Life After Bankruptcy

Hawaii Bankruptcy Firm Will Help You Move on After Bankruptcy

Honolulu Bankruptcy Attorneys Provide You with Options

You've filed for bankruptcy. Now what?

First, take a moment to let that feeling of liberation that comes with being debt-free sink in. Remember that feeling when you receive offers to incur debt in the future – because, surprising as it may sound, you will likely receive them.

Granted, your bankruptcy filing will be noted on your credit report for seven years if you filed for chapter 13, and ten years if you filed for chapter 7. But the impact the bankruptcy filing has on your overall credit score dwindles as the months and years roll by. Depending upon your credit behavior after you receive your bankruptcy discharge, your credit score may rebound to respectable levels within just a couple of years.

In the short term, most lenders will see you as a bad credit risk and it will be hard to get a loan or credit card at a good interest rate. But it is not uncommon for lenders to offer high-interest loans or credit cards to consumers who have recently declared bankruptcy. One reason they are willing and even eager to do so is that, if you filed chapter 7, you must wait eight years to be eligible to receive another chapter 7 discharge, and four years to be eligible to receive a chapter 13 discharge. These high-interest lenders know that bankruptcy cannot prevent them from collecting on their loans if you default during that time.

In fact, a recent study showed that 96 percent of consumers were offered new credit within a year of declaring bankruptcy. Numerous auto companies and lenders also are willing to finance a vehicle or approve loans at less-than-eye-popping rates after a bankruptcy.

So bankruptcy is not the end of the world. Although life after bankruptcy will have its challenges, it is not the scarlet letter that it used to be.

Bankruptcy: A Fresh Start

After your bankruptcy has been discharged, you will have to re-establish credit to rebuild your financial life. If you reaffirmed a vehicle loan in your bankruptcy case, continuing to make your monthly payments on time should help your credit score rebound. If you were able to hang onto your house through the bankruptcy, making your mortgage payments on time can also improve your credit report if you reaffirmed your loan while the bankruptcy was active, but the risk of reaffirming a sizeable mortgage may outweigh the benefit to your credit. The prevailing view in the Bankruptcy Courts is that a debtor is not required to reaffirm a mortgage in order to retain the mortgaged property, though the lender can still foreclose if payments are missed. A knowledgeable Honolulu bankruptcy attorney can help you carefully weigh the risks and benefits of reaffirming a mortgage loan.

Another strategy for rebuilding your credit after bankruptcy is to obtain a secured credit card. Some banks and credit unions offer these, though perhaps only after one year has passed since the bankruptcy. With a secured credit card, you make a deposit (usually $500 to $1000) at a financial institution, and that financial institution holds the funds as collateral while issuing you a credit card with a credit limit equal to the deposited sum. It is important to make sure that the institution issuing the card reports the payment history to the credit bureaus.

Above all, the key to rebuilding your credit after bankruptcy is to become extra vigilant about your finances. Even if you've never created or stuck to a budget in the past, now is the time to get serious about doing so. An experienced Honolulu bankruptcy attorney at The Law Office of Jean Christensen LLLC will explain your options and help you move forward. Contact our firm online or call 808-521-1202 to schedule a free initial consultation today.