Starting over after a bankruptcy is possible

Filing for bankruptcy may be a difficult decision, but it has the potential to help people start over and rebuild their credit.

When faced with some of the problems that can result from a job loss, too much credit or an unexpected financial emergency, filing for personal bankruptcy may be an effective option for New York residents. Depending on whether they file for Chapter 7 or Chapter 13, bankruptcy has the potential to let people start over with a clean slate or restructure their debt to manageable payments. After a bankruptcy discharge, it can be easy to think that one's credit is ruined for good. However, the first few years after starting over can provide an opportunity to rebuild credit, in many cases faster than one might expect.

A change of attitude

It is true that filing for bankruptcy comes with consequences, such as negatively impacting one's credit report for up to 10 years. These reasons might be enough to make people think twice about taking this option. Fortunately, Fox Business states that many banks and lenders do not view personal bankruptcy as having the same negative connotations as it did in the past. Despite the negative hit to a credit report, many people are able to secure major loans, such as auto loans or home mortgages, after a bankruptcy.

Rebuilding credit immediately

Once a discharge of bankruptcy is received, all of your dischargeable debts are extinguished as a matter of law. It is possible that when you attempt to rebuild your credit, that some credit card companies may be more willing to extend credit knowing that another Chapter 7 bankruptcy cannot be filed for an eight-year period from the date of the original bankruptcy. Some lenders may be willing to extend loans to people starting over in an effort to improve their credit scores. You may also want to ask a friend or relative to assist you in obtaining a credit card by agreeing to be a co-obligor on the credit card.

It is important that utility bills and other monthly bills going forward are paid on a timely basis to be able to establish that obligations are being paid when due.

According to Bankrate, there are some items you should consider:

  • Being careful about credit decisions, such as not having too many credit cards or applying for credit too quickly after a bankruptcy
  • Understanding that predatory lenders target people after a bankruptcy and steering clear of scams
  • Considering a secured credit card instead of traditional credit while rebuilding a credit score
  • Avoiding risky financial traps like payday loans and title loans
  • Putting aside some money each paycheck for emergencies
  • Periodically negotiating with lenders for better interest rates

One of the reasons that a bankruptcy should be considered in many situations is that if you are delinquent on bills and just in a revolving cycle of borrowing money and paying, you are never going to have the opportunity to extinguish this debt. That is why an experienced bankruptcy attorney may be able to assist you to obtain a fresh start envisioned by the Bankruptcy Code so that you can eliminate many of your debts and begin to rebuild your credit score and relieve the stress associated with monthly bills.