Planning Ahead: Coping With Credit After Chapter 7

Chapter 7 bankruptcy presents weary consumers with just what they need: a fresh financial start. In many cases, people spend too much time worrying about what a bankruptcy will do to their credit. Unfortunately, the longer a consumer waits to file for debt relief, the more complex their bankruptcy experience can be. To help calm your credit fears and make that first important bankruptcy move, read and follow these tips for coping with credit after your chapter 7 bankruptcy is final.

1. Take advantage of the bankruptcy debtor education course. This class is required and must be completed before your bankruptcy is final. Don't just treat it like another bankruptcy requirement, though. This class contains helpful information about what to expect post-bankruptcy. Topics of the course include budgeting and how to build your credit back up again.

2. Be a credit monitor. Your credit report and score are likely already in poor shape. Those about to file for bankruptcy may have reports full of late and missed payments. Some may also have auto repossessions, foreclosures, medical debt write-offs, and court judgments. Once your bankruptcy is final, all creditors you listed on your bankruptcy matrix should disappear completely from the report, however. Be sure you check the report to ensure that all listed accounts are not showing as active and past due. If you reaffirmed a car loan, the debt will still be listed. You should only notice one negative mark — the federal bankruptcy filing.

3. When it comes to acquiring new credit, take it slow. Many filers are astounded to find credit card offers in their mail after declaring bankruptcy. Creditors follow federal filings (which are public record) and then focus on offering those "sub-prime" debtors credit. Unfortunately, some of these offers are not in the best interest of the filer. Be sure to review interest rates, membership fees, and other punitive fees before you apply. Remember too that each time you apply for credit, it can lower your score.

4. On the other hand, a secured card might be a good idea, as long as you read the fine print carefully. With a secured card, the cardholder retains a certain deposit and extends you credit based on the deposit. Once you have established a pattern of on-time payments, you are refunded your deposit. In the meantime, you are building up your credit score.

Don't allow your fears of credit issues to let you put off your bankruptcy. If you are still worried about your credit picture after bankruptcy, speak to a bankruptcy lawyer.