After years of living in debt, you’re finally free. After filing for bankruptcy, much of your debt has been eliminated, and you’ll find yourself in a position to start rebuilding your life. Things that you’ve waited on for years are suddenly within reach again.
There’s just one problem: you’re still going to have to wait for a few things. With your credit having taken a hit, you’ll have to be patient for a little bit longer before you acquire many of the things you’ve wanted for.
Waiting is the hardest part. You’ve taken the steps to get your life started again. But, there’s just a few more things you’ll have to wait on after bankruptcy:
1. Seeing that Bankruptcy Disappear from Your Credit Report
A bankruptcy can remain on your credit report for 10 years if you filed Chapter 7, 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. If you filed a Chapter 13 bankruptcy, it will only be on your credit report for 7 years.
2. Repairing Your Credit
There’s no perfect rule of thumb for how long it will take to repair your credit after a bankruptcy, though by that 7 or 10-year mark mentioned above, it should be like new again. It’s important to note that rebuilding your credit is based on a series of factors. How well you pay current debts, including your house payment (if you were able to keep the house), is at the top of the list and should be a priority in your new budget.
3. Seeing Your Paycheck as Your Own
If you’ve filed for Chapter 13 bankruptcy, which entails reorganizing your debts, you may have to live on a very strict budget for the next three to five years, depending on the terms of your bankruptcy. Your limited income will be regulated by the court until the reorganized debts have been repaid. After that term, however, you’ll be able to claim your paycheck as your own again and spend it as you see fit.
4. Taking Out a New Loan without Permission from the Court
During that stretch of repayment, even your current income isn’t entirely yours to spend as you like. You have to have the court’s permission to take out any new loan, including car loans, until your current debts have been repaid. Once your current debt has been discharged, however, you can take the steps necessary to start rebuilding your credit.
5. Applying for an Unsecured Credit Card
Immediately after you file for bankruptcy, 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 you’re trying to build your credit, try options like secured credit cards. Using this card each month will help rebuild your credit faster.
6. Buying a House
It seems like the perfect time to go house hunting, doesn’t it? With no debts hanging over your head, 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 take 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 wait. 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 in an account devoted to buying a house. In four years’ time, you’ll have a substantial down payment that will make it much easier for you to get the loan you want.
7. 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 can be a difficult time in your life. Rebuilding when it’s over doesn’t have to be.