What To Do After Bankruptcy?

What happens after bankruptcy

After my bankruptcy requirements are completed, what happens?

When you complete all your duties in bankruptcy, you will obtain a type of discharge, which is the official certification of how it was completed.

Your personal bankruptcy will be a permanent part of your life history. When asked if you have been bankrupt, you must always answer “yes”. To do otherwise would be untrue.

A record of your bankruptcy will remain on your credit report (from the credit bureaus) for several years after your discharge.

Apart from the note of your past bankruptcy, your credit status will be clear. It will be as if you had never had credit. Like a young adult starting independent life, you will have to earn the trust of creditors from the ground up.

Financial life after bankruptcy – can I get credit again?

While bankruptcy does affect your ability to get credit it is possible to rebuild and reach your financial goals.  For first time bankrupts, the fact that you filed a bankruptcy and the debt that was part of that bankruptcy will remain on your credit report for six years from your date of discharge.  You do not have to wait six years in order to start rebuilding your credit history.   Once you are discharged you can start right away.

The first step to rebuilding your credit is to take a look at how your credit bureau reports look after you receive your discharge from bankruptcy.  Making sure that your credit report is accurate will ensure that when you begin rebuilding your credit there are no inaccuracies that may lengthen the process.  If there are errors you can complete a form provided by the credit bureau indicating what items need to be updated on your report.

Once you determine that your credit report is accurate you can apply for a ‘secured’ credit card.  Unlike a prepaid credit card, a secured credit card gives you revolving credit.  This means that you can access any available credit over and over again provided you maintain the payments.   The only difference between a secured credit card and a regular credit card is the required deposit.  When you apply for a secured credit card you have to put down a sum of money that acts as a security deposit in case you default on the account.  The security deposit is not always the same as your available credit and is usually affordable.

Upon receipt of this new credit card you can use the card responsibly, paying it in full each month.  This will establish a positive credit report which will begin to increase your overall credit score even during the six months after your bankruptcy is finished.  After several months of using this card it is possible to apply to get your security deposit back.

Once you have used a credit card for a little while you may begin to think about establishing credit in other ways.  Once of the best ways to this is to consider a loan for an RRSP.  This type of loan is often a small amount with payments over a one year term.  Once you borrow the funds they are deposited into an RSP account.  This RSP account is available to you after you complete your loan payments.  This type of loan is a positive way to establish credit as it has the added benefit of increasing your net worth and it offers you an income tax deduction.

It is often the case that an individual may need to obtain financing for a vehicle after filing for bankruptcy and they are afraid they will be turned down because of their credit history.  While it is true that a bankruptcy can affect your ability to finance a vehicle loan many people are still able to obtain loans of this kind after bankruptcy.  If you take the steps outlined above to start rebuilding your credit getting a car loan will be that much easier.  However even without these steps in place it is still possible.

There are several companies that will look at financing a vehicle for individuals with a poor credit score.  When you approach these places be cautious and ensure that the cost of borrowing and the monthly payment are reasonable and affordable.  If they are not, consider purchasing a less expensive vehicle in the short term to establish a payment history first.  A loan for a less expensive used car may be more affordable and realistic for your circumstances.  After completing that loan you will then be better able to obtain financing for a more expensive vehicle with more reasonable terms.

Obtaining a mortgage after bankruptcy is not something you can usually do right away but it is possible in the future.  Mortgage lenders look at three criteria when assessing whether they will issue you a mortgage: Income, Debt Level and Credit Score.  After bankruptcy it is only the third criteria that is affected as you should have no debt and bankruptcy does not affect your income.   If a lender sees that you have taken steps to rebuild your credit and you meet their other lending criteria then you may qualify for a mortgage even while the bankruptcy is on your record.

Filing for bankruptcy is a serious decision and should definitely be considered as a last result for those individuals that simply cannot afford to meet their obligations to their creditors.  It does not have to mean the end to your credit score for the rest of your life.  In fact, filing for bankruptcy can end a poor credit situation and give you the power to rebuild.

Feelings and thoughts after your bankruptcy

After you complete your bankruptcy, the burden of debts you can’t pay will be wiped out, with a few exceptions. Most people experience a great feeling of relief at finally achieving that fresh financial start they needed so much.

The lessons you have learned will be valuable for your future success. You must know that the ways you handled money need to be changed. And the credit counselling you received during bankruptcy will have given you new abilities to do better with money. Whether you actually do so is now up to you. Will you follow the help and good advice you have received?

Not been bankrupt yet?

If you have not yet filed for bankruptcy as a solution to your difficulties, reading this page was wise. We advise everyone with money problems to research personal bankruptcy and bankruptcy alternatives, so as to make the best possible decision. This site is intended to answer all your bankruptcy questions. If you still have a personal question, or wish to have a free, confidential consultation, please contact a bankruptcy trustee near you.