Post-Bankruptcy Pitfalls

A fresh financial start can be in your future after filing for bankruptcy protection, however, a start does not guarantee your financial future. It takes a lot of work on your part to turn your fresh start into a way of life. You have the power to take back control of your finances and start building a positive credit rating.

The University of Iowa College of Law conducted a study in 2006 about the reasons why a bankruptcy's fresh start fails for some people. The answer was involved and very complex, involving many factors, but there was one constant thread: if your income falls short of your expenses, you can't get ahead after bankruptcy.

Poor Planning after Bankruptcy:

Budget budget budget! Many people think that after they have filed for bankruptcy and have received their discharge, their financial troubles are over. If you do not budget after bankruptcy, you may find yourself in the exact same position that led you to file in the first place. You must ensure that your future income is sufficient to cover your future expenses. Failing to do so is the most dangerous mistake most bankruptcy petitioners make.

Falling into Old "Crisis" Patterns after Bankruptcy:

Most bankruptcies result because of major life events: illness, divorce, job loss, death. However, it is likely that these financial problems were exacerbated by desperation efforts, making the situation worse instead of better. Living on credit cards, paying one credit card with another, borrowing from payday loan stores or other high-interest, high-fee sources are never a good idea, and are often set up solely to prey on those in difficult financial circumstances.

Click Here For a Free Bankruptcy Evaluation

Rebuilding Credit with the Wrong Companies:

As mentioned earlier, you will most likely be subject to higher interest rates after a bankruptcy, as opposed to someone with good creditl. It's good to be realisitc and accept that this will often be the case until you have re-established your good credit - it is not a good idea to have high balances on your new credit cards to begin wit, so you shouldn't end up paying too much extra in interest. But don't be fooled. There is a difference between paying a somewhat higher interest rate and being hit with fees, paying extremely high interest rates, outrageous penalty rates and additional charges. You do not need that kind of credit, because it will be of little use to you anyway. Knowing what credit cards to avoid is as important as knowing that you need to re-establish your credit.

Credit Repair Scams:

A good rule of thumb is that if it seems too good to be true, it probably is. Many places advertise offers to "Erase Bad Credit" quickly and easily. Such companies may directly target you, because they know you have recently filed bankruptcy. It is impossible to repair your credit overnight; there is no such thing as a "quick-fix". A bankruptcy remains on your credit for 10 years and the only way to outweigh the effects of that is by building a positive credit history after bankruptcy. While it may take up to a year or two, it will be worth it in the long run. It is also important to know that such companies often recommend practies that are fraudulent and can lead to criminal charges. Avoid these companies!