With your credit in tatters, you’ll have to be a little more patient before you acquire many of the things you’ve wanted for so long. He took the right steps when he hired Chapter 7 attorneys to regain control of his finances. Unfortunately, there are some things that he will have to look forward to after bankruptcy.
1. Watch the bankruptcy disappear from your credit report
Bankruptcy can stay on your credit report for ten years, negatively affecting your score and causing lenders to take a hard look at you before they’re willing to give you a basic loan. However, after those ten years, you will be free and clean because the bankruptcy will no longer be visible.
2. Repairing your credit
There is no perfect rule of thumb for how long it will take to repair your credit after a Chapter 7 bankruptcy, although by that ten-year mark mentioned above, it should be shiny and new again. Instead, credit repair is based on a number of different factors. How well you pay off your current debts, including your house payment (if you managed to keep the house), is at the top of the list and should be a priority in your new budget.
3. Apply for an unsecured credit card
Immediately after filing for bankruptcy with your Chapter 7 attorneys, you will likely see many credit card offers claiming to be interested in helping you rebuild your credit. Sounds perfect, right? Unfortunately, these credit card “offers” come with important strings attached. They know you can’t file Chapter 7 bankruptcy again for eight years, and as such, you’ll have to find a way to make payments on these high-interest cards. Worse yet, you’ll incur high fees, low limits, and take a hit to your credit if you cancel the card. Instead, wait until you’ve raised your credit score to around 700 before applying for a new card. As you try to build your credit, try options like secured credit cards; you deposit the money in a specific account at the bank, and the bank offers you a “loan” of 50-100% of that amount. Using this card each month will help rebuild your credit faster.
4. Buy a house
Sounds like the perfect time to go house hunting, doesn’t it? With no debt hanging over his head after a Chapter 7 discharge, he feels like he has more of every paycheck to put toward things like a new house. Unfortunately, you can’t jump yet. If you are using a VA loan, you will need to wait two years from the time you filed for bankruptcy before attempting to purchase a home. A more traditional loan will require a four-year waiting period. However, don’t despair. In the meantime, you can start building your down payment. Take the amount you’d like to spend on a house payment each month and put it in an account dedicated to buying a home. In four years, you’ll have a substantial down payment that will make it much easier for you to get the loan you want.
5. Return to your old lifestyle
You have more money on hand now that you’ve reduced or eliminated your debt, but that doesn’t mean you should dive right back into your old lifestyle. Remember, those overspending habits are what got you broke in the first place. Take the time to develop good spending habits and wait for a change in your employment status and income before trying to meet those standards again.
Filing for bankruptcy after hiring Chapter 7 attorneys is a scary time in your life. Rebuilding when it ends can be even more difficult. For more tips and tricks on managing your finances after bankruptcy, contact us today.