I got my Chapter 7 discharge! Now what?

Congratulations! You made it to discharge in your chapter 7 case! This means that your case is essentially over and you can move forward with your fresh start. In this article we will talk about what that process looks like practically and how to maximize the benefits of your fresh start in both the short and long term.

Discharge

For most filers, a discharge marks the end of their bankruptcy case. The bankruptcy is officially over once the court issues a final decree following the the trustee’s “Final Report”. There are, of course, exceptions to this if the trustee needs to liquidate any property or resolve any litigation, but these instances are much less common.

Short term steps and long term steps

Short term

In the short term there are some practical steps that you should implement as soon as possible after receiving your discharge. First, make certain that you keep a full set of all of your bankruptcy documents, including the petition and schedules, the certificates of completion from your debtor education courses, any filed amendments, and, of course, your discharge letter. Be certain to keep this all together in a safe place - you might need to access the information if a debt pops back up in the future that was included in your case or it might be necessary if you are are in the future applying for more credit.

Second, get a copy of your credit report and make certain that all the information is accurate, particularly that any debts discharged in your case are now showing as zero. You can obtain a free copy of your credit report from each of the three credit reporting agencies one time per year.

Third, you should set up a budget based on your current income and regular ongoing expenses. There may have been some helpful tips or exercises about how to do this in your credit counseling sessions. If not, you could also use Schedules I and J (income and budget) from your filed case to use as a starting point. Make certain that you also set up an emergency fund that you contribute to on a regular basis. This can help you avoid financial difficulty in the future if you have an unexpected expense that can be covered instead of taking on debt.

Long term

Plan for remaining debts

In the long term, you should make certain that you have a plan to pay any debt you were not relieved of in filing for bankruptcy, such as child support or alimony (both arrearages and ongoing), student loans, and government debts such as taxes. With all of your unsecured debt now discharged and behind you, it might be possible to catch up on non-dischargeable debts faster, which can help your financial situation going forward.

Rebuild your credit

You should also take steps to start rebuilding your credit. It may sound counterintuitive to do so - you just got out of debt! Why would you start taking on more? This is a completely fair question and by no means are we suggesting that you open a bunch of new credit cards and start taking on debt (even though you might be surprised by how many credit card offers you receive in the mail once you’ve filed for bankruptcy).

You can address this strategically and start with a small secured credit card. A secured credit card is similar to a pre-paid card - you can set up a secured credit card with cash as collateral/line of credit so that the charges, and more importantly the timely payments, are being tracked. This helps to show that you have control over your finances and you are able to maintain your payments. It is best to only charge a small amount and pay it off in full every month. That way you are establishing positive credit history and avoiding paying interest on your purchases. You might decide to designate the card for a single purpose, for example gas for your car or groceries, that you know from your budget to be an amount you can pay in full each month.

Keep in mind also that there are things you are already doing that will help to rebuild your credit. Did you stay in the same rental property during and after your bankruptcy case? If so, great! Your regular rent payments will help to show a positive payment history. Did you keep making payments on your car loan (with or without a reaffirmation agreement)? Again, great. This is also showing good financial strategy.

Conclusion

Making it through your chapter 7 bankruptcy to discharge is absolutely an accomplishment. Congratulations on getting your finances in order! With the fresh start you can set up good habits for going forward to avoid financial difficulty in the future and to prove yourself to be creditworthy for when you do decide to make a major purchase in the future. But most importantly - live your life! Make the most of your fresh start by sticking to a budget and making sure you’re living within your means!