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What Happens After a Bankruptcy? (in the USA)

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If you have recently filed for bankruptcy, or you are planning to, you may wonder what happens after your bankruptcy claim has been approved. The short answer is that you are free to start rebuilding your life. The long answer is a bit more complicated and more detailed.

Deciding to file for bankruptcy is a big step, and one you shouldn’t make alone. The legal system is very complicated and precise, so you may get lost in it without a guide. You need to hire a bankruptcy attorney, and here’s why

But the question we are here to answer now is what comes after bankruptcy.

Keep a Copy of Your Papers

Once your case is done, you may assume that you are off the hook and you are free to do whatever you want. However, the fact that you filed for bankruptcy stays with you for a while, so you should keep all the transcripts, your petition, and the discharge order with you. The court has those records as well, but if you ask to retrieve them, it will cost you.

The main reason why you need these papers is that some creditors will attempt to claim some assets which have been protected by your discharge. Essentially, these papers protect you from unlawful moves for the former creditors. You can’t be sure when these claims may happen, so it is useful to keep these papers with your permanent records.

In most cases, even if you forgot to list a debt when filing for bankruptcy, it is considered discharged, so even if that particular debt is not on the discharge list, you are still protected from creditors. If they continue pursuing you even after you have shown them the discharge papers, contact your attorney for legal help.

Credit Reports

After you have filed for bankruptcy, your credit score is fairly poor, as you may assume. However, you have a chance to rebuild it to reputable levels again. Chapter 7 bankruptcy usually stays on your credit report for 10 years. That may seem like a long time, but a silver lining is that it is counted from the moment you filed, rather than from the date of the discharge. Chapter 11 bankruptcy will disappear in seven years.

Despite the fact that it is listed on your credit report, the effect of the bankruptcy will lessen as time goes by, provided that you resume with your normal life and start rebuilding your credit score.

How to Repair Your Credit Score?

It may sound difficult to repair your credit score, but it is not impossible, and with a bit of careful money management, you can begin returning to normal life. There are 3 important things to do in these situations.

  • Arrange the payment plan for any non-dischargeable debts – there are some debts which cannot be discharged by the bankruptcy. Most notably, student loans cannot be discharged, as well as some taxes. You will need to pay these back over time, so it is useful to contact your creditors and arrange some kind of a payment plan. If you fail to do so, the creditor can report that you are not complying, further damaging your credit score.
  • Start making regular monthly payments for a credit – You will need to show the credit bureau that you are capable of managing a credit. The simplest way to do it is to have a secured credit card or a car loan which you will pay for each month.
  • Avoid unnecessary debt – once you are free from all that debt, you may feel free to start creating new debt once again. However, that is not a good idea, since your income-to-debt ratio is very important for determining your credit score.

Freeing yourself from debt is great, but you need to think about what happens afterwards, so you can recreate your normal life once again.

To contact The Bankruptcy Lawyers Chang & Diamond, APC
9089 Clairemont Mesa Blvd, Suite 110, San Diego CA 92123