With your credit in tatters, you’ll have to be patient for a little longer before acquiring many of the things you’ve wanted for so long. You took the right steps when you hired Chapter 7 attorneys to regain control of your finances. Unfortunately, there are a few things you will have to wait for after bankruptcy.
1. Watch the bankruptcy disappear from your credit report
Bankruptcy can stay on your credit report for ten years, negatively impacting your score and causing lenders to scrutinize you before they are willing to even 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. Repair 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 for the ten-year mark mentioned above, it should be shiny and new again. Instead, credit repair relies on a number of different factors. How well you pay off current debts, including your house payment (if you’ve 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 conditions. They know that you cannot re-file for Chapter 7 bankruptcy for eight years, and as such, you will have to find a way to make payments with these high-interest cards. Worse yet, you will incur high fees, low limits, and affect 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 every month will help you rebuild your credit faster.
4. Buying a house
Sounds like the perfect time to go looking for a house, right? With no debt hanging over your head after a Chapter 7 discharge, it feels like you have more of each paycheck to spend on things like a new house. Unfortunately, you are still unable to participate. If you are using a VA loan, you will have to wait two years from the time you filed for bankruptcy before trying to buy a home. A more traditional loan will require a four-year waiting period. However, do not despair. In the meantime, you can start to build up your down payment. Take the amount you would like to spend on a home payment each month and put it into a dedicated home purchase account. In four years, you will have a substantial down payment that will make it much easier for you to obtain the loan you want.
5. Going back to your old lifestyle
You have more money available now that you’ve reduced or eliminated your debt, but that doesn’t mean you need to dive right into your old lifestyle. Remember, those overspending habits are what bankrupted you in the first place. Take the time to develop good spending habits and wait for your employment status and income to change 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’s over can be even more difficult. For more tips and tricks on managing your finances after bankruptcy, contact us today.
