Life After Bankruptcy

Rebuilding Credit after Bankruptcy

by Vincent Polisi on August 28, 2009

Bankruptcy is one of the most difficult experiences someone can go through.  There are so many difficult emotions – embarrassment, guilt, and regret.

One of the most important things you can do is keep your eyes firmly looking forward.  Yes, it is important to understand what caused the situation, take responsibility, and do what you can to ensure that you don’t end up in the same situation.  But then, <b> it’s time to MOVE ON!</b>

Here are some key things you can do to begin rebuilding credit after bankruptcy.

  1. Get a Bank Account! Ok,  this doesn’t technically help you rebuild credit, as your bank account doesn’t show up on your credit report.  (Unless, of course it was charged off.)  None the less, if you lost your bank account during your financial struggles, it is imperative that you get a new one.  You have probably already learned how difficult life can be without one! But how?  Many of the larger banks (think Bank of America) may not be willing to work with you.  A good step is to try to find a regional bank (Best Bank in Georgia is a good example) that will open a bank account when you have bad credit.  Another great option is a credit union.  Don’t underestimate the worth of building a relationship with the Branch Manager.  And, once you have an account, take care of it!
  2. Pay Your Bills On Time! This should go without saying, but it is extremely important.  Lenders will not be as lenient with small hiccups post bankruptcy as they would have been before.  The bottom line: you have to prove yourself all over again and you can do this by paying slow!
  3. Take Care of Your Student Loans! If you had student loans before your bankruptcy, they are probably still haunting you.  Unfortunately, unlike other debts, they are typically not dischargeable.  The good news is that you can rehabilitate your student loans! To find out how, click here.
  4. Get a Secured Credit Card! You most likely won’t be able to get unsecured credit right now, but you can begin to rebuild credit by getting a secured credit card.  This is where you will take a certain amount of money and give it to your credit card holder.  They will then issue you a credit line in that amount or slightly more.  If you can, look for a card holder that will convert the account to a secured loan after a set period of time.
  5. Get a CD loan! Once you have an established banking relationship, you will want to get a CD loan.  Here, you will go in an open a CD with your bank and they will issue you an installment loan in the same amount.  This is especially helpful for two reasons. One is that bank loans are especially helpful in raising your credit score.  Also, by having a credit card and an installment loan, you now have a “mix” of credit.  Showing that you can handle both will help raise your score.

Follow these steps and you will be well on your way to after bankruptcy credit repair! Credit repair after bankruptcy takes time but it can be done!

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Student Loan Rehabilitation

by Vincent Polisi on August 28, 2009

Student Loans can be one of the most difficult credit issues you will face.  If you have fallen behind on your student loan payments, you probably already know that it is one of the most difficult debts to deal with.  Unlike other debts, bankruptcy laws are such that student loans are not dis-chargeable in a bankruptcy.

Additionally, the IRS will likely take any tax refund that you are due and send it to the Department of Education until your loan is paid in full.  (By the way, if this happens to you and you want to challenge it, you can go to www.studentloanborrowersassistance.org to learn more)

The good news is that the government offers you the ability to rehabilitate your student loans!

To do this, you will first need to call your lender and let them know.  They will set an acceptable payment schedule up for you.  Then you will need to make between 9 and 12 payments on time.  (Don’t slip up – they used to offer this as often as you needed it, but now it is a one shot deal!)

Once you have done this, your loan will no longer be considered in default and the default status will be completely deleted from your credit file.  Some lenders will offer to delete the negative history in entirety.  If they do, MAKE SURE YOU GET THIS IN WRITING.  Lately, I’ve been hearing of people that were promised this but once the 9-12 month period was up have been having difficulty getting what they were promised.

Other benefits of rehabilitating your loan include that you will regain eligibility for loan benefits such as deferment and forbearance.  (make sure you use this if you are ever at risk of falling behind again) Additionally, your wage garnishment ends and the IRS will no longer take your tax refund.

It is important to note that most student loans are not discharged in a bankruptcy.  So, even if you have filed for bankruptcy, it is important that you rehabilitate your student loans.  Not doing so can make it very difficult to establish after bankruptcy credit – even something that is typically easy to get like credit cards after bankruptcy.  In fact, having outstanding student loans will make it impossible to get mortgage loans after bankruptcy.

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