LIFE AFTER BANKRUPTCY
In 2019, nearly 11,000 Colorado residents filed for Chapter 7 or Chapter 13 bankruptcy. That number fell in 2020 to 7,641. The decrease is largely due to closed courtrooms, remote practices by bankruptcy attorneys, and the inability of cash-strapped residents to pay attorney and filing fees. The COVID-19 pandemic also radically altered the economic lives of so many people who decided to have a “wait-and-see” attitude toward their finances.
People who file for Chapter 7 or Chapter 13 bankruptcy are seeking a fresh financial start for themselves and their families. Most do not make the decision to file easily. Even when debt is managed and cleared, bankruptcy leaves behind a poor credit score for years.
By following some careful strategies, you can repair your credit score over time. If poor money management and spending habits are what put you into the financial situation that makes bankruptcy an option, you will need to avoid those traps in the future.
At Garcia & Gonzales, P.C., we help clients in Westminster, Denver, Aurora, Boulder, and Northglenn, Colorado explore options for pursuing a fresh financial start. We can answer your questions about the benefits and consequences of Chapter 7 and Chapter 13 bankruptcy so you can make an informed decision about your financial future.
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 case, the court will inform all of your 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.
Impact On YourCredit Report
People with below-median incomes can file for Chapter 7 bankruptcy, which wipes out all debt; The bankruptcy, however, remains on your credit report for 10 years.
If your income exceeds the median income in Colorado, 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 filed for bankruptcy. Make sure any debt not included in the bankruptcy 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 debts you paid off under the plan show zero balances.
Take Out a Credit-BuilderLoan 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 that you deposit an amount of money which 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 and high interest rates and penalties. Using either type of card can help restore your credit — 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 Our Team at Garcia &Gonzales, P.C. 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 experienced bankruptcy attorneys from the moment you start considering bankruptcy. While it 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 Garcia & Gonzales, P.C., we have helped thousands of clients in Westminster, Colorado, and the surrounding cities and towns take control of their lives again by helping them free themselves from the crushing burden of debt, rebuild their credit, and avoid making the same mistakes again.
Call our office now to schedule a consultation. You have nothing to lose but perhaps much to gain.