With your credit in tatters, you’ll have to be patient for a little bit longer before you acquire many of the things you’ve wanted for so long. You took the right steps when you hired Chapter 7 lawyers to regain control of your finances. Unfortunately, there are a few things you’ll have to wait on after bankruptcy.
1. Seeing bankruptcy disappear from your credit report
Bankruptcy can remain on your credit report for ten years, negatively impacting your score and making lenders take a long, hard look at you before they’re willing to give you even a basic loan. After those ten years, however, you’ll be free and clear because the bankruptcy will no longer be visible.
2. Repairing your credit
There’s no perfect rule of thumb for how long it will take to repair your credit after a Chapter 7 bankruptcy, though by that ten-year mark mentioned above, it should be bright and new again. Instead, credit repair is based on a series of different factors. How well you pay current debts, including your house payment (if you’ve managed to hang onto the house), is at the top of the list and should be a priority in your new budget.
3. Applying for an unsecured credit card
Immediately after you file for bankruptcy with your Chapter 7 lawyers, you’ll probably see plenty of credit card offers claiming to be interested in helping you rebuild your credit. It sounds perfect, right? Unfortunately, these credit card “offers” come with substantial strings attached. They know that you can’t file for Chapter 7 bankruptcy again for eight years, and as such, you’ll have to find a way to make payments on these high-interest cards. Worse, you’ll incur high fees, low limits, and take a hit to your credit if you cancel the card. Instead, wait until you’ve raised your credit score to around 700 before applying for a new card. While trying to build your credit, try options like secured credit cards; you deposit the money in a specific account at the bank, and the bank offers you a “loan” of 50-100% of that amount. Using this card each month will help rebuild your credit faster.
4. Buying a house
It seems like the perfect time to go house hunting, doesn’t it? With no debts hanging over your head after a Chapter 7 discharge, it feels as though you have more of each paycheck to devote to things like a new house. Unfortunately, you can’t jump in just yet. If you’re using a VA loan, it will need to wait two years from the time you filed for bankruptcy before you try to buy a home. A more traditional loan will require a four-year waiting period. Don’t despair, though. In the meantime, you can start building up your down payment. Take the amount that you’d like to devote to a house payment every month and put it into an account devoted to buying a house. In four years, you’ll have a substantial down payment that will make it much easier for you to get the loan you want.
5. Jumping back into your old lifestyle
You have more money available now that you’ve reduced or eliminated your debts, but that doesn’t mean that you should dive straight back into your old lifestyle. Remember, those overspending habits are what led to your bankruptcy in the first place. Take the time to develop good spending habits and wait for a change in your employment status and your income before you try to live up to those standards again.
Filing for bankruptcy after retaining Chapter 7 lawyers is a scary time in your life. Rebuilding when it’s over can be even harder. For more tips and tricks on managing your finances after bankruptcy, contact us today.