You’ve finally received the discharge papers at the end of your bankruptcy case after filing for Chapter 7 or Chapter 13. You’re thrilled that you no longer have the stress of creditors hounding you for payments and now you can have a fresh, new financial start. But what do you do next? Here’s our simple guide to getting back on track.
Keep your paperwork
Keep a copy of all of your bankruptcy paperwork even though your case has closed. All documents including your bankruptcy petition, schedule, and the order of discharge that you have recently received. If you have lost your copies of any of the paperwork or shredded them thinking they were a part of your past, then you can get a copy of your records from the court. This may cost a fee to do so.
Keeping your paperwork is proof that you did file for bankruptcy (and lists when you did so) and that it was granted by the court, which can come in handy if a creditor should mistakenly come knocking. If your debts have been discharged, there is no reason for them to be contacting you. The paperwork could also be used if you needed to correct something on your credit report.
There is no legally required date that you must keep these documents but issues could flare up years later and it is always good to have them on hand in case something comes up when you need them.
Keep track of your credit report
Keeping track of your credit report is a vital part of your future after bankruptcy. A bankruptcy can take ten years before it comes off of your credit and it is a hard hit to your score. You will be severely impacted because of your filing for bankruptcy and creditors will not be willing to take a risk with providing you an unsecured loan or line of credit. You may be eligible to get a secured credit card in which you front the money for the credit line. Your next tasks will be to slowly rebuild your credit.
Make a budget and pay your bills on time.
Make sure that you create a monthly budget to show how much money you have coming in and how much must go out. Only include income that you know you will be receiving, like from a job. Cut out any unnecessary expenses like cable TV (read a book or at least get a cheaper streaming service), daily lattes or coffee (make it at home), or gym memberships (start exercising at home).
You may be required to put a deposit down for an apartment or utilities because of your bankruptcy. Also make sure that your rent, phone, utility, or other bills are paid on time. This will help to repair your credit history and provide you with a healthy credit background.
Open a savings account.
Even if you don’t have much to put into the savings account at first, there are plenty of banks with little or no deposit requirements. Add as much as you can, even if it is only five dollars, every week. This little bit will soon grow into a large amount. Over time, as you rebuild your credit and get back on track, you may be able to deposit more each week.
In the event that something in your home breaks down, like your air conditioner or fridge, you will have some emergency funds to pull from instead of resorting to a line of credit.
Rebuild your credit, one step at a time.
To start rebuilding your credit you will need to set up payments for any non-discharged debts and make sure you make those payments on time. If you fail to make a timely payment, creditors will be allowed to begin taking collection actions against you. And you aren’t eligible for filing for bankruptcy again for a few years, so get those payments in on time.
To keep your credit score from dropping further, do not enlist in any new unnecessary debt that led you to bankruptcy in the first place. Avoid opening new credit cards, even to have on hand for “emergencies only”.
Once you have your budget under control and have been consistently paying your bills on time and feel confident that you can handle a credit card, check with your bank or other reputable credit card company about opening a secured credit card. Secured cards allow individuals with poor credit to have a line of credit while also working to rebuild their credit at the same time.
Secured cards work by putting a down payment on the card, the minimum usually being $300. Whatever amount you put down will be your line of credit. You still have to repay the money you charge to the card. Secured cards are not prepaid cards. Your down payment will only be used to pay off your remaining balance if you close the account; it cannot be used towards monthly purchases. Make only small purchases and pay them off as soon as possible. Make sure the balance is paid off in full every month. Over time, this habit will reflect well on your credit history, slowly bringing it back up.