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Life After Filing for Chapter 13 Bankruptcy: A New Chapter

Filing for Chapter 13 bankruptcy is often perceived as a last resort, a black mark on one’s financial record that will bring about social shame and ruin one’s creditworthiness.

While the process is undoubtedly difficult, the reality is that life after Chapter 13 bankruptcy isn’t as dire as many think. It is not the end of your financial life but rather a fresh start, a new chapter that provides opportunities for restructuring debt and rebuilding your financial standing.

Here, we’ll explore what life looks like post-bankruptcy and offer advice on how to navigate this new terrain.

The Immediate Aftermath

Once you’ve successfully filed for Chapter 13, the first thing to realize is that you’re not alone.

Millions of people in the United States file for bankruptcy each year for various reasons, ranging from medical expenses to job loss. It’s also worth noting that filing for Chapter 13 bankruptcy allows you to keep your assets, such as your home and car, which are often crucial for daily life.

Soon after filing, you’ll find yourself in a legal process aimed at helping you repay your debts over time. The court will appoint a trustee to oversee the repayment plan, which usually lasts three to five years.

During this period, you’re required to make monthly payments to your creditors through the trustee. Despite the lingering debts, many people find relief in knowing that there’s a structured plan to resolve them.

The Emotional Toll

Bankruptcy can be emotionally taxing. Some people experience feelings of failure or shame. It’s important to recognize that bankruptcy is a financial tool designed to help individuals navigate extreme financial difficulty.

It’s not a reflection of your character or worth.

Many successful people have filed for bankruptcy and come out stronger on the other side. Support from family and friends, as well as professional help from counselors or therapists, can be invaluable in dealing with these emotions.


Bankruptcy Timeline: Filing the Petition


Rebuilding Credit

Rebuilding your credit is a critical part of life after Chapter 13 bankruptcy. Initially, your credit score will take a hit, but it will gradually improve as you make consistent payments under the court-approved plan. A few ways to boost your credit score after bankruptcy include:

  1. Secured Credit Cards: These cards require a cash deposit that serves as your credit limit. They offer a way to show that you can manage credit responsibly.
  2. Installment Loans: Small installment loans that are easily manageable can also help improve your credit score when they’re paid off in a timely manner.
  3. Co-Signed Loans or Cards: A co-signer with good credit can help you qualify for a loan or credit card. However, this places the co-signer at risk if you default on your payments.
  4. Timely Payments: Perhaps the most straightforward way to improve your credit is to consistently make timely payments on all your debts and bills.

Living on a Budget

The court-approved repayment plan will likely necessitate some lifestyle changes. You will need to create a budget to ensure you have enough to cover your monthly payments as well as other necessities.

Dining out less, shopping for sales, and cutting out non-essential services are often the first steps in living a more budget-conscious life.

Access to New Credit

While you’re on a Chapter 13 plan, getting new credit will require court approval.

After the plan is complete and the bankruptcy is discharged, you’ll find that lenders may still consider you a risky guest.

However, the longer you go after bankruptcy with a solid repayment history, the less weight the bankruptcy will carry.

Future Employment and Housing

While federal law prohibits employers from discriminating against applicants who have filed for bankruptcy, some private employers may consider it when making hiring decisions.

Similarly, future landlords may require a higher deposit if they find out you’ve filed for bankruptcy.

Looking Forward

While Chapter 13 bankruptcy may seem like a daunting step backward, it often serves as a crucial step forward for many. The experience teaches invaluable lessons about financial management and provides a structured way out of overwhelming debt.

In conclusion, life after Chapter 13 bankruptcy is not the end but rather a new chapter that involves restructuring your debts, improving your financial habits, and regaining your economic footing.

By focusing on rebuilding credit, sticking to a budget, and maintaining a positive outlook, you can navigate through this period and emerge financially stronger. Bankruptcy may be a difficult part of your past, but it doesn’t have to dictate your future.


Bankruptcy Abuse Prevention and Consumer Protection Act


Hiring an Experienced Bankruptcy Lawyer

It’s important to hire an experienced bankruptcy attorney as one of the steps to take when you’re facing bankruptcy and you need solid guidance and representation.

This is because there are many different types of bankruptcy. Only an experienced lawyer will know which one would work best for your specific situation.

It might seem like it makes sense to do this yourself. But most people don’t have the time or patience to understand all of the intricate details involved in bankruptcy.

That means they make mistakes by not choosing the right type, or by not filling out paperwork correctly. Both things could lead to delays and ultimately hurt your chances of getting any debt relief at all.

This is not a journey to take lightly, but it is also not one to take alone. So, if you need to file for bankruptcy, reach out to us today to start your journey with us.

If you want to learn more about the options you have and the steps to take, call us for a free consultation.


Rebuilding credit after bankruptcy? Parker & DeFresne can help!

Parker and DuFresne

Parker and DuFresne