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After filing bankruptcy (Chap 7) should I get a car after its discharged or a credit card to start re-establishing credit?

Chicago, IL |

Looking to file for Chap 7 bankruptcy protection. I want to reestablish my credit. I want to aggressively begin put my money into my savings account which right now has less than $5 in it. I 've have a two year plan to purchase a home for my 2 small children and myself. I couldn't work for a year due to sickness with and after child birth. I had no income for about 6 months fell behind on credit cards, unsecure loans and personal loans. I dreadfully took out to pay day loans. I need a fresh start in debt ($15,000.00). I need to know the best course of action I must follow.

Attorney Answers 3

  1. Best answer

    I would suggest financing a car of low value (5k or less) before filing the bankruptcy and reaffirming it in the BK. That way you can obtain the credit before the BK shows up on your credit report and have an open credit account to rebuild your credit. You should consider this ONLY if you can afford to make the car payment. I would recommend hiring a competent BK attorney and have him/her review your financials before taking action. Good luck!

  2. To answer the question in the heading, it would be probably better from a credit rehabilitation perspective to establish a number of small modest consumer accounts and utilize those to re-establish credit. The problem with a car purchase is that it's generally a big ticket item and after bankruptcy you can expect rates in the plus 20% range. Cars also require maintenance, insurance, etc.

    To answer the question in the body of your remarks, you should be cautious and while it is great to have goals, you need to plan carefully, and analyze your financial situation to determine your ability to move forward with your plans, always containing a buffer for unforeseen events.

  3. I suggest to my clients that they save their money and not apply for credit for at least a year, if not longer. An application for credit right after bankruptcy suggests you haven't taken the bankruptcy and debt issues seriously. I think it's more important, from what you say in your post, to have some cushion. It's very comforting to get used to not using credit cards. You could use a debit card for online purchases. Your goal is a good one and I hope you reach it.
    I do suggest you see an attorney for help in filing, as it can be very complicated.

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