Archive for March, 2016
Life After Bankruptcyby Chekian Law Office
Congratulations. You have successfully completed your Chapter 7, 11 or Chapter 13 case. You have received a bankruptcy discharge. You should be free of some or all of the debt which burdened you prior to bankruptcy. Now what? There are several steps you should take to maximize the benefit of your successful bankruptcy.
First of all, check your credit score and your credit. You should wait at least 60 days from bankruptcy completion to do this. For individuals, this means obtaining your credit reports from Experian, Equifax and Transunion. If you go to www.annualcreditreport.com, you will find links to these 3 bureaus. If you are an incorporated entity such as an LLC or corporation, you should order a credit report from Dun & Bradstreet at this link: https://creditreports.dnb.com/m/home?serv=UP-HP-07082014-new28
Closely look at the report and make sure all debts which should be discharged in the bankruptcy are listed as such. If not, follow the instructions to dispute the line item, and include references to the bankruptcy, including case number, court location, filing date, chapter and discharge date. Your credit score may be significantly lower now than prior to filing, especially if you had a high credit score at that point. There may be little to no decrease in credit score for those persons and companies with very low prebankruptcy credit scores.
The point is to begin increasing your credit score, so that for future major purchases like homes and vehicles, you can obtain credit with preferred interest rates and down payments, available to applicants with better credit scores. For corporations and LLC’s, good credit can lead to lower interest rates and better terms on business loans, leases, factoring, and the like. It is also very important to build corporate credit to avoid having to give personal guarantees for company obligations.
Rebuilding credit scores also requires you to pay your new bills on time. In this regard, it is important to keep paying current on secured obligations which survived the bankruptcy, such as mortgages, car loans and leases. You also need to attempt to obtain new credit cards and lines of credit, not because you are going to drive up your debt again, but because responsible use of credit drives up your credit score. The goal is to only use a small fraction of the total credit line, then pay it down to zero, and repeat the process to maximize the benefit. For those who cannot qualify for unsecured credit cards, secured credit cards can be obtained, and after a period of responsible use, unsecured credit may be obtained. The Bankrate website is a good resource to shop for credit cards and other credit products: www.bankrate.com .
Maintaining steady income is also an important step in obtaining good postbankruptcy credit terms, as is timely filing of income tax returns. Keep good records of your income, so that when you are ready to apply for that home mortgage or equipment loan, you have all documents available. Loan agents love the organized applicant, and prefer to see regular income and no missed payments post bankruptcy.
Far from being a scarlet letter, a bankruptcy discharge may actually help you to get qualified for credit. This is because most lenders look at your expected monthly payments in determining whether you have sufficient income to service the debt. For those with, say $60,000 of credit card debt, the lender may estimate $1200 per month in minimum payments, which could disqualify you for the loan or lease. But postbankruptcy discharge, you would have no such line item in your expected expenses.
In this way, your postbankruptcy life can be an exciting time, with much less stress and greatly increased opportunity to reach your goals by making credit work for you, instead of against you.
Michael Chekian is a certified specialist in bankruptcy law through the State Bar of California. Based in Los Angeles, he represents debtors throughout the state. (310) 390-5529; firstname.lastname@example.org