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There is Life After Bankruptcy

Your life leading up to insolvency was a bit of a financial nightmare. That’s why you filed for bankruptcy protection. Maybe you had been sucked into the vicious cycle where your credit score was quickly tanking and you were hoping to get a loan to help you consolidate, but you had a hard time getting any loans … because of your credit score. Maybe the interest rates on your credit cards were so high, you couldn’t even afford the minimum payment. You probably had creditors calling you every day and spent nights awake worrying how you could possibly get out of the hole.

Bankruptcy is a lifeline and a path to a second chance, so in spite of the social stigma it can carry, most people feel incredible once it’s all settled. Finally having the weight of debt and creditors off your shoulders is an enormous relief. However, your past isn’t simply swept under the rug. There is a responsibility now to form better habits going forward. Change is difficult, and bankruptcy clings to your credit history for 10 years. The road ahead is bumpy, but you have more control over its challenges than you may realize.

Clean slate” is wonderful in many ways. But, though your slate is now clean, the Ghost of Habits Past is clanking around in heavy chains behind you like ol’ Jacob Marley, scaring banks, insurance underwriters and credit card companies. You likely will not be able to get credit for a while. If you filed Chapter 13, you’ll be living off a court-appointed amount of money for 3 to 5 years, with the rest of your income divided up among your creditors each month. In this scenario, you may be able to take on new debt or loans, but not without permission from the court. Also, since you’ll be on a much tighter budget than you’re used to, you’ll need to adjust what you pay for shelter, groceries, and other basics.

It’s all about changing the way you think about money.

If you filed Chapter 7, your salary is yours to dole out. You’ve walked away from all or most of your debt completely. However, you must  live on the cash you have, and the court will expect you to start building funds for savings and for emergencies.

Since re-establishing good credit is essential to rebuilding your financial life, you have to somehow get access to credit. Basically, Chapter 13 opens the door after the 3-5 years is up, allowing you to apply for loans and lines of credit without court approval. People under Chapter 7 can start immediately; although it is not easy, it can be done. If you were able to keep your house, that’s one way to start. If you reaffirm your loan, then the lender will report payments to the credit bureaus. Renters who live in an apartment might not be able to use housing payments as a way to build up their score, however. Many apartments don’t report rent to credit bureaus.

Just like with everything else, you’re more likely to succeed if you’re self-motivated. Once it’s time to start applying for loans and credit cards, you’ll find that interest rates are terrifyingly high. However, don’t let that scare you. Interest rates often don’t apply if you pay off your balance at the end of each month. That’s one way to help build credit with credit cards. You’re showing lenders that you can manage your own money and are increasingly less likely to spend more than you’re bringing in. If you can do that while building up savings, no matter how slowly, you’re on the right track. However, if you don’t trust yourself with the temptation to spend more than you earn, or if you find that you’re simply not able to get approved, opt for a secured credit card. That’s a card that requires you to first make a deposit, which is then the amount you’re allowed to spend. It’s very possible that within six months, you’ll be eligible for an unsecured card, which will allow you to really prove to everyone that you can totally do this.

Questions about Bankruptcy?

Anyone can find themselves struggling with debt and the need to make difficult economic decisions. Each situation has a unique set of facts and a corresponding best course of action. With over 35 years’ experience in our community, the Fayette County bankruptcy lawyers at Bunch & Brock are committed to providing each of our clients with a high level of personal service. We are dedicated to helping those in our community who may find themselves struggling with overwhelming financial problems and who want to make better choices in the future. We take the time to fully understand your situation and discuss options for debt relief. Let us work with you to make the best plan for eliminating or repaying your debts. We encourage you to contact our office by calling 859-254-5522 or filling out this online form.

Lexington, KY Attorney Matt Bunch

Attorney Matthew Bunch

Matt handles complicated bankruptcies and debt restructuring in Chapters 11 and 13 for both individuals and companies. He has also negotiated with multiple creditors on behalf of his clients to avoid bankruptcy. Matt is the firm’s lead litigator and handles contract disputes, certain personal injury claims and general litigation. [ attorney bio ]


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