After Bankruptcy

Donna has asked a question that's affects more people every single day. In 1996 there were over 1.1 million non- business bankruptcies in the US. And another 98,000 in Canada. According to the American Bankruptcy Institute quarter two of 1997 set a record for new filings. More than that, the problem Donna faces is common to everyone who's working to repair their finances and credit.

Let's begin by understanding what the bankruptcy proceeding does. In it's simplest form, it allows the court to take some of your assets and sell them. The money made is then distributed among those who are owed money. Any balances owed after that are wiped away and you don't need to repay the remaining debts. Depending on where you live there are some assets and debts that are excluded from the process.

Live on a Budget. That's an ugly word, I know. But the facts are simple. Unless you know for sure that you're not spending more than you're making you'll get in trouble again. And using a budget is not that painful. If you have a computer, there's software that makes it easy. Even if you have to do it using a calculator and paper it's not that hard. The real question is whether you'd rather live on a budget or have all the problems that come with living beyond your means.

Repairing Your Credit. The first item for many people after bankruptcy is seeing how fast they can get a credit card. But is that the right strategy? Let's look at your big credit picture. First, your credit record will not be spotless. You probably have a 'slow pay' history. The fact of your bankruptcy will be listed, too.

It's a good idea to check your credit files for accuracy. Your credit history is maintained by private companies called credit bureaus. They can legally report negative information about your credit history for seven years and bankruptcy information for 10 years.

Write to them and ask for a copy of your file. If you've been turned down for credit they must provide it free. Otherwise they will have a small charge. The largest are: TRW Consumer Assistance, P.O. Box 949, 660 N. Central Expressway, Allen, TX 75002 (1-800-682-7654) or Equifax Information Center, P.O. Box 740241, Atlanta, GA 30374-0241 (1-800-685-1111).

Once you have your report look for errors. If you've paid off a debt make sure that the report shows that. Were any of your accounts kept current? If so, make sure that information is included. Also check and make sure that negative reports more than seven years old are deleted. If you have a correction send it to the bureau in writing then check later to see that the changes were made.

Credit Repair Companies. As a rule avoid them. There's nothing that they can do that you can't do yourself. They cannot erase accurate negative information from your file. Some will promise to give you a new credit identity. That's illegal. Purposely hiding your credit history can be fraud! When they ask for your money before starting the process don't open your checkbook...flee instead!

Credit Cards and Borrowing. It's natural in our society to want to have a credit card at your disposal. And it's possible that you emerged from your financial problems with an old account still active. You may have elected to keep a credit card account out of the bankruptcy process. Then both the amount owed and the card will still be active.

It's also possible that you'll be able to get a new credit card after a bankruptcy. By law, you can't declare again for six years. To some companies that makes you a better credit risk than before. If you have a steady income many companies will consider your application.

What happens if you can't get a new credit card? Well, for most people the goal was to get a piece of plastic in their wallet or purse. So they'll pursue a 'secured card'. You'll be asked to deposit some money (sometimes as little as $200) into an account. Then you'll be issued a card with a credit limit equal to the amount that you've deposited. As you demonstrate your ability to repay the credit limit will be raised.

There are other things to consider with this type of account. You will be credited with no or very low interest on your deposit. Some accounts will also have an annual fee. Hardly good money management techniques.

But, do you really need a 'secured card'? You've already saved the money. Wouldn't you be better off putting the money in an interest bearing checking account? When you want to spend it just write a check. Some readers travel and need a credit card for hotels and rental cars. They should try for an unsecured card based on their income. For the rest of us the lure of a secured card could be more in the pride of plastic rather than practicality.

A New Attitude. The last, and most important element, of emerging from financial problems is creating a new attitude about money. Do you know why you got in debt? Are you a compulsive shopper who loves to cruise the malls? Maybe you can't stand to see your neighbor have a newer or fancier car, boat or TV than you have.

Whatever the reason, you need to understand how you got in trouble. Chances are you don't need a professional to do this. Just take a cold, hard, honest look at yourself. If you don't fix the root problem, you've only treated the symptoms. The disease that caused your problem is still with you and will cause even greater damage later.

Ultimately, getting it together after financial problems is a very personal matter. We'd all like to think that there was a quick and easy way out. But, at best, bankruptcy only provides a temporary fix. It took years to get into trouble. It will take years of living within your means to repair the damage and create a new credit history. Be encouraged, though. Every day people are changing their financial futures and living happier lives in the process. If you want to join them, you can, too!

Do you have a time or money saving idea that wasn't included in this article? Please send it to tips @stretcher.com. We get the best ideas from our readers!

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