7 steps to take after bankruptcy

By Bankrate.com

Many bankruptcy attorneys like to call a Chapter 7 bankruptcy a "fresh start" bankruptcy. In a way, it is a fresh start -- you do get to eliminate a great deal of debt.

However, the reality of being bankrupt is not fresh at all. "Bankrupt" is a word with a strong negative connotation. It's often unfair, but there is a widespread perception that if you've gone bankrupt, you've done something wrong.

The truth is that you will need to start working immediately to truly have a positive, healthy life after bankruptcy. Follow these seven steps to give yourself a true fresh start:

Reaffirm your car debt.

If you own a car and are still making payments, make sure you sign a reaffirmation agreement with the car lender. A reaffirmation means that you intend to keep the vehicle and continue making payments. If you fail to make payments, your car can be repossessed and sold (with you liable for any deficiency). Signing this agreement is an act of good faith and will give you more leeway with your lender.

Remember: Do not reaffirm the debt if you intend to surrender the vehicle. You will be financially liable for the balance and will not have a car to show for it.

Establish new credit lines.

You need to re-establish credit as soon as possible. Most traditional banks and credit card companies will probably not approve you. However, some banks will allow you to deposit money into a savings account and issue a credit card attached to that account. This is called a secured credit card. Another possibility is a passport loan. This is when you deposit money into a savings account, borrow that money and pay the interest each month.

Neither of these options is great; they are, however, crucial. You see, you will have to do something like this eventually in order to be eligible for a credit card with a traditional bank. Getting started early is far, far better for you in the long term.

Clean up your credit report.

Make sure all three credit bureaus -- Equifax, Experian and TransUnion -- show that your debts have been "discharged in bankruptcy."

This is important because you want the trade lines (accounts) to accurately reflect that they have been eliminated.

Continued: Never co-sign for anyone

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