The objective of most bankruptcies is to achieve a “discharge,” which is an order from the bankruptcy court releasing the debtor from personal liability for specified debts.  Most bankruptcies (but not all) result in a discharge.  This article provides 12 specific tips about moving forward successfully after the discharge.

 
• You are free of discharged debts and collection actions on discharged debts.

A debtor has no personal liability to pay a discharged debt, and the discharge is a permanent order prohibiting creditors from taking any form of collection action on a discharged debt, including legal actions such as a law suit, and communications such as telephone calls or letters to the debtor.  (NOTE however that a secured creditor retains any lien that has not been avoided in the BK proceeding.)

 
• Make sure to pay any reaffirmed debts.

In many cases, a debtor will have reaffirmed one or more secured debts such as a car loan.  Reaffirming a debt allows the debtor to keep the secured property such as the car; however, you must make payments on the loan or the creditor can enforce the lien, repossess and sell the security, and proceed against you for any deficiency.  By making payments on reaffirmed debts, the debtor (1) keeps the property, (2) avoids the collection efforts, and (3) begins rebuilding credit. (NOTE: be very careful that you only reaffirm debts that you can pay, and you have good advice of counsel before making this decision.)

• Begin rebuilding credit with new lines such as a secured credit card or a passport loan.

Most banks and credit card companies will restrict or cancel credit cards when they are informed of a bankruptcy petition.  However, many will establish a secured credit card or a debit card, which allows you to make credit card transactions against a balance that you have deposited with the institution.  With a passport loan, you borrow against your own deposit with a bank.  Both of these methods allow you to rebuild credit by showing the ability to pay debts.

• Check and monitor your credit report

After bankruptcy, most of your debts should be shown as “discharged in bankruptcy.”  This means that you have no remaining liability for any of the discharged debts.  You should obtain and review credit reports from all three credit bureaus, and inform them if they are incorrectly showing any accounts as still owing.

• Open department store and/or casoline credit cards – but use them carefully.

The easiest credit cards to get are usually department store cars and gasoline cards.  Sometimes, department store cards are available when you use them to make purchases.  Check on the availability of this type of credit cards, and get them when you are able.  But make sure not to fall victim to temptation: use them sparingly and pay them off in full each month.

• Prepare an honest – but positive – explanation for your bankruptcy

After a bankruptcy, people may ask about why you filed bankruptcy.  Most debtors have many factors that contributed to their bankruptcy.  Usually, filing the petition required courage and was a crucial step to starting over.  In almost all cases, there is an honest and positive explanation that can be made in less than 30 seconds.  If you are prepared to make this statement, you will often find that people are willing to work with you.

• Be aware of the psychological burden: Believe in yourself

Feeling depressed after bankruptcy is not helpful.  You have taken a major step to begin a new life, and now you can continue that journey.  Believe in your ability to continue that journey – the more you believe, the faster you will progress.  Accept the challenge and believe in yourself, and you will re-establish credit more quickly.  Do not succumb to devastation – this can add years to your recovery time, when positive action can restore good credit in as little as two years.  Look at your discharge as the flag to start the race – work hard and you will quickly be winning again.

• Try opening an account with a credit union

Credit unions are widely available and their mission is to help their members financially.  You are probably eligible to join a credit because of your work, school, where you live, or some other reason – join it, and find out what you will need to do to qualify for credit.

• Set up automatic programs to save

Most employers or credit unions will establish withdrawals from your paycheck or account to save money, or to contribute to retirement.  This ensures that you are making progress every month.  This can also make it easier for you to work within your means, and stay solvent.

• Get only one credit card, and pay it monthly

Do not return to debt dependence.  Make sure your credit is paid up each month.  Do not carry balances on any credit card, and do not maintain more than one credit card.  If you pay your debt off each month, you will not return to unaffordable debt.

• Avoid Debt Traps After Bankruptcy

Don’t co-sign for the debts of others – you cannot file another bankruptcy for years, and could be liable for deficiencies.  Don’t let your children take on debts – teach them about money, budgets and credit;  distinguish what you need and what you want.  Use credit sparingly as you rebuild – always end each month by paying off your balances, that way you will never get into a deep hole.

• Avoid “Credit Repair” scams

Credit repair is not free – it usually costs you to have your credit repaired.  After bankruptcy, you have taken a huge step to repairing your credit because you have eliminated much or all of your debt.  Many scam artists claim to “fix” credit but take your money and do nothing that you cannot do yourself.  Rather than pay for credit repair, take a few steps yourself, and you will be on the way to improving your own credit, at no cost.  For information about your rights under the Fair Credit Reporting Act, go to: http://www.ftc.gov/bcp/conline/edcams/fcra/index.html

Finally, remember that federal law forbids discrimination against discharged debtors.  A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case. The law prohibits the following forms of governmental discrimination: terminating an employee; discriminating with respect to hiring; or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely upon the bankruptcy filing.

http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/DischargeInBankruptcy.aspx