After Bankruptcy

The decision to file for Bankruptcy is one that will have a profound effect on your life.  It may be difficult to imagine right now, but personal Bankruptcy can give you a fresh start, free from overdue bills, creditor harassment, lawsuits and financial stress.  

Once you make the decision to file and complete the process, you may feel relief as your debt struggles are finally over.  However, eliminating the debt through Bankruptcy is only the first step in this process.  Once your Bankruptcy is concluded, you will need to take additional steps to make sure the past problems do not occur again.

REBUILDING YOUR CREDIT

Some people do not wish to re-establish or obtain credit after their debts have been discharged through Bankruptcy.  Other people welcome the fresh start and hope to rebuild their credit scores as soon as possible for a more secure financial future.  Even if you want to avoid new credit in the future, establishing some new credit is an important and necessary step to starting over.  It is also necessary if you wish to purchase a new vehicle or home after Bankruptcy. 

Rebuilding your credit history can start immediately after your case closes.  While there are many ways to rebuild credit after a Bankruptcy case, here are some helpful suggestions: 

Step One:  Obtain a copy of your credit report from Experian, Equifax, and TransUnion.  You can obtain a free report from each of these agencies at: https://www.annualcreditreport.com. 

Step Two:  Review each report for errors and report inaccuracies to the credit bureau.  Discharged debts should be described as "Discharged in Bankruptcy" with a "Zero Balance."  There should be no activity since the date of your Bankruptcy filing.  This will give you a fresh start for the future. 

Step Three:  After correcting your credit report, it is time to rebuild your credit score. Approximately 1/3 of your credit score is based on your payment history, so many of our former clients have found they can quickly rebuild their credit by making on-time payments to a secured credit card or small bank loan (small loans may require a co-signor).  On-time payments to a secured debt, such as a home mortgage or auto loan, will also improve your score. 

Slow and steady really does win the credit rebuilding race.  Making wise credit choices and paying bills on time will dramatically improve your score.  The good news is that new credit, when managed wisely, will have a positive effect on your credit score.  

ESTABLISHING A BUDGET

For some clients, mentioning the word "budget" causes extreme anxiety.  I understand these concerns; however, living on a true budget is essential for your financial future and success.  Creating a budget does not mean you must deprive yourself of things that make your life happy and content.  The process is all about planning, prioritizing and determining what you want to do with your money based on the most important things in your life.  You can budget for more savings, avoid interest and penalties, and clear a path for financial success.

You should carefully track all payment due dates on your new bills.  It may be helpful to keep a journal of all spending and expenses in order to analyze your financial habits and make positive changes.  Be sure to avoid past mistakes, such as taking on more expenses than you can truly afford to pay. 

An effective budget will allow you to take control of your money, examine how and where it is spent each month, and prevent bad financial habits from developing again.  A monthly budget can be an excellent tool on the road to financial freedom. 

BUILDING A SAVINGS ACCOUNT

Following a budget can have many rewards.  A major benefit to properly managing your money is the ability to save.  After Bankruptcy, and even during the process, you should begin putting money in a savings account in regular intervals.  The money you would have used to pay your creditors (or towards the interest and penalties), can now go in a savings account and start earning interest.  Even if the amount is small at first, it is a good financial habit to start and continue. 

There are several ways to build a savings account.  If you are employed, and your employer offers a 401(k) plan or other type of retirement plan, you may want to join and add to the plan.  If you are self-employed, you should consider opening an Individual Retirement Account (IRA).  If you budget for a certain amount each month, you can have that amount deducted from your checking account each month and placed in your savings account. 

AVODING IDENTITY THEFT

After the Bankruptcy is over, your mailbox will start to overflow with new credit card offers.  As you start to rebuild your credit, you may become vulnerable to identity theft or other credit repair scams.  Be careful!  As noted above, it is critical that you closely monitor your credit report on an annual basis (every 6 months or every year), as well as all credit card and bank accounts. 

If you become a victim of identity theft, you should notify your creditors and the police immediately.  You should also change your passwords and PINs on a frequent basis to protect yourself. 

THE ROAD TO FINANCIAL FREEDOM STARTS HERE

If you have decided that Bankruptcy is a good option for your situation and need proper guidance along the way, please contact the Law Office of Nicholas R. Westbrook at 713-893-6204.  I will explain the pros and cons of filing and what life will be like after the Bankruptcy is concluded.  You can also contact me through  E mail or the Free Case Evaluation.  I look forward to helping you get debt free.