By Christopher C. Carr, Esq. Chester County bankruptcy attorney.
So You Finally Got that Bankruptcy Discharge
Congratulations! You’re on your way to a fresh start.
Now you’ve got more to do? See why below:
1. Check debts that didn’t get discharged: Child or spousal support, student loans, or taxes for years for which you did not file a return (unless the IRS exceptions are met) are not dischargeable in bankruptcy. The discharge order will not tell you which debts survive and which do not, nor will the Court provide this information so you may continue to require the services of a knowledgeable bankruptcy lawyer to help you to assess this.
2. Verify lien balances: The discharge eliminates your personal liability for dischargeable debts; liens survive. If you plan to keep a house or car encumbered with liens, find out what you owe and resume payments. Otherwise, the creditor can enforce its lien by foreclosure or repossession.
3. Reset Banking Priveleges: Online banking and automatic bill pay may have been disabled while you were in bankruptcy but can be restarted at your request now..
4. Do Some Record Keeping: Save your bankruptcy papers and keep a copy of your discharge paper handy: You’re likely to encounter efforts by buyers of to collect debts that have been discharged in your case, or so called “zombie debt”. You need to be able to show that the debt was discharged in your case. Creditors with notice of the bankruptcy, and likewise those who buy up their worthless accounts and try to collect on them, were discharged (unless they fall within Rule #1 above). The services of a knowledgeable bankruptcy lawyer may be necessary to stop these collectors, or even under some circumstances to sue them for unfair practices and potentially turn the tables by collecting from them, including your legal fees.
6. Join a credit union: Credit unions are owned by their members. They are in the business of extending credit to members (hence the name, “Credit Union’: “Credit” stands for what they do and “Union” for the members they lend to) and the profits from such loans flow to members. Rates are almost always lower and terms better than the commercial banks, savings and loans and private lenders. Start out with a savings or checking account. Sooner or later you will probably need a car loan or even a home loan. Joining now will give you the longevity that adds credibility to a credit union.
7. Maintain insurance coverage: Even though you may have elected to surrender property through the bankruptcy that still stands in your name, make sure that you are insured for liability. Liability insurance covers you for claims of anyone injured on your property. Electing to surrender property doesn’t take you off title until someone else goes on title. Post bankruptcy claims arising from property you’re trying to offload can potentially ruin the fresh start.
8. Get a credit report: Several months after your discharge, check your credit report to make sure all discharged debts reflect a zero balance. The bankruptcy history can properly remain on your credit for up to 10 years, but you are entitled to a showing that you now owe nothing on all discharged accounts (but see Factor #1 above) This is crucial because your debt to income ratio (“DTI”),one of the primary if not THE primary factor lenders look to in extending credit. Getting erroneous entries corrected may be facilitated using the services of a knowledgeable bankruptcy lawyer. You are entitled to a truly free credit report annually from each of the 3 major credit bureaus which you can get by clicking here and credit experts recommend that you check it at least once a year.
9. Budget and Learn to Spend Within Your Means: Studies have shown that people who go bankrupt only do so ONCE in their lives. WHY? Well debt relief is only one side of the coin. On the flip side are the lessons people take from bankruptcy. So, like these now money wise people, take advantage of the fresh start that bankruptcy has provided, and make lifestyle changes so that it does not happen again. Follow Rule # 10 below and stop using trade credit (AKA: Credit Cards). Get a debit card instead and be you own bank, there is no interest that way!
10. Use credit Wisely. Once Lenders see that you have received a discharge, they may well start sending you “preauthorized” credit card applications. However, if you start to load up on credit again, you will soon be right back where you started. So the rule of thumb is to have just one credit card that you keep in a drawer somewhere for emergencies; If you do use it, make it “free credit”, that is: plan to pay it all back in the same month as incurred so that you are not left carrying a balance ant interest. That way you are living within your means. See Rule # 9 above. The only other credit to use generally speaking is for major purchases such as car or home loans.
11. Build up a reserve for emergencies and start saving again. Set up automatic savings Bankruptcy probably brought home to you how little net worth you have and how thin the safety net is. Arrange for automatic savings for both an emergency fund and for retirement.
Since you no longer have trade credit, it will be easier to devote some of your income to savings…follow the rule “Pay yourself first”. Experts recommend a reserve of 6 months salary and at least a 10% savings rate. Contributions toward your IRA or 401K at work count as you can withdraw these funds (with penalty if applicable) in an emergency.
If you follow these rules, you are more likely to take full advantage of your fresh start and not ever be back to see your friendly local bankruptcy lawyer!
Law Offices of Christopher C. Carr, MBA, P.C., is a quality bankruptcy and debt relief practice, located in Valley Township, west of Coatesville, Pennsylvania, where Attorney Christopher Carr, a Chester County bankruptcy attorney, who has over 30 years if diversified ;egal experience, concentrates on serving the residents of and businesses located within Western Chester County and Eastern Lancaster County, Pennsylvania, including the communities in and around Atglen, Bird in Hand, Caln, Christiana, Coatesville, Downingtown, Eagle, Exton, Fallowfield Gap, Honeybrook, Lancaster, Lincoln University, Modena, New Holland, Parkesburg, Paradise, Ronks, Sadsbury, Thorndale, Valley Township, Wagontown & West Chester, Pennsylvania. If you reside or do business in the area and need assistance with a legal issue, please call Mr. Carr at (610)380-7969 or write him at firstname.lastname@example.org today!