Valerie looked at the pile of bills on her desk and sighed. She realized that at this point, there was no chance that she would be able to pay off the debts that she had accumulated over the last few years. Between her medical problems and losing her job, she had depleted all of her savings and maxed out all of her credit cards, and could no longer even make the minimum monthly payments on them. Her rent and car loan were past due, and the temporary job that she was working would hardly cover her current expenses. She pushes the bills to the side and decides to talk to a bankruptcy attorney about her situation. One week later, Valerie finds herself filling out the Chapter 7 paperwork.

Unfortunately, Valerie\'s situation is all too common - in fact, Mark Twain, Walt Disney, Donald Trump and Henry J. Heinz all filed for bankruptcy at some point in their lives. If you think bankruptcy could be looming for you as well, read on to discover what you can expect and what to watch out for after filing for personal bankruptcy.

You\'ve Filed - Now What?
For the individuals who have declared bankruptcy, the recovery process is long and difficult. The first step comes when you and your bankruptcy trustee meet with your creditors to inform them of the bankruptcy, at which time any non-exempt assets that you have must be liquidated. (To see a full list of asset exemptions, check out You will be allowed to keep your furniture, your car and your personal belongings up to a certain value, but any non-exempt liquid assets such as cash or certificates of deposit (CDs) must be turned over to a court-appointed trustee. But liquidating your assets is only the first of many issues that must be dealt with as the consequences of your bankruptcy begin to unfold. (To learn more about assets and the actual bankruptcy process, see What You Need To Know About Bankruptcy.)

Getting a loan of any kind will be extremely difficult for the next couple years, although it is possible to regain a better score and even some types of loans after only a year. However, the lenders that will finance you will probably be from finance companies that charge exorbitant rates of interest. In some cases, it may not be possible to get credit at all for major purchases, such as a car or home. These issues will remain for the next 10 years under a Chapter 7 bankruptcy. If you file a Chapter 13 bankruptcy instead, this kind of bankruptcy will often disappear from your credit report after only seven years. However, this type of bankruptcy also requires that you pay back all of your debt within three to five years according to a set payment plan. Because there are six types of bankruptcy filings, it is important to contact your lawyer to make that you file the one that best suits your financial position.

Take Back Control
Here are a few steps that you can take to help regain control of your situation:

  • Maintain a Job: It is vitally important that you get - and keep - a job as soon as possible, if you don\'t have one already. Finding a good place to live ranks a close second, if this is an issue as well. A stable residential and employment history is necessary because it shows creditors that you are reliable. Unfortunately, a growing number of landlords are starting to check credit references as a means of screening out possible unreliable tenants. If you are not able to rent an apartment to your liking, then you may have to room with a friend or relative until your credit improves. Furthermore, employers may also request credit scores and histories of their potential applicants as a measure of personal responsibility. Therefore, a little bit of bad luck can fuel a vicious cycle that may prevent you from getting a job that pays enough for you to pay off your debts. (To read more about finding housing after filing, check out
  • Pay Your Bills: It is imperative that you stay current on all of your monthly bills and other payments so that your post-bankruptcy credit record stays clean.
  • Keep a Bank Balance: Opening and maintaining a checking and/or savings account is also necessary. But more banks and insurance companies are evaluating their customers\' credit records before taking on their business. After declaring bankruptcy, insurance companies may feel that you are at risk of being unable to pay your premiums, just like having a history of charged-off bank accounts could hinder your ability to open a new checking account. Fortunately, many banks offer some sort of second-chance program for people in this situation. Keeping a positive balance in all accounts at all times will show employers and creditors that you now have a reliable cash flow.
  • Start to Rebuild your Credit: During bankruptcy, it is important to start to build up what you so quickly tore down. To rebuild your credit you may need to obtain a credit card. If you learn how to use it wisely it will demonstrate to lenders that you can manage your money and that you are determined to slowly rebuild your flawed credit history. This is only a viable option if you can control the credit and not let it control you. If you find yourself racking up debt again, you should cancel your card immediately and start a repayment plan. Fixing your credit rating is a good thing only when you can handle the credit itself. Keep in mind that the interest rate on any card you are eligible for will likely be higher than the average credit card. When the time comes to buy something larger with debt (such as a car or house), you may need to have another party, such as your parents, co-sign the loan. Without this, you may not be able to obtain financing at all; with it, you may be able to get something resembling decent terms on your loan (depending on the credit score of the co-signer). However, if credit is not available, then you may simply have to wait until you can pay for a car with cash or consider a personal loan from your relatives and/or friends.

Although recent legislation has made it more difficult for Americans to declare bankruptcy, bankruptcy is still far too common. Using your post-bankruptcy income and credit wisely is the key toward rebuilding your rating and standing on your own two financial feet again. If you can prove to lenders and employers that your post-bankruptcy life is in order, then this obstacle, too, will pass. Remember, Mark Twain, Walt Disney, Donald Trump and Henry J. Heinz all went on to have prosperous futures - and if you can put your bankruptcy behind you, so can you.

Related Articles
  1. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  2. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  3. Credit & Loans

    5 Extreme Ways To Raise Your Credit Score

    Desperate to rebuild your credit score because you can’t obtain a loan with a decent interest rate? Here are some extreme options to try.
  4. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  5. Options & Futures

    Five Advantages of Futures Over Options

    Futures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
  6. Personal Finance

    The Top 5 Personal Finance Experts to Follow in 2016

    Here is a look at five money and investing experts who can help you reach your financial goals for 2016.
  7. Credit & Loans

    Top 5 Reasons Why People Go Bankrupt

    The biggest cause of bankruptcy in the United States is medical expenses.
  8. Options & Futures

    Contango Versus Normal Backwardation

    It’s important for both hedgers and speculators to know whether the commodity futures markets are in contango or normal backwardation.
  9. Economics

    What is a Trade Credit?

    Trade credit means that a customer purchases goods from a seller who allows the purchaser to pay for those goods at a later time.
  10. Home & Auto

    What to Do When You Can No Longer Afford Your Car

    Life is full of unexpected and undesired events, like layoffs or divorce. Unfortunately, these events can sometimes make your car payment unaffordable.
  1. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>
  2. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  3. Can a debt collector contact me about a debt that's no longer on my credit report?

    According to Experian, a debt collector is permitted to contact a consumer about a debt that is no longer on the consumer's ... Read Full Answer >>
  4. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  5. Are personal loans considered income?

    Personal loans are not considered income for the borrower unless the loan is forgiven. In other words, you cannot be taxed ... Read Full Answer >>
  6. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
Trading Center