You filed for bankruptcy in New York. You succeeded in getting a discharge. You’re in the clear. What happens next?
If you’re not careful, you can end up right back in the situation that led to bankruptcy in the first place. Except that the law prohibits you from filing for bankruptcy again for another 8 years for a Chapter 7 (and 4 years for a Chapter 13). A little post bankruptcy counseling can help you avoid more financial problems in the future.
How might someone end up with the same problems again after bankruptcy?
1. Overly optimistic feeling about their finances. The moment after you get your discharge is probably the best financial shape you’ve been in for a long time. Your debt has been wiped clean for the most part. And suddenly you may feel like you have more cash than you can remember having access to. So it’s understandable that you might feel like spending. But beware of that feeling, or you’ll end up back in the same boat, but without a paddle. And make sure to set aside some money for savings.
2. Credit! Credit! Credit! For the first time in a while, you have access to credit again. From lender’s view, you’re actually an attractive customer. Why? Because you don’t owe lots of money to other people. (Not yet anyway.) But watch out – after bankruptcy credit cards come with a catch. The credit available will be very high interest credit. And you’ll get lots of offers for credit cards and perhaps car and mortgage financing. On one hand, it is good to have some credit which you use responsibly, as that helps gradually rebuild your credit history. But on the other hand, if you’re not careful, those high interest rates will do you in very quickly.
3. Living the good life. Often credit lets people think they can live a lifestyle that they really can’t afford. You may feel good following your discharge and want to celebrate and start having the things you couldn’t have the past year or years. But if you live beyond your means, then you’re going to start relying on credit and get tripped up with those high interest rates described above. If you stay within your means, you’re going to be much happier in the long run. Just keep your eye on the prize.
4. Borrowing from Peter to pay Paul. Following their discharge, many people fall into bad financial habits and end up borrowing money to pay off other debts. If you recognize that you’re about to do this, or already doing this, that’s a sign that you need to stop and reassess. This is a problem that ends up affecting many people after they’ve gotten their discharge from bankruptcy. Be aware of what and how you’re spending to avoid this common post-bankruptcy trap.
If you need some post-bankruptcy counseling, want to make sure you use after bankruptcy credit cards responsibly, or have any questions about the bankruptcy process and the bankruptcy experience, please feel free to call our Brooklyn bankruptcy law firm at (718) 855-6840 or contact us on-line.
