The Aftermath of Bankruptcy: How to Climb Back Up the Ladder

Filing for bankruptcy can leave an overwhelming impact on the debtor. Aside from the emotional stress, the negative marks on your credit report can be astounding. As a debtor, you are left mostly with a poor credit report to rebuild on. Your primary goal is to repair your credit rating, eliminate that negative mark on your report, and get your financial condition back in good shape.

Tips After You Have Filed Your Bankruptcy

While no hard and fast rules exist in getting back on track, here are some suggestions made by financial experts:

Renew your commitment to pay your car loan. If you are still making payments on your car, see to it that you will sign a reaffirmation agreement with the lender. By signing this agreement, you are making the lender know that you plan to retain the car and make good on your payments. It is an act of manifesting good faith. If you fail to do this, you are increasing your chances of having your car repossessed and you will end up paying for any deficiency balance. This, in turn, will pull down your credit score. Prevention is better than cure. This can put you and your lender in good terms.

Open new credit accounts. Because bankruptcy tends to pull down your credit score dramatically, most banks and financial institutions might deny your credit application. But some banks tend to make exceptions when you open a savings account with them then apply for a secured credit card with that account. This is indispensable if you want to secure credit cards from major banks. At least, you are starting somewhere.

Start with a clean slate. Request for a copy of your credit report from any of the three credit reporting bureaus and check if the information updated therein is accurate. Make sure that your report reflects that your debts have been discharged in bankruptcy. This is important since you need that credit score to go up again.

Do not become a co-signer. Even Solomon in his wisdom advised heavily against co-signing or co-making a note or loan for anyone--even for your closest friend. Since you have just filed your petition for bankruptcy, you will have that on your credit history for a minimum of seven years. If you co-signed just now and it did not work out, it will take even longer to repair your credit.

Do not carry any credit card balances. While this can be difficult, try to exert more effort in paying off all your credit card balances. Usually, credit card balances are what get people in the most financial trouble. The money spent for paying off credit card charges can be spent for contingency. If you keep the habit of paying off all your credit card debts every month, you can have extra cash to stash for emergencies.

Statute of Limitations on Bankruptcy

According to the Bankruptcy Code, the statute of limitations is the period of time a creditor can pursue you for debts owed to him. As the period prescribes, the creditor loses his right to file a collection suit against you and to recover deficiency funds. This can be another relief for the debtor although it is attributable to the creditor's undoing. The period varies from State to State and will also depend on the type of debt you owe.

Stimulus Checks and Tax Refunds During Bankruptcy

Stimulus package checks under the Bush administration were provided to encourage spending in the economy. However, when a person claims bankruptcy, these checks will form part of the assets which creditors can rightfully claim as payments for the debts. These checks form part of the debtor's estate; hence seized for debt settlement. Tax refunds, on other hand, generally belong to the debtor and can be exempt from seizure. However, if one is bankrupt, tax refunds may be placed at risk. It all depends on when the tax return is filed. If the return is filed after January 1, the trustee can claim all of the tax refund for the satisfaction of fees and debts. But prior to January 1, the trustee can only claim a pro rata share from such refund.