Filing bankruptcy takes a toll on all areas of your life. Not only are your finances in crisis, it can be easy to get down and think that you will never get your life back.
I like to share a story with you a client of mine – will call him John. Now John was different than a lot of people. He knew that his bankruptcy was a bad thing, but he also realized that it didn’t define him. He was 100% committed to getting his life back on track and believed that nothing could stop him.
John did everything right. As soon as his bankruptcy was discharged, he got a copy of his after bankruptcy credit report. What he found was the many of the accounts that had been included and discharged in his bankruptcy were still open still reporting as being open and currently past-due.
He immediately wrote a letter to all three credit bureaus stating that these accounts were reporting an error. He included a copy of his bankruptcy discharge, and sent the letters via certified mail. Within 30 days, he heard back from all three bureaus that the accounts were now reporting accurately.
While he was waiting for his credit bureau to be updated, John set out to reestablish a bank account. The first thing he went to was a large commercial bank. They weren’t willing to open an account to someone with his history. Many people might have become discouraged, or even given up, but not John! He was serious about after bankruptcy credit repair and forged on!
He went to a small local bank and sat down the branch manager. He explained that he filed bankruptcy due to being laid off when his company downsized. He told the manager that he now had a great new job and was committed to getting his finances back on track. Because this was a small bank, the branch manager was able to see his sincerity and approved the opening of his bank account. Going forward, John was meticulous in how he handled his account.
With a corrected credit report and a bank account from which he could pay bills, the next thing John set out to do was to reestablish his credit history. The first thing he did was to get a secured credit card. He placed a deposit with the lender and received an after bankruptcy credit card in the same amount.
He then went back to the bank and opened a Certificate of Deposit. He then took out an installment loan against this CD. He took the fund he received from the CD loan and used them to open a second secured credit card. He now had three new trade lines reporting to his credit bureau.
The next thing he did was have a conversation with his Dad. He explained that he was serious about getting his life back on track, and was wondering if this Dad would be willing to help him.
What he wanted to do was have his father had him as an authorized user to one of his existing credit cards. Now Dad had perfect credit and carried very low balances on all of his credit cards. By doing this John was able to take advantage of his father’s years of good credit and receive an instant boost in his credit score. There was no risk to John’s father, because John didn’t ask for a credit card. He just wanted to be added as an operation user to improve his credit score. John’s father was happy to help him and John was grateful for the help.
Six months went by, and John was ready to apply for unsecured credit. He found a credit card company that specializes in working with people who have less than perfect credit histories. Because he had been paying all of his bills on time, he wasn’t surprised that he was approved in minutes.
Another six months went by and John’s credit score continued to rise. His car was giving him trouble that he wasn’t worried. He’d kept all of his new credit cards with low balances, built up a nice savings account and could easily afford a new car loan. He wasn’t surprised to find out that even though he filed bankruptcy only a year before his after bankruptcy credit score was in the high 600s.
After another year John was ready to buy home of his own. It’d been two years since his bankruptcy discharge in his credit score was well within underwriting guidelines.
Now is bankruptcy seemed like a distant memory and his financial life was truly back on track.
Hopefully, you see from John’s story, that if you have a plan, you can get your life back on track after a bankruptcy!
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