Life After Bankruptcy: The Light at the End of the Tunnel

Posted by Wesley Scott on September 10, 2013 at 4:00 PM
Wesley Scott

Life After BankruptcyThe effects of filing bankruptcy are felt almost instantly. The moment you decide to file bankruptcy you will likely feel some of the stress fade because you know the end of your financial nightmare is in sight. Once your petition is approved, you can begin the journey to debt freedom, feeling lighter and happier than you have felt in a long time. Put the nightmare behind you and begin living the life you have been dreaming of.

Say Goodbye to Debt

The first and most rewarding element of life after bankruptcy is the elimination of your debt. Not only are you free of your financial burden, but your stress will lift and you will be able to get your life back on track. You will be debt free, based on what chapter you file, in the near future:

  • Chapter 7: you will be completely and immediately free of all discharged debts
  • Chapter 13: you will be completely debt free in 3-5 years after completing your manageable payment plan

Creditor Harassment Disappears

You will no longer be afraid to answer your phone or retrieve the mail. Bankruptcy turns over a new leaf, burying your creditors; creditor harassment comes to an end. During bankruptcy your creditors will be notified of your filing and be required to stop all collection activities against you. Your creditors are forbidden by law to attempt to collect on any debt that was discharged now or in the future.

Opportunity to Rebuild Credit

Don’t be afraid of credit. After filing for bankruptcy you can rebuild your credit fairly quickly. You should establish a new source of credit and manage it responsibly. Show creditors you are capable of making payments on time. You should note that getting credit in the future may be more difficult. Creditors may be hesitant because of your history; they may only offer you credit at high interest rates. This is where patience and responsible finance management is necessary to prove your credit-worthiness. The more responsible you are the more likely creditors will be to offer you credit.

The effect bankruptcy has on your credit during your life after bankruptcy is a common misconception. There is confusion between the effect on the credit score and the note that gets applied to your credit report. A note will appear on your credit report that simply states “account was included in bankruptcy”.  If a chapter 7 is filed this notation will remain for 10 years and if a chapter 13 was filed this notation appears for 7 years. These timelines are not synonymous with the impact on credit scores.

Your credit score will drop temporarily based on how much debt you had and how many accounts were involved. This drop isn’t based on the fact that you filed for bankruptcy; your credit will be damaged due to the debt you incurred and your inability to make payments.

Repair Any Underlying Issues

Determine what caused you to fall into debt and figure out a way to fix those habits or avoid those situations. If excessive spending, living outside your means and overall poor financial decisions or management caused you to fall into debt, work toward fixing these underlying issues so you don’t fall back into your old habits. If medical issues or divorce caused your financial difficulty, determine ways you can prevent these from happening in the future; for example, work toward developing a savings account or get insurance for those unexpected, costly events.

Credit counseling and financial management courses taken during your bankruptcy filing process should be taken seriously and applied to your life after bankruptcy.

If you are interested in learning more about what happens during life after bankruptcy or if you want to start the journey to this life, sign up for a free consultation to see if bankruptcy is right for you.

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Topics: Bankruptcy

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