What Not to Do After Filing Chapter 7

Many people, including famous industrialist Henry Ford, recovered from bankruptcy by making a new plan and sticking to that plan. Like many of us, Ford was a slow learner. He filed bankruptcy twice, in 1899 and 1901. The Detroit Automobile Company went bankrupt because Ford was a perfectionist. The Henry Ford Company went bankrupt because Ford wasn’t much of a salesman. He revised his plan, didn’t give up, and hit a home run with the Ford Motor Company in 1903.

All bankruptcy debtors need to follow the Henry Ford pattern, change their plans, and stick to those plans, even if they experience initial setbacks. Frankly, if you file bankruptcy, your current financial plans clearly aren’t working. By avoiding the three pitfalls discussed below, and keeping your partnership with a Chicago bankruptcy lawyer active, you can put bankruptcy behind you faster than you ever thought possible. We can’t guarantee you’ll be a rich industrialist, but we can guarantee you’ll have a better life.

Pay Cash for Everything

Raising their credit scores is the first order of business for many former bankruptcy debtors. Before we discuss this point, we should point out that a bankruptcy filing-related credit score hit, while significant, isn’t as bad as banks would have people believe. Due to multiple late payments, charge-offs, and other negative information, most bankruptcy filers already have bad credit. A Chapter 7 simply means their credit goes from bad to worse.

A credit score is a reflection of your ability to responsibly use credit, not your ability to pay cash for everything. So, obtaining a credit card and using it regularly may be the best way to improve a poor credit score.

The initial boost occurs as soon as you get the card. Someone thought you were a good credit risk despite prior troubles.

As the months roll by, use the card frequently (at least $100 a month) and pay the bill religiously. This pattern raises credit scores every month. But beware that a single missed payment could undo months of diligence.

Fall Behind on Bills

Religiously paying bills doesn’t just apply to credit card bills. The same principle applies to rent, mortgage, student loan, and all other payments reported directly to FICO and other such companies. Falling behind on other bills, like doctor bills, eventually lowers your credit score as well, when the doctor or whoever refers the matter to a collections agency.

Estimates vary, but simply paying bills on time may account for as much as 40 percent of your credit score. So, you have the power to raise or lower your score.

Avoid Major Purchases

No one likes rejection. No one likes to spend time shopping for a car, house, or other expensive item only to have their credit rejected. We understand. But we also understand that such purchases, if handled properly, significantly boost your credit score.

Realistic expectations and upfront exchanges help. As a damaged credit buyer, your options will be limited. You’ll also pay more. Additionally, before the salesperson checks your credit, tell him/her about your prior filing. No one likes rejection and no one likes unpleasant surprises.

A Chicago bankruptcy lawyer is an important partner in all three areas. We point former debtors in the right direction when it comes to revising plans and borrowing money.

 Count on a Detail-Oriented Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After-hours visits are available.