After Bankruptcy: What's Next?

You made the difficult decision to file for Chapter 7 bankruptcy. The legal work has been done, and your debts have been discharged. You probably feel a sense of relief as well as determination to start over the right way. Although your credit will not immediately recover, you can take action to right your financial ship as soon as possible. 

Live On Cash

After Chapter 7, you will need to live on cash. The bankruptcy will stay on your record for ten years, and although your debt has been discharged, you will find it difficult to get any significant, affordable credit for a while. Fortunately, you do not have to make any payments toward your old debts and can keep your salary. Before bankruptcy, you probably had an emergency credit card that you used if you had a car repair or other large, unexpected expense. Immediately after bankruptcy, you will need to use a "cash stash" of your own making. As soon as possible, begin putting away at least small sums to be used when things go suddenly awry. Reduce your spending, if possible, so that you have money left over after essential expenses. 

Getting Credit

After you file for bankruptcy, you may be surprised by how quickly you begin to get credit card  and even loan offers in the mail or online.  Although you may be able to get credit, you will pay dearly for the privilege and your credit line will probably be quite modest. As long as your credit score is low, you will be paying high-interest rates. In addition, these lenders often charge high yearly fees simply for the privilege of having a card available. Paying for most things in cash is still the best plan. 

One way to build up your credit is to use a secured card. These cards require that you give a cash deposit as collateral for the card. Your credit line will typically be the amount you deposit, but that money is not used to pay for your monthly charges. It's there so that the bank can use it to pay off your debt if you stop making monthly payments. Your timely payments should be reported to the credit bureaus, resulting in a slow but steady improvement in your credit score. Use the card regularly to make small purchases so that your payments are noted by the bureaus. Be certain to pay off the entire balance each month if at all possible. You should not carry a balance on these cards. 

Overcoming bankruptcy is a slow process, but you can do it by cutting expenses, saving money, and judiciously using a credit card. Since you have left the worst of your financial problems behind, you should feel hopeful and encouraged that what comes next is a better life. For more information, contact an attorney such as Attorney John A McLaughlin Jr PC.

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