WHAT TO DO AFTER YOU FILE BANKRUPTCY

LEARN HOW YOUR CREDIT WORKS FOR YOU AND AGAINST YOU

Some of the most frequent questions I get are 1) how long will this stay on my credit report? Will I ever be able to have credit again? The answers are 1) a while, and 2) yes. One of the reasons people delay seeking bankruptcy information is the fear regarding the impact on the credit. If you are over your head in debt, you don't have any credit anyway. The effect of a Chapter 7 discharge is to officially relieve you of all debts, unsecured debts, medical bills, personal loans, payday loans and anything else you have listed in your petition. Your credit is wiped clean. As a result, you get to start rebuilding your credit and can do so with surprising quickness, if you play the game right and you know what you're doing. Your FICO score is the result of many things, number of open accounts, open balance, on time payments, and balance to available credit. For a more in depth understanding of how the credit reporting agencies evaluate your credit, get a copy of UNDERSTANDING YOUR FICO SCORE.

Bankruptcy officially wipes the slate clean, and what you do after you file is more important than what you did before. If you have income and have just eliminated all your debts, from the lenders point of view, you actually are a better credit risk than you were before. That's because you now don't have any other bills to pay, except those that survived the bankruptcy, like your mortgage, your car payments and your utilities. In actuality you'll start receiving credit card applications in the mail after the discharge is entered. The credit card companies know that you can't file again for another eight years, though, so they'll be more than happy to start you over on credit hoping to suck as much out of you as they can. Warning! Be sure and read the terms and conditions of any new card and stay away from cards with high interest rates, annual membership fees and participation fees. The effective interest rate on these types of cards is exorbitant. We'll tell you the best credit cards to get and why. The reason why you're required to do the post-petition debtor education is to give you some ideas about how to avoid the same problems that got you to the Bankruptcy Court in the first place. Realistically, how much can learn in an hour and half online? The real solution is to start upon an education journey for the rest of your life. Because financial recovery, and any kind of financial success requires that you::

BECOME FINANCIALLY LITERATE

The next thing to do is "Learn to be the Master of Your Money, or Your Money Will Master You." A lot of people get to the bankruptcy court because life happens, uninsured medical bills, loss of job or income, layoffs, downsizing, rightsizing, divorce, illness or catastrophic illness. If you are over your head in debt, you don't have any credit anyway.You have an anchor around your neck. But if you've made bad lifestyle choices, or if your money is controlling you, not the other way around, you need to start asking different questions post bankruptcy. You need to think about how you manage your money and your credit after you file, or you'll be back in the same position in another eight years. The questions you need to ask are 1) How do I manage my money effectively; 2) what's the differnce between good credit and bad credit; 3) what do you need credit for, anyway? My job as a lawyer is to give the best financial advice possible, even though it may not be in my best interest to do so. I am required by the Professional Rules of ethics to give you the best advice possible. So if you are easily offended, stop reading right now and just skip over the rest of what I'm going to tell you. I'm probably going to offend a lot of people, a lot of people are going to disagree with me, and there are possibly a few of you are going to think I'm crazy. I don't care because its my job to tell you what I think you need to hear, not necessarily what you want to hear. And of course, its my opinion, and I could be wrong. On the other hand, I have seen how the rich get rich, and how anyone, even the allegedly wealthy, can lose their fortunes, their houses and their families overnight.

What you are taught in traditional schools has nothing to do with financial literacy. You are told to go to school, get good grades, get a degree, and get a good job, many people I see do not even know how to balance a checkbook or read a financial statement. They do not know what the difference is between an asset and a liability. And, they cannot tell the difference between good credit and bad credit. Even students of economics are taught theory, not how money is actually made. That's why people who work for a living are going down a dead end street, because if the only thing you ever have is a job, that's the only thing you'll ever have. And the truth is, its not your boss's job to make you rich. A job only provides you with a paycheck, not a lifestyle. And in today's economy, your job is not guaranteed, and the only thing a job gives you is a steady, predictable source of income.

There was a recent Harvard Study that concluded that during the recent real estate boom from 2000 to 2007. The actual earnings of the average American went down $1,500.00, at the same time as the cost of living went up $4,500.00. What that means to you is that your personal buying power actually went down by a net $6,000.00!.

As a result of the mortgage meltdown, the stock market crash, the credit crisis, and unemployment, there are some analysts who have said that Americans have lost a net $11 trillion dollars. The number is so staggering its beyond comprehension. The one thing that is for sure is that it means that there is something seriously wrong with the current economic system. It's my belief that the underlying problems with the economy are not purely financial, it's a problem with character and ethics in business, and lack of integrity and adding value and service to other people. The "me" generation needs to become the "we" generation.I'm going to give you a little historical lesson that I learned from Jim Rohn. He tells the story of where the concept of money came from. Back in the olden days, before there was money, artisans traded their wares, in a bargained for exchange. (This is where the idea of a contract comes from also). The value of whatever the artisan made was determined by the talent that he possessed or displayed, as a result of learning, applying knowledge to his product, and displaying his skill in production. The more skill the artisan had in producing his goods, product or services, the more he was rewarded by measure of talents or money. In simple terms, the more talent or value the artisan put into his product, the more he was rewarded. It's a matter of adding and giving value to whatever good, product or service you are putting into the market.

I am old enough to have grown up in a time where the local grocer allowed you to run a tab, charge groceries, food, and products and kept a running tab. When your crops came in or sold your cattle in the fall, you came in and paid off your bill. It was based on an honor system, and everyone got paid for their hard work and effort, and trust in each other

The invention of consumer credit, however, is a recent phenomenon, a post World War II product that was designed to allow consumers to buy things and obtain things over time. But the first thing you have learn about any type of credit is the LAW OF PRESENT VALUE. If you are paying things over time with interest, you are not paying present value, and future money is always more expensive than present value. Now, there are economists that will tell you, that deficit spending is ok because you are coming out ahead, because inflation actually decreases the value of the debt. This is pure sophistry in my opinion, because that ignores the fact that you are paying off future debt with future dollars, which have equally declined in value. This point being ignored, if you buy an item for 500.00 and make the minimum payments over time, you will find that the actual cost of the item is astoundingly higher than the cash price.

But the other problem with buying things on credit, is that your not paying present value, and you're not adding value to the exchange. All you're doing is giving a promise to pay at some future date, which is conditional upon a variety of circumstances, many of which are beyond your's or anyone else's control.

I can recommend a lot of reading materials, but you can start with Dave Ramsey's Financial Peace, Suze Orman, and many others. Anything by Robert Kiyosaki is highly recommended. The point is to get started on a life long journey to make your family and this country strong again. I'll be updating this site on books that I recommend, and if you come across some great stuff, please let me know, so we can all benefit. Two of the other books I highly recommend are Thomas Friedman's "The World is Flat" and Stephen Covey's "The Seven Habits of Highly Effective People." The World is Flat explores how the world is rapidly changing and explains why you need to be constantly upgrading your skills. While The Seven Habits is valuable reading for many things, Stephen Covey talks about the character ethic and an interdependent, rather than competitive, business environment. To recover from bankruptcy or any financial disaster; and to be successful in business and in life, you are going to have to adapt to the current business and social trends in order to survive. Combining forces in an increasing complex and technologically evolving environment may be the only answer to long lasting financial success.

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