Whether you have just filed for bankruptcy protection or are simply considering the option, it’s important to know what comes next. After filing bankruptcy, you may feel an initial sense of relief. The bankruptcy laws were set up to help people in your situation, after all. Your credit rating will not be as strong after filing bankruptcy, but it probably was not very strong leading up to the process anyways. There are some things to expect once you file, as well as some things you personally can do to get yourself back on the good financial road sooner. Let’s look at a few of those factors now.
Trim Down Your Lifestyle
After filing bankruptcy, there is still the chance that there is a small amount of your debt that you will need to pay back. Paying this debt back is part of the deal, and you must make sure you do it in order to really start rebuilding your credit. The court can sometimes help you set up a budget to live off of and will divide the rest of your income out to the creditors you owe.
What does that mean? You must set yourself up for a no-frills type of lifestyle as you improve your financial situation. This can mean changing the basics, from buying cheaper options at the grocery store to finding a less expensive place to live. Remember that during the period of your bankruptcy, you cannot add on new debt, so what you have as income is it. No extra income will come from creditors.
Once your bankruptcy has cleared, the filing will still stay with you for another 10 years, making it hard to get a low interest line of credit or any credit at all. Making small changes in your lifestyle to help your budget can help you manage your credit and spending better later.
After filing bankruptcy, you might immediately start getting calls from credit card companies offering you cards that will help you build your credit back up. As tempting as this may seem, you cannot add new debt if you are still within the active bankruptcy process. Also, do not jump back onto the credit card bandwagon until you are sure it’s something you can safely manage. You do need credit to rebuild your finances, however, so be careful and honest with yourself as you start this part of the journey. How fast you rebuild your credit depends on you and the resources you have available to you.
If you managed to keep your house in your bankruptcy filing and have been making your mortgage payments, this will help build your credit back up. As you start to get new credit lines, you need to know that you will probably not qualify for most conventional loans or mortgages. If you pay your bills and debt on time during your active bankruptcy, you should have access to these conventional types of loans within two to three years.
After filing bankruptcy, you are likely to see higher interest rates on any line of credit you obtain. These rates are based on your 3-digit credit score, and this score is going to be low right after a bankruptcy. The good news is that negative items on your credit will have less and less impact on your credit report as time goes by. Making sure you replace these older negative items with newer and more positive items will quickly raise your credit level to good standings.
Discuss Your Lifestyle After Bankruptcy With Your Lawyer
You most likely had weak credit when you decided to file for bankruptcy, so you already know what this entails. After filing, you have a great chance to rebuild that credit. Talking with your lawyer can help you start down a good path in the right direction. If you handle the old debts carefully, your credit can bounce back stronger than it was before. Your attorney should have the resources to help you make those decisions and do what's best for you and your future credit.
Filing for bankruptcy can be a stepping stone to better money management and a good lesson for you on how to develop the skills to increase your credit score and keep it all in good standing.
If you want more information on bankruptcy, check out attorney Dan Higson’s other blogs, such as these that go over the basics of Chapter 7 bankruptcy and Chapter 13 bankruptcy. If you have more questions about bankruptcy in the state of California, contact the Law Firm of Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez today!
Hathaway Perrett Webster Powers Chrisman & Gutierrez, APC is a debt relief agency pursuant to 11 U.S.C. 528(a)(4) and assists individuals, families, and businesses file for bankruptcy relief under the Bankruptcy Code. This website is a communication under California Rule of Professional Conduct 1-400. No legal relationship is created by the use of this website and no legal advice is provided. No guarantee or warranty is provided that your case or matter will achieve any particular result and testimonials and endorsements provided on this site do not constitute a guarantee, warranty, or prediction about your matter or case. This communication is made on behalf of Hathaway Perrett Webster Powers Chrisman & Gutierrez, APC and DANIEL A. HIGSON, State Bar No. 71212 is responsible for its contents. All information contained on this website may be factually substantiated by a credible source, including data from the United States Public Access to Court Electronic Records (PACER) system. Detailed data and information is available on request.