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Winter Law Group Feb. 16, 2021

Filing for bankruptcy may be the best — and sometimes, the only — option to get out from under crushing debt. While getting that fresh start may be right for you, it does come with some repercussions, including damage to your credit score that can keep you from getting a mortgage, auto loan, or other types of credit for years.

In 2020, more than 49,000 individuals and businesses in California filed for bankruptcy. Few would have made that decision lightly, knowing that relief comes at a cost. Still, there are ways to live a good life after bankruptcy, especially if you seek help from an experienced bankruptcy attorney.

At Winter Law Group, we represent clients in Fresno, California, and the surrounding communities who need the fresh start bankruptcy can provide. We are also committed to helping them take steps to live their best lives after bankruptcy. The first step is knowing the challenges you will face and the best way to address them.

Creditor Harassment

If you have fallen behind on your bills and other financial obligations, you probably have creditors constantly calling you to request immediate payment. Once you file for bankruptcy, the court automatically issues a “stay order” which stops any action a creditor can take against you. As long as you have listed those debts in your filing, the court will inform all creditors. You are under no obligation to do so before or after you file for bankruptcy.

Upon notification from the court, all creditor calls should cease. Creditors are not allowed to call, email, text, or send threatening letters to you. They also cannot repossess your collateral, foreclose or place a lien on your real property, or file a lawsuit against you.

If creditors fail to cease these actions, notify your bankruptcy attorney. Your attorney can update creditors or threaten to file suit against them if they continue to violate the court’s stay order.

Credit Report

People with below-median incomes can file for Chapter 7 bankruptcy, which wipes out all debt. The bankruptcy will, however, remain on your credit report for 10 years.

If your income exceeds the median income in California, you can file for Chapter 13 bankruptcy, which restructures your debt. You then agree to a plan that allows you to pay off that debt in three to five years. If you adhere to the plan, the bankruptcy remains on your credit report for up to seven years.

Fixing Your Credit

Here are three steps you can take to start rebuilding your credit while the bankruptcy appears on your record:

Request a copy of your credit report from the three national credit bureaus, Experian, TransUnion, and Equifax. 

If you filed for Chapter 7, wait 90 to 120 days after your debt has been discharged. Make sure all debt that was to be discharged shows a zero balance.

If you filed for Chapter 13, request copies 90 to 120 days after you file for bankruptcy. Make sure any debt not included in the bankruptcy filing still shows that you are making payments. Once you have completed the debt repayment plan, wait another 90 to 120 days to make sure all debt you paid off under the plan show zero balances.

Take Out a Credit-Builder Loan at a Credit Union

These are small loans (usually $1,000 or less) placed in a special savings account. You don’t get to use the amount borrowed until you have made the required number of scheduled payments equal to the borrowed amount. The loan earns interest in the savings account while you make payments on it.

Get a Credit Card

Your mailbox will not overflow with credit card offers after bankruptcy. You can, however, try to get a secured credit card from your credit union or bank. A secured credit card requires you to deposit an amount of money that then serves as the limit for the card. If you can qualify for an unsecured credit card, it will probably be one with a low spending limit, high interest rate, and severe penalties for missed payments. Using either type of card can help restore your credit only if you use it wisely. Use it for small purchases that you could pay for out of your checking account and pay off the entire balance every month.

How the Winter Law Group Can Help

Filing for Chapter 7 or Chapter 13 bankruptcy is a huge step, but often one that helps people get back on solid financial footing. It is important that you seek the advice of an experienced bankruptcy attorney from the moment you start considering filing for bankruptcy. While bankruptcy provides a fresh start, it also comes with implications that ripple throughout a significant part of your life afterward. You need someone to guide you through the bankruptcy process, tackle the long-term effects, and help you avoid making poor financial choices in the future.

At Winter Law Group, we help clients take control of their lives again, first by freeing themselves from the crushing burden of debt, then by taking the right steps to live their best lives after bankruptcy.

If you live in Fresno, Clovis, Visalia, Madera, or Merced, California, call our office now to schedule a consultation.