Here's What You Do Once Your Bankruptcy Is Approved

Law Blog

If you're heading to a bankruptcy hearing and have been told by your attorney that you have a good chance of being approved, you're no doubt feeling more than a little relief that your debt will finally be either under control or completely wiped out. But the aftermath may also look a little scary from where you're standing. You're heading into a world where you won't have good credit and may have to deal with explaining what happened for several years. But there are obviously ways you can improve the situation, so take action on those to make your overall situation much better, much faster.

Lie Low for a Few Months

Your first action involves some non-action: Lie low. This doesn't mean disappear, but take some time to get your budget under control and establish a really good payment record for rent, utility bills, and other costs not discharged in the bankruptcy. If you have student loans, for example, make those payments with absolute consistency.

This period of time lets you regroup and figure out where you want to go from here. Do you want to concentrate on paying off remaining debts? How much emergency savings do you want to build up? It also allows you some time to just breathe and get used to the fact that your debt situation is a lot better. This time can turn a nerve-wracking period of your life into a much happier, more positive one.

Look up Credit Builder Loans

After you've been paying on time for a while -- and after you have saved up some money -- ask your bank about credit builder loans. These are loans where the bank gives you a loan that you place in a special account, and you pay back the loan over a set number of months with a little interest. The loan is reported to some or all of the credit reporting bureaus, depending on your bank.

These are designed specifically to build credit, so it's crucial that you do not spend the money loaned to you. Keep it in a separate account and use it to make the payments, adding a little extra for interest each month. This is one of the cheapest non-credit-card routes to building credit.

Get That Secured Card

Once your credit score is higher and the credit builder loan is paid off, start asking about secured credit cards. You'll have to pony up the money for the credit limit, of course, but these cards are generally easier to get when you are recovering from bankruptcy. Be aware, though, of how the bank handles transitions from secured to unsecured cards as your credit gets better. Some make the transition seamlessly; you keep the same card and account number but get your deposit back. Others actually cancel the card and issue a new account, which can affect your credit score by making it look like you closed and lost credit.

A good bankruptcy attorney can help you find the right path to recovery. Do not do this alone because having that attorney on your side will help you make the best choices for your situation. For more information, contact professionals like Geranios Law PLLC.


19 July 2016