly payments, and if you have made all the payments, should show that the payments are current. If a reaffirmed debt is not reporting the payments, you will need to dispute that item. On-time payments after a bankruptcy discharge will help to re-build your credit.
If you filed chapter 13 and are continuing to make mortgage payments, the mortgage should be reporting monthly payments. If you were catching up mortgage payments in your bankruptcy case, make sure the mortgage is showing that it is current since your bankruptcy discharge. On-time mortgage payments can quickly help your credit score improve.
Your credit score will need a boost after a bankruptcy filing. The best way to do that is to pay all of your bills in full, on time, each month. Mortgage and car payments are especially important.
Getting a credit card can also help. Make sure there is a low limit, no more than $500.00. Use it, but not to the limit, and pay the balance in full in each month. Shop around for the lowest interest rate and fees possible. You may need to get a secured card at first. With a secured card, you have to make a cash deposit or attach the card account to a savings account. Once you have a good credit history with the secured account, you can change it to a regular credit account.
You may have some debts that survived your discharge, such as student loans or taxes. Making arrangements to pay those will help rebuild your credit. There are many repayment options available for student loans. Talk to your lenders; they are happy to help you get back on track. Taxes can usually be put on a payment plan fairly easily, or you may be able to do an offer in compromise to settle the debt. If the debt survived your discharge, it is not going to go away and paying it will help rebuild your credit.
Looking To The Future
Take steps to make sure you don’t end up in financial trouble in the future. Start with a good budget that includes saving for emergencies such as car repairs, home repairs and medical expenses. Make sure you are saving for your retirement. Maximize your 401k and 403b contributions and make sure you are taking full advantage of any matching funds from your employer. Since you have gotten your financial affairs in order, it is also a good time to make sure you have a will, living will, health care power of attorney and general power of attorney. A little planning and discipline will go a long way to protecting your financial future.