Court cases and documents filed in court are part of the public record. The same holds true for bankruptcy cases. As a result, companies searching the court records will know that you filed for bankruptcy and will start sending you advertisements in the mail offering you their services, including offers to apply for credit. However, before you accept that offer for a new credit card or car loan, continue reading to learn what you need to consider and what your best options are.
Credit Counseling/Financial Management Course Offerings
In 2005, the Bankruptcy Abuse Prevention and Consumer Act, known as BAPCA was passed by Congress. One of the requirements of the new bankruptcy law was to file for bankruptcy, you had to take two courses, one related to credit counseling and the other to financial management. The first class, known as the budget and credit counseling class, has to be completed in the 6 months before filing for bankruptcy, and the financial management course has to be completed within 45 days of the first scheduled 341 Meeting of Creditors. In order to have your bankruptcy case approved and receive your discharge, you have to file both course certificates with the bankruptcy court.
Since bankruptcy cases are public record, it’s common for filers to receive advertisements in the mail to sign up for the financial management course. If you already signed up for the second course, you can ignore these advertisements, but if you’re going to choose another provider, do your research first.
Just because you received an advertisement from a course provider, doesn’t mean the provider is approved in your state or district. Larger states may be divided into several districts. For example, in Florida, there are three districts: the Southern, Middle, and the Northern Districts of Florida. A provider could be approved in one district, but not another. The provider can also be approved in your district, even though they are located in another state.
Under BAPCA, credit counseling and financial management course providers have to meet certain qualifications to be approved by the U.S. Trustee’s Office. The U.S. Trustee’s Office publishes a list of approved non-profit course providers. If you are unsure as to which district you are in, you can search the U.S. Trustee’s Office website that provides a breakdown by county. Prices do vary by course provider as well as the method of course instruction which could be by internet, telephone, or in person. Some providers also offer courses in other languages such as Spanish. However, note that while the U.S. Trustee’s Office approves the course providers, it does not recommend or endorse any specific provider. You should conduct your own research with reputable organizations such as the Better Business Bureau (BBB) or the website of the Attorney General of your state.
Credit Card Offers
If you just filed for bankruptcy, why are you receiving offers for more credit? Because credit card companies and lenders know that you can’t file for Chapter 7 bankruptcy again until another 8 years have passed. Credit card companies feel safe offering you credit because if you fail to pay them back, they can file a lawsuit against you to collect any outstanding balances. But just because you received an offer and you want to rebuild your credit, doesn’t mean you should accept it. Remember, you won’t be able to file bankruptcy again for 8 years, so you have to be careful about getting into debt again.
If the lender or the credit card company is not known to you, carefully review the details and fine print. Compare offers and interest rates. Also, make sure you aren’t being offered a secured credit card which requires a down payment to use the credit card and your credit limit is based on the amount of funds you have deposited in your account. Make sure there are no annual fees either as that will only increase your costs unnecessarily.
Offers from Car Dealerships
When you file for bankruptcy, you can keep the car you currently have if it makes financial sense to do so based on how much you still owe on it. However, what if you’re surrendering your car? Just like you will receive offers for credit cards, you are also likely to receive offers on buying a new car. The advertisements might say “everyone is approved and recent bankruptcy filings are okay.” But again, do your research and pay attention to the fine print because some car dealerships may take advantage of your situation, especially if they know you are desperate for another car.
For example, don’t fall into the trap that just because you’re buying a used car, that you will be saving money. The interest rate on the car loan may be sky high to the point that a used car is going to cost you more than the car you currently have. Some car dealers may even list the car payment amount and you think it's an amount you can afford, but it's actually a weekly or bi-weekly payment that they take straight out of your bank account. So, if you need a car because you’ve surrendered yours, make sure you get one you can afford, even if it’s not your dream car. Get something that will get you around and circle back to that dream car of yours a few years down the road, once your steps to rebuild your credit have put you in a stronger bargaining position.
Other Mail Advertisements
In your bankruptcy forms you made clear you’re keeping your car, so why are you receiving letters in the mail about surrendering your car? These letters can have deceiving titles and look like official court documents, making you think you received a letter from the bank or the trustee. Be careful and take another look at the letter that you received. Often these are just advertisements sent out by private companies that will help you surrender your vehicle to the creditor or maybe they’re offering other bankruptcy-related services. But if you aren’t careful, you could end up making a costly mistake thinking the company that contacted you has something to do with the bankruptcy court or trustee.
While filing for bankruptcy will give you the fresh start you need, be careful about getting into debt again. Even though you are receiving offers for credit cards, be patient before you make your decision. Take your time to review the offers. You don’t have to decide immediately. Research the lenders with reputable organizations such as the Better Business Bureau or the State Attorney General’s Office. Remember, if an offer is too good to be true, it usually is.
When possible, work with a lender you used before or lenders you are familiar with. Even though they may offer credit cards with a lower credit limit, you’re better off using a lender you can trust versus a lender you aren’t sure about but are considering because you’re being offered a higher credit limit. With time as you continue to make timely monthly payments and work towards rebuilding your credit, the lender will increase your credit limit and in time, this will also boost your credit score.