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LOCATIONS

 
Chicago, IL Office
2218 West Chicago Avenue
Chicago, IL 60622
(773) 227-2218 - Office
(773) 435-6752 - Fax

 
Rosemont, IL Office
10700 W. Higgins Road
Rosemont, IL 60018
 

 

LOCATIONS

 
Chicago, IL Office
2218 West Chicago Avenue
Chicago, IL 60622
(773) 227-2218 - Office
(773) 435-6752 - Fax

 
Rosemont, IL Office
10700 W. Higgins Road
Rosemont, IL 60018
 

Chicago Credit Repair Services

Spalding Law Center Chapter 13

Your New Life After Bankruptcy

When you have your discharge papers and your bankruptcy is behind you, take a big sigh of relief! You have just accomplished a large milestone in your life. Pat yourself on the back for taking control of your life and putting your credit on the road to recovery. So many people ignore their debts and turn a blind eye to a plummeting credit score due to a large debt load, and possibly late payments. You have taken charge of your life and given yourself the gift of a new beginning. While you are experiencing a financial rebirth, don’t forget why you filed bankruptcy to begin with. Do your best to improve your financial life so that you do not fall into the same situation again. Spend less time approaching life from a consumer standpoint valuing material goods. Refocus your life by spending more time focusing on your mind, body, friends, family, and spiritual life. Clearing your life of clutter, both mentally and physically, is a helpful reminder that we do not need all the “stuff” our culture sometimes makes us feel that we do. It robs us of our lives. Start truly living yours! You have earned your new life, so enjoy it!

After you have had a chance to relish in your new life and the freedom it affords you, it is time to start thinking about rebuilding your credit after bankruptcy.

 

Rebuild Your Credit

Your credit matters. Most people know that your credit score affects home and auto loans, but did you know that it could affect home and auto insurance rates too? Employers may look at your credit report as well. Don’t throw in the towel and give up on your credit just because your credit has been poor due to years of debt, and because you filed bankruptcy to solve your debt problem! Instead, make good on the major progress you have made by greatly improving your income to debt ratio, and keep on at it! Rebuilding credit after bankruptcy is not all that difficult and you may be able to progress faster than you may think. A poor credit score will not haunt you forever. It is a snapshot into your current credit risk at a particular time, and the score changes gradually as you change your relationship with credit. Start by figuring out where you are, by pulling your credit report.

 

Accurate Credit Reporting

You should check your credit report about two to four months after you receive your bankruptcy discharge. Keep the discharge that you receive from the court in a safe spot. We recommend that you keep it as long as possible, or at least 10 years. We can send you a copy as well when we close out your file with us. Order your credit report from one of the three credit bureaus (Equifax – 800.525.6285; Experience – 888.397.3742; or TransUnion – 800.916.8800) so that you know exactly what’s on your credit report, and you can begin to understand it better. You can contact each bureau directly, or you can connect thru www.AnnualCreditReport.com. You are entitled to a free report from each bureau once every 12 months, as a result of the Fair and Accurate Credit Transactions Act; the FACT Act.

When you request your own credit report, it is scheduled as a “soft inquiry” and doesn’t count against your score. Check for mistakes. Make sure debts that were discharged through bankruptcy list as just that, rather than as due and owing. The last thing you want to happen is go to the trouble of filing for bankruptcy and then find out many years later that discharged debt still shows as a current obligation. Creditors and credit reporting agencies also make mistakes if someone enters a wrong social security number or account number. A paid account could be listed as a charge-off too. Follow the instructions listed on the credit report for reporting errors. A few months later obtain a copy of your report from the second bureau. Report any mistakes. Then two months later obtain your third report. Spreading out your three free credit reports over the year is the best way to check up on your report to make sure mistakes are being cleared up, since creditors are likely to correct mistakes with all three bureaus when they follow up on one reported mistake. This is why we urge our clients to order a paid three-source report from all three agencies when we file the case; so that the free annual reports are best optimized in the year following the bankruptcy discharge.

It is better for you to be educated about your credit rating, even if it is not as high as you wish. If you never inspect your credit report, you will never know what possible mistakes are bringing down your score. You have the right to have anything that is incorrect investigated and possibly removed. Federal laws require that the credit bureaus verify all disputes. The law says that if they are unable to verify your dispute, it must be removed from your file. Your discharged bankruptcy, items older than 2 years, charge-offs, repossessions, late payments, and inquiries are easier to remove than newer open accounts. Frankly, the creditor is just not too concerned with the account anymore when this is the status. Creditors may not want to take the time to verify a dispute if already paid, or may not even be able to find the account information to verify a dispute, if they have already written the account off the books due to bankruptcy. It is more difficult to dispute the open accounts that are still active, such as for your recent bankruptcy, current past due and collection accounts, judgments, and tax liens. These creditors have your account open as due and owing, and so are expecting to receive payment, and therefore much more likely to verify credit information for you.

 

Life after Bankruptcy

When you have your discharge papers and your bankruptcy is behind you, take a big sigh of relief! You have just accomplished a large milestone in your life. Pat yourself on the back for taking control of your life and putting your credit on the road to recovery. So many people ignore their debts and turn a blind eye to a plummeting credit score due to a large debt load, and possibly late payments. You have taken charge of your life and given yourself the gift of a new beginning. While you are experiencing a financial rebirth, don’t forget why you filed bankruptcy to begin with. Do your best to improve your financial life so that you do not fall into the same situation again. Spend less time approaching life from a consumer standpoint valuing material goods. Refocus your life by spending more time focusing on your mind, body, friends, family, and spiritual life. Clearing your life of clutter, both mentally and physically, is a helpful reminder that we do not need all the “stuff” our culture sometimes makes us feel that we do. It robs us of our lives. Start truly living yours! You have earned your new life, so enjoy it!

After you have had a chance to relish in your new life and the freedom it affords you, it is time to start thinking about rebuilding your credit after bankruptcy.

 

Applying for Credit

This is an especially important time to not go around haphazardly applying for loans or credit of any kind. Applying for several credit cards within a short period of time means multiple requests for your credit information, or “inquiries,” will appear on your report. Inquiries into your credit report except those made by you will lower your credit score further.

Do not take on any obligations that you cannot repay based on the terms you agreed to. Do not, under any circumstances, co-sign for a credit card or any type of loan, for anyone. This WILL come back to haunt you, and you should just consider yourself responsible for the entire loan, if you do not heed this advice. Also, even if you are applying for a loan at one place, many inquiries could be generated if your credit application is sent to many different lenders. There is good news though, for the home and auto loan process. If you have multiple inquiries within a short amount of time due to the loan application process for these items, most credit scores are not affected. The inquiries are lumped together and treated as a single inquiry.

Speaking of which, if you are able to get a car loan, and can afford it, then finance a car loan. We can give you the information for a few car finance companies that specialize in helping bankruptcy filers. Think this through though. A car note will help you rebuild your credit if you have a manageable monthly payment and keep the account current. You must get as much positive information on your credit report as you can, after all. Make certain that the lender you choose reports to the bureaus. A “buy here; pay here” lot will often NOT report, and should therefore be avoided. Your interest rate will probably be high if you apply for a loan immediately after your discharge, but your timely payments will reflect positively on your credit report. Try to make extra payments and pay your car note off early if you can. Only then should you trade your car in for an upgrade and repeat the process. At that point, you will be making great progress in reestablishing yourself.

It is a horrible idea, however, to put yourself right back where you started with an expensive car, accompanying expenses, and a high monthly payment and interest rate. We see too many people that are working for their car. Although making regular timely payments on a car note is good for your credit, it is not good if your car expenses divert precious funds from other necessary expenses as well as your emergency fund, so that you have negative monthly income. If you can get by for a while with public transportation, you may be amazed at how much disposable income you are able to free up. If public transportation is not available, consider paying cash for a used car that is fuel-efficient.

A better option for the near future may be to take out a new credit card. Misuse and other factors, some beyond your control, were the problem that got you into trouble; not the card itself. You can probably qualify for one, even if it is a high interest rate. Most likely you will need to start with a secured credit card that is secured with your savings account, but that is ok. You need to start somewhere with positive information on your credit report. Do not carry your card with you all the time, or to the mall, since this is not a green light to go on a shopping spree. Just use it for necessities, such as for groceries, utilities, or gasoline if you have a car. Pay off the balance at the end of each billing cycle! If you absolutely must carry a balance on any credit account, make sure that you are only using 25% of your available credit. These necessities should already be in your budget, so it should not be a problem to pay off the balance on the secured card. If you have adjusted your mentality as previously mentioned, you can do this. If you can’t control the spending on even a secured card with a low credit limit, then do not obtain a credit card yet.

This information should help you repair your credit, whether or not you have filed bankruptcy. It most likely took you many years to harm your credit score, so do not expect to fix it overnight. If you did file bankruptcy to eliminate a large amount of outstanding debt, then you have already made major progress on the road to recovery. These steps will put you further down that road. It is possible to have a nearly perfect credit score just one or two years after a bankruptcy discharge. With a little effort and time, you can do it!

 

Pay Your Bills on Time

Make sure you pay your bills on time. No excuses. Even paying one day late can have an impact on your score and interest rate. When you mail payments, make sure it is in the mail 7 days before the due date. If you have any debt that was not discharged in bankruptcy, focus on paying that off. Did you spend several months in a payment plan working on your bankruptcy fees? Now that you are used to setting aside a little money, keep it up until your non-discharged debt, such as your parking tickets or student loans, are paid off. Municipalities report parking ticket and traffic violation debt to all three credit bureaus. After 6-9 months of nonpayment the debt can turn over to a collection agency that can then tack on additional fees and interest. After you have paid your non-discharged debt off, keep putting those funds aside. Now you should put those funds in a savings account set aside for emergencies. If you are only able to put aside $50 a month, it will build a good foundation and add up to a significant amount of money quickly.

If you find that you are still encountering roadblocks to improving your credit score after following these instructions, then give Spalding Law Center a call to inquire about using our unique credit education and assistance program. There are no gimmicks to the customizable program. For a small flat fee you can have one on one education on improving your credit score, budget coaching, have someone handle for you all the correspondence and follow-up in correcting credit report information, and have meaningful regular contact to encourage credit improvement. We at Spalding Law Center are committed to making sure you have the best financial life possible. If you are having problems obtaining credit and find yourself stuck with a low credit score that will not budge, give us a call and we will discuss how our credit repair service can help!

 

"Thank you for your kindness and gentle guidance that made these troubling days bearable. We will always remember you Ms. Spalding as one of the best lawyers. May God continue to bless
you and your family and your business."
Sheryl & Leroy M. - Chicago, IL