Once an individual or couple has filed a bankruptcy petition they will likely find their mailbox full of credit card and auto loan offers. The reason for this is that some creditors actively market towards those who have recently filed bankruptcy. This shocks many of my clients who were under the impression that once they filed a bankruptcy that no creditor would touch them with a ten foot pole. But think about it from the creditor's perspective....the bankruptcy debtor has just wiped off most if not all of his or her debts and has therefore likely freed up some additional cash flow in the debtor's life. In addition, there are limits on how often an individual can file for bankruptcy (for example a Chapter 7 discharge may only be obtained every 8 years). Finally, the credit score of those who have recently filed for bankruptcy is low, which means that the creditor will charge higher than average interest rates to a person who has recently filed bankruptcy. In my opinion this seems like a creditor's dream! The creditor has the opportunity to charge a high rate of interest to a person who has just cleared off all of their debt and cannot discharge the debt again for a number of years. This sounds like a high profit loan with low risk for the creditor!
My clients will often ask my opinion on how they should rebuild their credit after bankruptcy. What I say is that I am no expert in credit scores. I do know people who are and am happy to refer my clients to them after bankruptcy. But I can only offer my opinion as a bankruptcy attorney practicing in Indiana.
What I will say is that if you have spent more than the last 3 minutes reading this blog you know that I am not a fan of credit cards. I don't believe there is any reason to have a credit card and I myself do not have a credit card....not even one credit card for emergencies. However, I must admit that opening one credit card after bankruptcy and PAYING IT OFF IN FULL EACH MONTH will certainly help to rebuild credit post-bankruptcy. However, you don't necessarily have to use a credit card to rebuild your credit. If you have reaffirmed an auto loan or a home mortgage in your bankruptcy the best thing you can do to rebuild your credit is to continue to pay these bills on time. Late payments post-bankruptcy are no help to rebuilding your credit....they may as well be a flag waiving over your credit score stating that you have not learned anything from the filing of your bankruptcy and you might be headed down that road again some time in the future.
I think that once a bankruptcy discharge is received that credit should be rebuilt first by building up an emergency fund of about $1,000.00. If you then wish to open a credit card for "emergency" situations (I put emergency in quotes because we all know that at some point the car will break down, the water heater will leak, the kids will fall and get injured, etc.) charge the emergency expense and then use your emergency fund to pay the bill when it comes in. This way you actually have the money at hand to pay for emergencies but you are also re-establishing your credit by using a credit card to pay for the expense, but are also lessening the chances that you will get in over your head with credit.
If you live in Carmel, Noblesville, Fishers, Indianapolis, Zionsville, Tipton, Kokomo, or anywhere else in central Indiana and aren't sure whether you should be considering bankruptcy or how it could help you call my office at 317-575-8222 or click here to fill out our contact information sheet and my office will contact you. I am happy to sit down with you for an hour to review your financial situation and to let you know whether or not I recommend bankruptcy as a method of helping to solve your financial difficulties.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
No comments:
Post a Comment