Bankruptcy

Going Bankrupt and Starting Again

Get tips about managing your financial life after bankruptcy.

It’s understandable why people feel a sense of relief after getting through the bankruptcy process—bankruptcy allows people to break free from the stress of heavy debt and get the fresh start that they need. Once you’ve reached the point that your qualifying debts have been wiped out, and you’ve received your discharge order, you’ll want to focus on three things: making sure your credit report is correct, rebuilding your credit, and staying out of further financial trouble.

(Still deciding whether bankruptcy is right for you? Read Choosing the Right Type of Bankruptcy: Chapter 7 or 13.)

Keeping a Copy of Your Paperwork

One of the first things you’ll want to do is to be sure that you’ve put a copy of your bankruptcy documents in a safe place. These papers should be kept as a part of your permanent records, like your birth certificate or social security card. Specifically, you’ll want to retain a copy of your:

  • petition
  • schedules
  • discharge order, and
  • any statements and related documents that you filed with the court.

You’ll need these papers to make sure discharged debts are reflected correctly on your credit report. You might also need them later to prove to a creditor that the court wiped out a particular debt in your bankruptcy case.

Checking Your Credit Report for Accuracy

About three months after you get your bankruptcy discharge order, you’ll likely want to pull your credit report. Everyone can receive a free copy from each credit reporting agency (Equifax, Experian, and TransUnion) once per year through www.annualcreditreport.com. Here’s a tip: Consider getting one report to start, then get the other two in three-month intervals.

It’s a good idea to review the report to ensure that the reporting agency marked all the debts listed in your bankruptcy papers as discharged in bankruptcy. You can dispute any item that isn’t notated correctly with the credit bureau by following the online instructions or the instructions on your credit report.

If you have reaffirmed a debt (agreed to remain responsible for it) in a Chapter 7 case, you’ll want to check that the creditor is reporting those payments on your credit report because the payments will help to rebuild your credit score. You can dispute any item that a creditor isn’t reporting.

If you filed for Chapter 13 bankruptcy and are making mortgage payments, the mortgage company should show that your mortgage is current and that you are making the payments—especially if you were catching up arrearages through your plan. Mortgage payments can be a big help in rebuilding your credit.

Rebuilding Your Credit

There’s no way around it—a bankruptcy filing will lower your credit score. However, you can improve your credit score by properly using credit after receiving your discharge. To start, if you have a mortgage or a car payment, continuing to make timely payments will help rebuild your score.

Also, it’s likely that you’ll get credit card offers almost immediately after receiving your bankruptcy discharge. Keep in mind that your credit score improves as the amount of available credit (not used credit) increases. As a result, it’s prudent to avoid low limit cards, if possible. Once you have a card, you’ll want to use it; however, to keep your balance down (and your credit score increasing), it’s a good practice to pay it off in full each month, if at all possible.

If you have debts that you remain responsible for after your bankruptcy, such as student loans or taxes, you’ll want to make arrangements to pay those debts. Student loans have many repayment plans available, especially if it’s a government-backed loan. Private lenders have options as well. Additionally, taxing authorities will often allow you to put your tax debt on a payment plan, or you could offer to pay a lesser lump sum to pay the debt off (called an offer in compromise).

Preventing Future Financial Problems

Saving for the future is key to your financial security going forward. A goal is to save three to six months of living expenses. Then, if you have an emergency, such as a car repair, home repair, or unexpected medical expense, you’ll have some cushion to fall back on. You’ll also want to consider saving for your retirement—especially if your employer offers a matching program—and preparing a will.

Questions for Your Attorney

  • How will I know which debts the court discharged?
  • Can you help me get a copy of my bankruptcy paperwork?
  • Do you pursue creditors who violate a bankruptcy discharge?
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