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What Does Life After Bankruptcy Look Like?

Life-After-Bankruptcy

Some people find themselves in a situation where they are unable to repay all their accumulated debts. Whether it is due to medical emergencies or a job loss, these dire situations put some people in a position where they have no choice but to max their cards and deplete their savings. Unfortunately, making the minimum monthly payments on credit cards and loans remains challenging even with unemployment checks or a temporary job.

Filing for bankruptcy can be a viable approach if you have financial issues. All collection actions are halted, including phone calls, wage garnishments, and certain lawsuits. It also eliminates various debts, such as credit card accounts, medical bills, and personal loans. However, it does not eliminate all responsibilities. For example, you still need to pay your student loans (most filers will NOT qualify for student loan discharge) as well as arrearages for child support, alimony, and most tax debts.

Life after bankruptcy means a new beginning. Your credit score will likely improve immediately upon discharge of your case. This is due to a large portion of one’s credit score stemming from the Debt-to-Income Ratio. The bankruptcy filing will stay on your credit report for ten years.  However, it will only affect you for about two years.  Most filers find that they can purchase a vehicle the instant a case is discharged.   Additionally, debtors can expect a reasonable interest rate on a vehicle approximately a year after discharge.  Most filers find that they are able to receive a credit card as soon as the Bankruptcy has been discharged. The reason for the rapid recovery of one’s credit is because you are viewed as a lower risk post discharge. You have legally written off at least some of your previous debts thus lowering your debt-to-income ratio. The largest affect stemming from a bankruptcy filing is a filers ability to qualify for a mortgage.  Most filers find that they can qualify for a mortgage 2 years after a Chapter 7 discharge.

What happens after you file?

First and most importantly the Automatic Stay is put in place by the Bankruptcy Court the instant that a case is filed.  The Automatic Stay is what protects you from your creditors collection attempts while you are in bankruptcy.  The next step will be your Section 341 Meeting of Creditors.  You will be required to attend this meeting, likely by phone or video conference.  Your Trustee will ask you a series of questions to ensure that your paperwork is accurate and that you have disclosed all of your assets and debts.  This meeting is typically very short.  Creditors have the opportunity to appear at this meeting and question a filer about their filing.  It is very uncommon for creditors to appear at these meetings. You will get to keep your furniture, vehicle, and personal belongings up to a certain amount. If you have non exempt property, the trustee may ask you to turn that property over to them.  It is very uncommon for filers in Texas to have non-exempt assets that will need to be turned over.  A competent bankruptcy attorney can inform you as to how your property will be treated long before the filing of your case.

Once your bankruptcy requirements are complete, you will obtain a discharge.

Once you complete all your duties in bankruptcy, you will obtain a discharge. The discharge is the end goal of a Bankruptcy filer.  The Discharge means that your legal liability to pay pre-petition dischargeable debts has been extinguished by the Court. Your Appointed Trustee will also be discharged from the bankruptcy process once all of their duties have been fulfilled. The Trustee’s duties are to ensure applicable income tax returns have been properly filed and assessed, review creditors’ claims, compile a final accounting, and distribute money to creditors.

You can slowly but surely get back on track.

Bankruptcy does not leave a lasting mark on your credit report, and your credit score will drastically improve in the two years after your discharge. Most Chapter 7 debtors receive their discharge in about 4 months, but the bankruptcy will remain on their credit record for ten years. You do not have to wait to start establishing and enhancing your credit score.

In order to rebuild credit, it is recommended to start by applying for a Credit Card as soon as your case has been discharged.  Further, you have to make sure you pay all your bills—even small phone bills—on time.  If you are unable to qualify for a traditional Credit Card a Secured Credit Card can be a good option to rebuild credit.  A secured credit card is a credit card that requires a cash deposit from the cardholder. This deposit serves as account collateral, ensuring that the creditor is covered if the cardholder cannot make payments.

It is essential to keep an eye on your credit report daily to ensure that all discharged debts get removed. Post-bankruptcy, your life will be whatever you want it to be. The Bankruptcy “rewards the Honest Debtor” with a fresh start.

Get professional legal advice from experienced bankruptcy attorneys in Dallas/Fort Worth with Acker Warren P.C.

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