As you contemplate the state of your personal economy, if you have reached the point where your only option is bankruptcy, you need a bankruptcy attorney. With the current extremely stringent bankruptcy laws, you absolutely do not want to try to file your own bankruptcy although the courts allow this for personal bankruptcy. In a business bankruptcy, the court requires an attorney.
The quality of knowledge and dedication of your lawyer will make a huge difference in how the Bankruptcy Court discharges your case. You want to find the best bankruptcy attorney for your unique situation in your area. Follow these guidelines:
- Ask friends and family for references if they have had a successful bankruptcy experience and their situation was similar to yours.
- Call your local bar association (the professional organization attorneys belong to) to ask for names of lawyers who only handle bankruptcies. Specify attorneys with a minimum of five years experience.
- Make preliminary screening calls to each office. Ask whether your situation is one the attorney usually handles and whether they offer a low flat fee and payment plans. Ask if you can set up a free consultation and case evaluation with the lawyer who would handle your case.
- Before your meetings, prepare a list of all your questions. During the meeting, ask them and write down the answers. Follow any instructions the office gives you about what to bring to your evaluation meeting. Ask for a written list of all services that the attorney’s fee will cover. You must be certain your case will be handled effectively for the fee charged.
- Decide whether you feel comfortable with the lawyer. Bankruptcy is an emotional process. You need an attorney who is sensitive to how it’s affecting you and is accessible when you have an important issue. Trust your gut. Your financial future is in this person’s hands. If you don’t feel at ease, find a different bankruptcy pro.
- Research the attorneys you like, and their firms, before committing. Be sure they have a highly regarded professional reputation.
After your bankruptcy has been discharged (completed), you will want to actively rebuild your credit. Your attorney should be responsible for removing all the errors that remain on your credit report three to six months after your bankruptcy has been discharged. This is essential to you creating a positive new credit history and should be included as part of your bankruptcy services.
Because creditors know it will be 10 years before you could file for bankruptcy again, you will become a more desirable customer than you were prior to bankruptcy. It may surprise you to discover how many credit card offers and invitations to open accounts you receive after your bankruptcy is discharged.
It is important for you to take the wisest path to create an excellent credit history. And it’s critical to remember you need only four lines of credit (open, active accounts) to build a superior credit history. You don’t need and should not acquire a handful of credit cards. Having many open accounts, especially with a bankruptcy history, makes you seem like a credit risk and will lower your credit scores.
Your four accounts can be with any creditor, where you make payments monthly and the business reports your account information to the major credit reporting agencies. These could include, but are not limited to:
- Car payments
- Bank credit cards – Visa, MasterCard, American Express, Discover, etc
- Department and specialty store credit cards – Cards issued by a specific store or group of merchants
- Student loans
Please note that debit card activity is not reported to credit bureaus, even when you use the credit card function. And ignore anyone who tells you one kind of account is better than another. Open the accounts that serve your life best and manage them responsibly.
The next basic rule to drive your credit scores up rapidly: Never charge more than 10 percent of the limit on any credit card. And pay the balance immediately. It is best to use each of a few cards once a month to make small purchases and pay them off in full. When your charges on any account exceed 50 percent of the limit on that account, your credit score begins to drop. When you use most of the available limit or max out an account, you can lose 100 to 150 points off your credit score. Don’t do it. Scores sink much faster than they rise. If you must charge an emergency purchase that would exceed 50 percent of the balance of an account, have the seller divide the purchase between a couple of accounts so the balance on each one stays as low as possible. Or pay for part of it in cash and charge part. Staying under 10 percent of the limit on every account is the smartest purchasing strategy when you want to drive your credit score higher.
Pay all bills on time. Late payments shave points off your credit score. Habitual late payments cause credit score nosedives.
If you’ve ended up in a financial disaster that requires a fresh start, know you can achieve excellent credit scores in about two years. Manage your use of credit responsibly and take strategic action to drive your scores up as rapidly as possible. It’s important to remember: Credit scoring is not about how much money you spend; it’s always determined by how you manage the credit that’s extended to you at any income level.