Personal Finance

Recovering From Bankruptcy - Part 1: Starting is the Hardest Part

The topic of bankruptcy recovery is one that is extensive and can be complicated; however, I’ve attempted to make an honest attempt here at providing you with some general steps that you can take - and a jumping off point for more research. I originally wrote this with the intention of being one long post - but the information has proven to be too much for just one post. Instead, this will be a 3-part post. The following points come in no particular order and therefore you should not necessarily follow them in order.

Self-Help May Be Best: You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

• “Credit problems? No problem!”
• “We can erase your bad credit — 100% guaranteed.”
• “Create a new credit identity — legally.”
• “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

Do yourself a favor and save some money, too. Don’t believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report. The FTC even published a statement concerning the numerous scams that have appeared recently regarding bankruptcy recovery. The truth is that no one can legally remove accurate and timely negative information from a credit report. The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete. There is no charge for this. Everything a credit repair clinic can do for you legally, you can do for yourself at little or no cost. According to the Fair Credit Reporting Act (FCRA):

• You’re entitled to a free report if a company takes adverse action against you, like denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
• Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report, at your request, once every 12 months.
  The three companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report. To order, click on annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can print the form from ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order your report from each of the companies one at a time. For more information, see Your Access to Free Credit Reports at ftc.gov/credit.
  Otherwise, a consumer reporting company may charge you up to $9.50 for another copy of your report within a 12-month period.
• You can dispute mistakes or outdated items for free. Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.

Set (Realistic) Goals: Sit down after your bankruptcy to assess your situation and set some goals to achieve your personal financial goals. Your goals will be different from mine. Perhaps you want to buy a house or perhaps a car - it doesn’t really matter - just write down your goal. Goals are important after bankruptcy for a number of reasons. First and foremost it gives you a sense of direction. Often after bankruptcy you can become confused, upset, and disoriented. A financial goal will allow you to work towards something specific instead of working on general “recovery.”

A goal is also a way for you to start “small” in building up your credit again. Obviously you cannot immediately begin to purchase at the same level as before bankruptcy and you will not likely be able to purchase a home, a car, or any other large purchases - especially at the same time. Because you’ll have limited resources and opportunities it is best to focus those resources on one thing at a time. Diversifying at this time would not be the best idea. Instead, focus on your goal(s).

Organize and Prevent: This one has to do with making sure that your personal finances are organized in the way they should have been before bankruptcy. This includes writing down your income and expenses, creating a budget, increasing your savings, and paying your bills on time. This might seem like common sense but you would be surprised at how often people revert back to the same personal finance habits that they had before falling into bankruptcy. One of the first steps in recovering from bankruptcy is to start fresh with new goals, new ideas, and new habits so that you can avoid the same mistakes again.

As I mentioned at the beginning of this post, this was just an intro into the steps of recovering from bankruptcy - some of the more simple ones that you may have not thought of. Be sure to come back soon to check out part 2 of Recovering From Bankruptcy for more ideas and tips on recovering from bankruptcy.

Bankruptcy, Recovery, Financial Goals

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