Being Wise after Bankruptcy
One of the most common questions I get during my bankruptcy consultations, “How long does the Bankruptcy stay on my credit report?” The quick answer to that is, 10 years. I start to see foreheads crinkle and eyes bulging. “10 years is a long time!” they say. How will I ever have credit to buy a car or a home in the near future, they ask?
Just because the bankruptcy remains on your credit report for 10 years does not mean that your credit is at a standstill for 10 years. In fact, I tell my clients that once their Chapter 7 bankruptcy case is closed and dischargeable debts are discharged, they can begin to reestablish their credit immediately. So we are really only looking at a time frame of 3-4 months before they can gain that fresh start. In fact, some of my clients have come back to tell me good news that they were able to purchase a home 2-3 years from the closing date of their case.
Helpful Hints for Life after Bankruptcy
1) Don’t apply for a credit card until you are READY!
Yes, you can take out a credit card after your bankruptcy case comes to a close. This sounds tempting but please be aware of the pitfalls that come with this privilege. You may want to take some time to get your financial situation back on track before rushing to get another card. Try to examine your budget realistically by writing down all of your monthly expenses and compare that to your monthly income. If there is barely enough there at the end of the month, you may need to wait a while before taking out another credit card.
Try living on cash for a while so that you gain a real sense of where your money is going. Don’t be tempted to rely on credit cards again if you are not ready. Take your time!
2) Avoiding accepting too many offers
There is no good reason why you would need more than 1-2 cards at a time. Having too many cards can lead to bad decisions and unmanageable debts. Having one card and paying off the balance at the end of the month is the best way to rebuild your credit.
Avoid taking out a store credit card like Victoria Secret or Lowes just to get a discount or a free gift. Before you know it, you will have 5 cards with balances you can’t afford to pay off.
3) Don’t get hooked on minimum payments
I tell my clients to avoid paying only the minimum payments at all cost after bankruptcy. What this tells me is that my clients are overspending once again. Living above their means and not learning from prior habits and mistakes. The only point of having a credit card after bankruptcy is to rebuild your credit, not to charge up on items you can’t afford.
It is also a good idea to set aside cash each month to cover what you have charged on your card. You will have peace of mind that once that credit card is due, you can cover it. It is extremely difficult to break old habits but it can be done!
If you need help budget planning, let our firm know and we can provide you with work-sheets that can help you see your monthly finances more clearly.
Should you have further questions regarding being wise after bankruptcy or your own unique financial situation, please do not hesitate to contact our office to speak with an attorney today. We are here and we are ready to help.
Lam Law Firm, LLC •1335 44th Ave North • Suite 100 • Myrtle Beach, SC 29577
DISCLAIMER: The information contained on this page is for general information, only. It is not intended to be legal advice, nor should you make legal decisions based on this information. Please consult one of our attorneys to see how the law applies to your particular situation.