After getting your bankruptcy discharge you need to prepare to tackle the task of making sure that credit entries in your credit report are not still showing delinquent accounts. Anything that should have been included in bankruptcy needs to be labeled as such. About 3 months after your bankruptcy discharge you need to take a close look at your credit report and fix any erroneous entries. These can cause trouble for you down the road qualifying for credit, loans, jobs etc.

You’ll be able to get your credit report from all three credit bureaus by visiting Annual Credit Report, everyone is entitled to a free credit report per year. When you get your report you are very likely to find accounts that have not been cleared after filing bankruptcy. It’s common for creditors not to bother to make these updates especially since they’re not getting paid, they’re certainly not interested in doing any favors. However, you must correct these errors yourself.

Repairing your credit report after filing bankruptcy

Ideally you’d want to wait from 3 to 6 months to get your credit reports and start spotting anything that should have been included in bankruptcy. If you find that accounts that should now be closed are still open and delinquent, then what you need to do is make a copy of your bankruptcy schedules and discharge documents and start a dispute with the credit reporting agencies (Transunion, Equifax and Experian). Your discharge papers are the key to get this resolved. This can also take sometime since the verification process is slow.

Hiring credit repair services will work better for anybody, it’s definitely a good option, just be ready to provide your bankruptcy documentation. Credit repair agencies are more effective at doing this, however you must take care to hire only a legitimate credit agency for this industry is filled with scams.

Bounce right back after bankruptcy

Repairing your credit is only one aspect of getting your financial life back on track. You have to now work a little harder to convince creditors that you’re still worthy of getting credit. Even after you get your credit entries corrected, you should know that your bankruptcy file will remain on your credit report for up to 10 years, however that big dark cloud can being to dissolve with positive credit entries that you should be striving to achieve.

There are several ways to regain control of your credit after filing bankruptcy, depending on what you want to accomplish, be it a mortgage, auto loan or a credit card. Your credit report must accurately report your financial history for you to begin rebuilding. Once you do that there many programs that offer bankruptcy credit cards, personal loans and mortgage loans after bankruptcy. Read the post on Getting a mortgage after bankruptcy for more info.

This is more of a myth than most people realize, the fact is that it is definitely possible to get a mortgage loan after bankruptcy. Sure, getting to a stage in which lenders will consider you again is still a bit tough, but generally the belief is that since personal bankruptcy stays on your record for up to 10 years you have to wait that long to get a mortgage loan or consumer credit again. It’s not that way at all. Credit after bankruptcy is possible when you take back control of your personal finances by implementing rigorous changes for repairing and bringing your credit to a healthy state again after bankruptcy.

Getting the necessary credit for buying a home after bankruptcy just requires you to know how. It’s true that filing bankruptcy deals a devastating blow on your personal credit, but the effects of bankruptcy can be overcome with an aggressive campaign on your part for rebuilding your credit properly and legally. When you apply for a mortgage after bankruptcy, you need to make sure your lender has in front of them a solid record of consecutive positive entries in your credit report. This should include a reference from your current landlord and rental receipts that prove that you made your monthly rent payments on time for at least a year.

Cleaning up your credit report after bankruptcy

This is not an invitation to hire a credit repair agency and attempt to delete your bankruptcy record from your credit report. Remember that you only have the right to dispute true inaccuracies in your credit report, if all else is accurate disputing them with the help of an agency may prove expensive and ultimately useless.

If you really want to qualify for a mortgage loan after bankruptcy, it’s imperative that you clean up your credit report. Meaning that you need to get copies of your credit report from the three credit bureaus and study them side by side making sure that accounts that were discharged in bankruptcy are not still labeled “defaulted” “open” or “overdue”, even if your creditors are not collecting from you, these are the red flags that will keep you from getting a mortgage loan. If this is the case for you, start by using the dispute systems from the three credit bureaus. You should also have copies of your personal bankruptcy discharge papers ready to send to the bureaus if they require them.

Another good way to being ranging high enough for a mortgage after filing bankruptcy is to get a bankruptcy credit card or a secured credit card. You’re going to need two types of payment history to successfully rebuild your credit and they are “installment credit” and “revolving credit”. When you show installment accounts in your credit history these will include current mortgage loans, auto loans, student loans etc. Revolving credit is typically unsecured credit, however qualifying for unsecured credit after bankruptcy is a bit tough, so a secured credit can be a great option. With a secured credit card you will only be able to spend up to the credit limit set by the amount you deposit in the credit card account. So it’s a prepaid credit card basically and it may seem like a burden to send money to a credit card company so you can spend it later, but it’s an important step in qualifying for a mortgage loan again after filing bankruptcy.

Other tips for getting a mortgage loan after bankruptcy

As mentioned above, you would want to show installment accounts on your credit report, this will server as a great reference and increase your chances of becoming a better prospect to mortgage lenders. However, car payments and the interest rates attached to car loans are typically high if you’ve been bankrupt. You have to realize that in order to qualify a mortgage after bankruptcy, your debt to income ratio will be the deciding factor. The lender has to make sure that you have the needed income to make your monthly mortgage payments again and then some. So resist the urge to buy a new car and ignore the recommendations from auto loan companies that this is a good way to rebuild your credit. It is only if you have enough income to cover a mortgage loan after the fact, that you should consider financing an auto purchase.

Pay your monthly bills on time. You can not afford any more glitches or blemishes on your credit report. Being able to get credit after bankruptcy is all about continuous positive entries in your credit report and nothing else. This applies not only to your consumer debt accounts but your rent, utilities, and any other obligations you have. Mortgage lenders will be more inclined to dig a little deeper if you have filed bankruptcy and are trying to qualify for a mortgage again, so show a good trail of positive credit entries and life after bankruptcy will simply get easier as you begin to regain the trust of lenders again.

If you have been paying your bills on time and are ready to apply for a mortgage loan again, another reference that can give you some leverage in qualifying for that loan is to have a letter of credit from the non-traditional credit companies such as your utilities companies, hence the reason why you must always make these payments on time as well. You can include your cell phone company, your electrical and cable companies, it’s as simple as contacting them for a letter of credit and as long as you have a positive record with them, it should not be a problem.

Finally, you may also be required to give a larger down payment on your new home before you can qualify for the mortgage loan, this can be an obstacle if you don’t have 20 to 30 thousand worth of liquidity to finance your purchase. You may be give the advice to borrow the money from you 401k, IRA or other retirement account, which is not uncommon for buyers who want a mortgage loan after bankruptcy, but it’s a decision that you should consider carefully, since you may have to pay back the money you borrow from your retirement account, otherwise you’d have to cash it all out and pay the tax and penalties as well.

Without bankruptcy protection you have nothing to help you stop your mortgage lender from repossessing and foreclosing on your property if you’re behind on payments. Bankruptcy law can stop the foreclosure process at anytime before the sale occurs, typically you’d want to file bankruptcy chapter 13 since this chapter will allow you to reach a new agreement for paying the arrears on the mortgage. Chapter 13 makes more sense for filers who want to keep possession of a particular asset such as home. No part of your loan balance or past due payments will be discharged, this will only allow you catch up on payments.

Discharge credit card debt and other unsecured debts

When settling credit card debt with your creditors proves to be impossible because of the terms they impose, consumers have the option of filing for chapter 7 bankruptcy in which typically all unsecured debts may be discharged. Discharging unsecured debt is a way to get a fresh start, if the debt can not be discharged because the means test does not back up the level of financial hardship, the debt can be reorganized under chapter 13 bankruptcy instead with a new repayment plan that normally let’s you, the filer, come up with the repayment plan.

Stop Wage Garnishment

When judgments are brought against you by your creditors or collections agencies, one of the many weapons they use to collect payments from you is wage garnishment. This typically means that a percentage of your salary is legally withheld by your employer to send to the collectors. This percentage is not usually something that you determine but it is decided by the collectors and this often creates serious financial complications for the debtor. Filing personal bankruptcy will end of all of this, restoring the full transfer of your earnings directly to you. Early in the process of filing bankruptcy it will be determined whether you’ll benefit from either chapter 7 or chapter 13 bankruptcy, then ultimately the outcome will be that either you get a discharge of your unsecured debts or a rearrangement of your total debts under a new repayment plan, but either way the collectors no longer have the right to garnish your wages again.

Filing for divorce

When you or your spouse file for divorce the marriage may end up with a pile of assets and debts, usually more debts than assets for the average American family. Filing for divorce and dividing up the assets and debts may leave one of you with more than your fair share of debt and not enough assets. Normally you would want to file for divorce first and then file bankruptcy, however it’s best to get a bankruptcy attorney’s opinion on this. Depending on which state you are in, all assets may be considered community property and used in the bankruptcy estate, otherwise only jointly held assets can be used, then individually held assets may be used to pay for the debts inherited after the separation. Bankruptcy law and divorce law are not under the same federal code, so it’s important that you seek professional help to accurately file for both.

Being the victim of identity theft

This is perhaps the worse situation to be in, having your identity stolen, not having the adequate protection to restore your identity and clear your name, bankruptcy can be an option. However, this is only if your disputes are rejected by your creditors and you have no way of proving that the fraudulent charges were not made by you. Depending on how long and how much was charged with your accounts you could end up with a huge collection bill. As a victim of identity theft you have rights and you should contact the Federal Trade Commission, should you become a victim of identity theft and find yourself in a situation where no creditor will entertain your dispute. In this case you should only file bankruptcy if you have no other way to stop creditors from collecting from you and you have no way of proving that your identity was stolen and used by someone else.

There are many other reasons to file bankruptcy and they’re typically very unique to each individual, but the most common reason is still large amounts of credit card and unsecured debt. There are also other reasons that can be beyond your control like the divorce, a death in the family where the primary provider passes on leaving a single parent to provide for children, having your identity stolen and not being able to resolve the fraudulent charges. These are special circumstances but are not that rare.

As always remember that bankruptcy should be your last resort, if you have already exhausted every option and have found no real alternative and no feasible way to come out of debt, then begin your research phase and understand what chapter 7 and chapter 13 are all about and how they can help you. Also take advantage of a free bankruptcy evaluation by simply contacting bankruptcy attorneys in your area or filling out an online bankruptcy evaluation form to get connected with an attorney in your area.

What is the Fair Credit Reporting Act all about? The FCRA is a federal law that governs the collection, reporting, and use of consumer credit information. What does this mean to you? These are specific regulations that are in place to protect consumers, without them you’re basically at the mercy of your creditors and credit bureaus. The specific code can be found here.

Does credit report really work? Yes, when used correctly. And it is absolutely essential that you do all you can within your powers to make sure that your inaccurate negative entries are fixed. Ignoring them will eventually affect your quality of life and no one else has the responsibility of making sure it is accurate but you. Credit repair works and it works particularly well when you make use of the right resources. For more information read the previous posts on credit repair.

Can I remove negative entries from my credit report on my own? You can most certainly repair your credit on your own. You need to begin by first getting a copy of your credit report from all three bureaus, you’ll find often that they differ by a lot and sometimes the inaccuracies do not spread across the board. Review all entries that you feel are inaccurate and begin your dispute process by contacting the credit bureaus through their dispute systems listed here:

TransUnion Credit Disputes 1-800-916-8800

Experian Credit Disputes 1-888-397-3742

Equifax Credit Disputes 1-800-685-1111

You may find that depending on the seriousness of the credit inaccuracies, some of these negative entries will prove to be more difficult to correct than you expected. The process may take longer or you may be denied by either the creditor that reported the entry or the credit bureau.

If I fail in my dispute with the credit bureaus, should I contact the creditors directly? Of course it won’t hurt to try, however you’ll need concrete proof that their negative entry was wrong. Bringing up an argument that you remember making the payment on time will not cut it. Creditors will listen but they won’t volunteer help, they’re looking for concise proof that they were wrong and since consumers don’t know the law and don’t have the resources some credit repair agencies have, they’re not likely to be as successful in these credit disputes.

Can credit repair agencies really help? Yes and no, that all depends on the status of your credit report and the circumstances around your inaccuracies. I’ve mentioned throughout credit posts on this blog that if you have accurate negative entries in your credit history, you are probably not going to succeed at removing them from your credit report. However, when it comes to the entries that are truly inaccurate, you have some options and the most effective one to take is to hire a credit repair agency.

With that said, you now have a new problem, and that is to find a reputable and honest credit repair agency to handle your case. It should not surprise you that the field of credit repair is filled with scams. Anyone can pose as a credit repair agency, get a catchy name and throw a website together and offer you their service. Making sure that you’re dealing with legitimate companies will save you time, money and a lot frustration. Once again start your search with the BBB and make sure that your candidates are legit.

How long can negative entries remain on my credit report? There are varied opinions on this issue, I have heard them all. It goes from 7 to 10 years, depending on the type of entry it is. For example a defaulted loan account will remain as such for 7 years even after you pay it off, whereas a bankruptcy will stay on your credit report for up to 10 years. Meaning that these periods can change for a variety of reasons that in fact only credit bureaus know about. It probably would have to do with an increasing number of consistent positive entries in your credit history that would eventually bump any old negative entries off the map.

How long will it be till the credit bureaus respond to my dispute? The Fair Credit Reporting Act states that credit bureaus shall respond to you withing 30 days of having received your dispute letter. Just remember that the credit bureaus can exercise the right to use their own discretion in the consideration they give your dispute. Because credit bureaus deal with so many frivolous requests and the dispute system is heavily abused by scam artists and illegitimate credit repair companies, they can simply deny process of the dispute without specifying a reason why.

Will removing negative entries really raise my credit score? That’s the general idea, however don’t be surprised if your score remains the same for a while. Despite what some credit repair companies may claim, credit repair may not cause the immediate results you were hoping for. The computer systems that calculate your FICO score work with the available data and time to determine your overall score. If you have several negative entries in your credit report but only some of them are inaccurate your score will probably climb a little slower as well after you repair them.

Credit Scores – the warm and fuzzy creditors love.

Credit reports are more than just a list of accounts with their payment history, yes it’s true that creditors love to see lots of green tabs and positive check marks on your credit history. But lately, one of the most important factors and probably the deciding factor in whether you get credit approval or not is your credit score.

This three digit number speaks volumes to anyone researching your financial life. It’s no surprise that so much emphasis has been placed on credit scores in the last few years since that’s the first impression creditors get from you. Consumers have also gotten more apt to actively manipulate their scores by doing certain things that can legally raise their scores. From making larger monthly payments, to paying in full and then borrowing again, to fixing inaccuracies in their credit reports either alone or by hiring a credit repair agency.

What to do about credit inaccuracies.

Many people today are living with credit inaccuracies and outdated information, mostly for lack of knowledge on what to do about them or simply because they don’t even know they’re there. These entries vary from late payments that were never late, to closed accounts that still show as open, to defaulted accounts that should be included in bankruptcy, etc

The Fair Credit Reporting Act established for consumers the right to dispute credit entries for free, however the process is often lengthy and complicated so handling it on your own is definitely the hard way of doing it and although you can save you money this way it can’t guarantee results.

Hiring a credit repair agency would be a better approach, BUT! Proceed with caution. What does that mean? Well, you can’t erase accurate entries from your credit report nor can any credit repair agency. No one has these magical powers or special ways of doing this. I mention this because there are in deed a lot of scams in the field of credit repair, so many in fact that it’s really hard to tell anymore if an agency is legit or not.

If you have true inaccuracies and outdated information that needs to be fixed then by all means begin by consulting a credit repair agency and get a good feel for how they work and what it is exactly that they intend to do for you.

Finding reputable credit repair agencies.

Just like you shop for auto insurance or a primary care provider, you should take care of doing the proper screening when looking for a reputable credit repair agency. The Better Business Bureau is not a bad place to start your research and definitely only consider those companies with satisfactory records.

Also it’s important that you know that the Credit Repair Organizations Act establishes that these agencies must follow specific guidelines in order to protect consumers. You should be made aware of these and be given any disclosures before you sign anything. Your contract should have the following information:

• Terms for Services, which should include any limitations and disclosures.
• A detailed description of the services to be performed and their total costs.
• The time it will take to achieve the promised results.
• Any guarantees they are offering you.
• The Agency’s name, Point of contact, business address and website.

Be suspicious of any company that does not have a website, this is a sign that they’re not well established or not established at all and you could be dealing with someone whose intent is to run with your money. On that note here’s a list of tell tale sings that you may be dealing with a professional scammer and not a legitimate credit repair agency:

• The agency representative asks for payment before the services are provided. According to the Credit Repair Organizations Act, this is a violation and more than likely you’re not dealing with someone who adheres by these laws.
• Outrageous promises, like removing all bad entries from your credit report to include your bankruptcy record, any judgments, leans etc. Once again, “no one” has the power or right to do this, if the entries are accurate.
• The agency representative insists that all credit entries are disputable and encourages you to participate in your own dispute by sending letters to the credit bureaus. This is based on the theory that if creditors do not respond within 30 days the entries can be erased. The process of verifying credit entries today is much easier than it was 5 years ago, it does not take 30 days to verify these entries, they can be done within hours of receiving the dispute.
• The agency representative suggests or lays down a plan for you to get a new identity under a new social security number. Should you hear these words come through the phone line, simply hang up immediately and report the agency. You do not want to willingly participate in such procedures, you will be held liable for such actions and prosecuted by the federal government. This is a felony and it is very serious!
• The agency representative makes outrageous claims about their experience and the number of clients they have helped, yet has no way of proving it, or insists on you reading testimonials on their website or pamphlet. Never base your decision on testimonials these are heavily abused and never worth the time reading anyway. The best testimonial you can read is that which the Better Business Bureau provides for its registered companies.

Should you want to consider giving it a go on your own, visit the Federal Trade Commission’s website and at the bottom of that article you’ll find a sample dispute letter that you can tailor to your situation. Keep in mind that this approach will take you more time and effort, but it is most certainly possible to achieve the same results if you truly believe that you have inaccurate entries on your credit report.

Limit the number of credit cards you sign up for – Ideally each individual should have no more than 3 credit cards, this is engouh to get you started building some credit history. You should also never sign up for more than one credit card at a time. Each time you submit an application, your credit is queried and this normally is ok once, but if you have several creditors querying your credit for the same thing, you’ll likely lose precious points off the top. More credit cards can be added later, but I would recommend that overall you have no more than 5 credit cards total.

Always pay more than the minimum – Paying on time is only part of your FICO score, your overall score will take into account how well you’re able to reduce the total outstanding balance on your credit card. If you only pay the minimum on your bill, you will continually show a high balance that’s only creeping down slowly. Try alternating the increase on payments each month, so if you’re minimun payment averages $40 dollars, you can pay that $40 dollars this month and next month pay at least 50% more of the minimum payment. This will crearly show that you are able to eliminate your balances.

Don’t close credit accounts you don’t use – I used to think this was a good idea, but it turns out that you really are deleting good history from your credit report, especially if these are accounts you’ve had for some time. It’s important that you show that you have been managing your own credit for some time, this experience counts. Also, and most importantly, if you close an account you’re eliminating available credit, you could potentially borrow from this account and this is taken into account as well in determining your overall FICO score. However, it’s also important that you keep in mind that there’s an even more important factor to this formula and that is to keep a ratio of no more than 30% of that available credit in use.

Nevermind those department store credit cards – Don’t bother with these, sure they entice you with a 10% discount, but this is another oppotunity for you to amount debt that must be paid back at a high interest rate no matter what your credit score is. Not only that but you will get another hit on your credit, which will take more points off your current FICO score. You may say to yourself “I won’t use it” I just want the 10% discount, but the damage is done once you turn the application in. Your credit will be queried and you will lose points; all so you can save 10%. It’s just not worth it.

Do not lend your credit! – I probably should have put this on top. I have also mentioned this point through other posts on this blog. Your credit should be like your underwear, you just don’t let others borrow it. There are so many dangers in doing this, you have to realize that you’re putting yourself on the line when you co-sign for credit card applications or major purchases like an auto mobile or anything else that requires someone else to bring a co-signer. Chances are, they don’t qualify for the credit on their own because they were not responsible with their own credit. There are times of course, when there are exceptions to this rule, and that is when you’re dealing with family members. Obviously it’s tough to turn your back on your family when they’re in need, by all means lend a hand just make sure they understand that you are taking on a risk that can affect your LIFE. They must understant this clearly.

College students don’t have a lot to spend or live on, yet somehow they’re able to get high limit credit cards and this is when it all begins to go wrong for many of them. Even at this educational level student do not have the necessary money skills and often end up spending more than necessary. Student loans normally cover tuition and living expenses but that’s not all that college students need to finance. Money in college is scarce and it’s one of the most important resources to a college student’s social life.

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The fact of the matter is that it is now a done deal, you’ve filed for bankruptcy and you’ve been discharged and although that was somewhat of a relief initially, you are now facing a bleak future with your new credit. There are some things you can do for yourself to help you get through this and recover from bankruptcy in a progressive manner.

Reestablish credit with a bankruptcy credit card – It’s not that you can’t get credit anymore, it’s that you don’t qualify for a good rate. Because creditors who will consider your application are in fact taking a chance on you. So they invented programs where you can get a credit card again and this is an important move in recovering your credit. This is often referred to as a bankruptcy credit card, you just have to pay more on your interest rate. Much more sometimes. it’s not unheard of that creditors will charge anywhere from 19% to 29% for these types of programs. So do some digging but always shop around and try your best to get the best deal. Once you do get your new credit card, use it only for necessities and emergencies. Do not take cash advances unless it’s a true emergency and always pay on time. Reestablishing a positive record of credit transactions will begin the recovery process for your credit and soon enough you’ll forget that you filed bankruptcy.

Check your credit history often – This is something that a lot of people overlook, they think that because their credit is ruined they should not bother to check it anymore. You may find that your credit will have more mistakes after filing bankruptcy. Sometimes after bankruptcy some of your debts will remain recorded in default on your credit report, when they should be labeled “included in bankruptcy”, if this is the case then you need to take the necessary steps to fix this, because if the entires remain in default no one will ever lend you a penny. Also collections accounts may appear especially if your debts were sold to collections agencies and then your debts were discharged in bankruptcy. No creditor will ever bother to make sure that your credit is updated correctly and since they won’t be getting paid the last thing they’re going to do for you is a favor. So make sure you use the credit bureaus dispute systems to get these entries corrected. Next, you need to sign up for credit monitoring from one of the three credit bureaus for a fee or sign up for your annualcreditreport.com, for free, which you can only do once a year, but you need to get something.

Be on the alert for shoddy deals – Lenders will access public records to target filers of consumer bankruptcy, this is a well known fact because your bankruptcy file is public record and anyone can access them. They access these records so that they can offer you credit, auto deals, and even home financing. Often they will emphasize that your credit does not matter and they can finance anyone. You MUST be very cautious with these deals. They are geared to making lots of money from desperate people. This is not a good way to start recovering from bankruptcy. Read these terms carefully and ask all the questions you can and if it does not feel right to you then don’t do it. Keep looking and you’ll eventually find a creditor with a better deal, it’s a bit tougher and the choices are limited but you have to realize that you could be getting yourself into more trouble financially than actually helping your cause. Remember that always, these companies would not come after you if they didn’t have something very valuable to gain. They are never acting in your best interest.

Consult with professionals and get support – You don’t have to have a lot of capital to go to a financial planner, they’re there to assist everyone. After your bankruptcy discharge you should be clear of your some debts or repaying them under better terms, you should be on a tight budget and making sure your extra cash is going some place where you can’t touch it. You won’t always have the knowledge to know how to invest your money and you may not always know what kind of budget you should adopt to start making significant improvements, that’s why financial counselors are there. You won’t be able to recover from bankruptcy if you don’t adjust your budget considerably. It’s all about change and it’s all about looking back at where you were before and where you are now and most importantly what you can do to ensure your future brightens up. Consult a professional and ask them to work out a good reasonable budget for you and then stick to it, do not negotiate with yourself and do not compromise. This is how you’ll avoid bankruptcy again.

Think about your future and your family’s future – This also means setting goals, you may have had plans to retire at a certain age. You can still accomplish these things if you continue to work on your attitude about money. Bankruptcy is not the end, it is the beginning of something new. If you continually focus on the future you’ll naturally begin to take action towards accomplishing those things, but it must be a constant effort and your behavior with your money needs to show it. If you do not see yourself advancing in the right direction you can always stop and study your plans again and make the necessary changes. Always stay in touch with your financial counselor and bring up any questions or concerns. You should not be investing aggressively, you should be investing consistently to help you recover from bankruptcy.

Change your attitude and practice discipline - What you did before obviously did not work too well. Maybe you always thought that it was ok to buy things you needed on credit. Maybe you thought it was a good idea to finance your home with a sub-prime loan and pay interest only and maybe you only made the minimum payment on your credit cards. Since none of those things proved to be wise decisions and only lead you bankruptcy, it’s time to change your habits, change your way of rationalizing when it comes to making purchases from now on. There’s a difference between needing and wanting something, but we often make ourselves think that what we want is what we need. You had everything to do with the decision making process in your finances so start with that and change it completely. Bankruptcy protection is over with, if you end up in serious debt again, there will be nothing anyone can do for you.

You need to know what debts are discharged under bankruptcy, this is particularly relative to bankruptcy chapter 7 filings, where you can basically get all your “unsecured” debts discharged at no further obligations to you, but it’s only these unsecured debts that get discharged. Then of course there are the “secured” debts, which you still need to worry about. So to be perfectly clear about this “Not all debts are discharged when you file for bankruptcy“.

If you had already defaulted on your debts prior to filing bankruptcy, it’s probable that your creditors sold your debts to collections agencies prior to you filing bankruptcy, who can then come after you for that debt plus additional fees. When you get a bankruptcy discharged, you need to make sure that you keep your discharge papers handy at all times. Make several copies of them and keep them ready to mail to whoever needs to see them for you to prove that you did in fact file bankruptcy and were your unsecured debts discharged.

When a collections agency contacts you about debt that was discharged in bankruptcy, you don’t necessarily want to ignore the call or letter, you need to let them know that the debt they’re seeking repayment for was discharged in bankruptcy and you need to provide them with the correct paperwork of your bankruptcy discharge to prove this. If they continue to pursue this even after you provide the documentation, and they will sometimes push it, then you must contact the bankruptcy attorney that represented you and make them aware of it, they will know just what to do about it. If you filed bankruptcy alone, then try first contacting the courthouse where you filed your petition and bring it to their attention.

Collecting discharged debts goes against the order by a federal court that you have no further obligation to this debt, but collections agencies sometimes push this in hopes that you won’t know any better or that you will simply give in and just start paying again. Once you threaten to take legal action against them they will back off since it can cost them money to fight a case they can not win.

On the flip side of that coin, if you ignore secured debts after your bankruptcy discharge, you are not only going to get chased by collections agencies, but you are causing further damage to your credit since collections accounts normally get recorded in your credit history.

Some of the debts that are considered secured debts are student loans, mortgage leans on your home, car payments, federal and state taxes and basically anything else that has some kind of collateral to it. However certain items that you buy with consumer accounts like those you get from a furniture store or department store where you might make large purchases, need to be clearly defined in your bankruptcy file as either exempt items or assets that can be liquidated. If they were marked as exempt, then they can not be taken back, though again they will try.

You must continue to pay for your secured debt or surrender the collateral, such as the car or home attached to the lean. When it comes to student loans and taxes, there are no actual collaterals for these debts, they are just obligations that you must take care of. The federal government in particular, does not need an external collections agency to collect taxes you may owe. The IRS will start by contacting you via mail about your debt, you need to act immediately and establish a repayment schedule, otherwise they can levy any assets you may have and/or you may even be sent to jail for not paying your taxes.

Do not ignore the warnings, if it’s unsecured debt, provide the appropriate proof of discharge and consult a your bankruptcy attorney. If it’s secured debt then continue paying it or surrender the asset.

1. Don’t buy things out of impulse – Going back to the first article I mentioned how we as consumers are targeted everyday and the efforts by commercial entities to market their products are so sophisticated that even human psychology is employed to more effectively entice consumers. What ultimately happens then is that your impulses take over your better judgment and you make the purchase. How many times does this happen to you? Exercise discipline with your finances, minimize your shopping trips and train yourself to ignore the trends and temptations to keep up with them. Make a distinctive evaluation of the product you intend to buy and determine if it’s something you actually need. People have conditioned themselves to negotiate their wants into needs and it’s a habit that only leads to high credit card balances.

2. Ignoring your savings account – If you aren’t actively and systematically saving money in a savings account, then hopefully you’re doing it via your employer’s 401K plan and contributing the most you can in order to get a match contribution from your employer. If you aren’t doing either, then most likely you’re living the paycheck to paycheck routine. Why is this dangerous? Not saving money means you have nothing to fall back on if you were to have an emergency or if you were to lose your job. You may think you can rely on family members to help you, but that only transfers the burdens of your debt on to others. The worst part of not having a savings account is accumulating debt on top of not having any of your own money. It’s a bad habit and it doesn’t prepare you for anything.

3. Paying the minimum payments on credit cards - If you are actively using your credit cards for what you’re judging as necessities you may also be brewing a storm. Credit cards are so heavily marketed that people forget what they’re really for. They’re not so you can get the latest gadget now because you don’t have the cash, they’re not so you can finance your ski trips, they’re for emergencies! Oh yes the credit card company forgot to tell you that I’m sure. If you’re only making minimum payments on your cards, you’re more than likely doubling the total amount owed when it’s finally paid off. The problem with these habits is that sometimes you make yourself feel good by sending a larger payment one month and then think that you’ve caught up, and then you use the credit card again. These are bad decisions and you can find yourself in the kind of debt that often leads to bankruptcy. Pay down your balance, never mind what the credit card company says about the minimum payment, send larger payments and pay that balance down.

4. Lending money to friends and family – You may not want to hear this one because you’re probably very close to your family and your friends may even be like family to you. But lending money to your friends and family can get you in trouble as well. Ask what they need the money for to begin with, people get themselves in trouble financially for a lot of reasons if they are real need then you can certainly make an exception. But you should never support any kind of debt that involves gambling, leisure spending or just any other kind of activity that isn’t a necessity. Lending them all you have can hurt you and put you in a really tight spot financially. This one can be a challenge so careful not too let you feelings take over your better judgment.

5. Never co-sign a purchase contract with someone else – Your mom or dad may have done it for you in the past and you may think that this is ok to do if someone doesn’t have the credit. One thing that is often overlooked in this situation is that if the person who needs you to co-sign for them defaults on payments to whatever it is they’re financing, you are now responsible for those payments. The creditor will come after both of you or whoever can pay the bill. Should you fail to pay for your friend or family member, your credit will be hit with late payment or defaults damaging your credit history. It’s not uncommon that bankruptcy results from such situations for innocent parties who were only trying to help out. Creditors only care about collecting payments and if you’re name is on that contract you’re on the hook.