Life After Bankruptcy -

     One of the core goals of bankruptcy is to give the debtor a "fresh start" in life, free and clear of burdensome debt. This is accomplished by Section 727 of the Bankruptcy Code, which provides for an individual debtor to receive a discharge of his debts. Once discharged, the debtor will be free from the hassles of dealing with debt collectors, and his credit report will display a clean slate. The path to economic recovery starts upon entry of the discharge.

Road to Recovery

     There can be a few speed-bumps on the road to recovery. A debtor needs to be careful not to fall into his old patterns. For example, he should carefully evaluate whether to accept new credit card offers which may come his way. He should heed the budgeting advice given in the court-mandated credit counseling and debtor education courses. Finally, he should read the tips found in the Avoiding Bankruptcy section of this site

     Many credit providers will allow credit to be reestablished within a short period of time after completion of the bankruptcy case. This is because the debtor cannot file another Chapter 7 bankruptcy case for 8 years, often has good income and no debts, and other than the bankruptcy filing on his record is a good credit risk. For instance, even though a person filed bankruptcy, clearing his record of debt may provide an advantage to him in certain situations. An example is renting an apartment. Potential renters # 1 and # 2 have the same monthly income, and want the same apartment. Renter # 1 has $75,000.00 of debt of credit card debt with monthly payments of $1500.00, and has not filed bankruptcy. Renter # 2 has filed bankruptcy recently, had his debts discharged, and has no other monthly debt payments. It may be advantageous to the landlord to rent to Renter # 2, because his debt to income ratio is lower and Renter #2 is thus better able to make the monthly rent payment.

Things to Do After Bankruptcy

     Check your credit report with the 3 big credit reporting agencies to make sure that they reflect a zero balance on the discharged debts. Improve your credit score by assiduously striving to make all your payments on time, and not exceeding your pre-established credit limits on credit that you obtain.

Buying a House

     It is possible to buy a house after bankruptcy, and obtaining a mortgage to finance part of the purchase. Governmental agencies like the FHA generally require that a debtor have a clean record credit-wise for a period of 24 months after exiting bankruptcy. Then, he basically is back to square one as far as obtaining a mortgage.

Buying a Car

     It is also possible to buy a car after bankruptcy, and to get a loan to help finance the purchase. In fact, many auto dealers and lenders specialize in bad credit auto loans, which are designed to help people with their credit history.

Written by Henry Rendler