How Not to Recover from Bankruptcy

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Parade (an insert in the Houston Chronicle) on August 16, 2009 had an article entitled, “How to Bounce Back From Bankruptcy”.  The article written by George Anders.  From the moment my eyes glanced across the introduction I knew I was in for an especially frustrating treat. 

Debt is Not the Solution to Bankruptcy

Interestingly, the article tells that one million Americans filed bankruptcy in 2008.  This is up 30% from 2007.  To those one million Americans, it says,

You can still bounce back and reestablish a good credit rating.

In a best-case scenario … you could qualify for a car loan with good rates in a year and a mortgage in two to four years.

the path back usually involves careful steps to reestablish creditworthiness.

WHAT?!!  Aren’t they implying that the way to bounce back from bankruptcy is to maximize how efficiently your borrow in the future?  Ironically, it seems to me that a person who has gone through bankruptcy would bounce back if she were to completely avoid borrowing and debt. 

Bankruptcy is a serious decision for Christians and so bankruptcy should be carefully considered

6 Things to Avoid After Bankruptcy

  1. Start with one credit card.
  2. Make prompt payments 100% of the time. 
  3. Ask for lower rates, especially as your credit improves.
  4. Avoid “credit-repair” schemes.
  5. View a car loan as the next big step.
  6. Keep balances under control.
  7. Plan for a mortgage.

Ahhhhhhhhhhhhhhhhhhhhhh.  Yes, this is an actual article.  No, I did not make this up.  This is a legitimate article.  Ahhhhhhhhhhhhhhhhh!!

Why this article contains bad post bankruptcy advice

  1. None of the suggestions deal with debt symptoms.  Be sure to identify why you went into debt.  Typically debt, and certainly bankruptcy, is a sign that something is drastically wrong with your financial operating system.  When the system fails to the point of bankruptcy it is time for an entirely new game plan.  A game plan that excludes debt and credit.
  2. None of the suggestions deal with positive habit changes.  If I experienced a bankruptcy, I would establish new habits, habits of the financially fit.  Those habits would exclude any strategy that led me towards debt or events that involved borrowing money.  It was not a blessing the first time around. I would not expect it to be such during a second go with debt.
  3. I think a Dave Ramsey phrase is appropriate, “I don’t worship at the alter of the great FICO score”.  This article is not about building wealth.  It is not about saving money.  It is about expediting your opportunity to return to the tumultuous world of debt.
  4. All of these suggestions deal with debt and credit.  None of these items deal with actually improving your financial situation.  At they very least you must develop some credit guidelines.  Nothing about spending less than you earn.  Nothing about taking an extra job for a short time.  Nothing about prioritizing your debt.  Nothing about debt as an obligation.

How To Rebuild your Finances After Bankruptcy

Start with one credit card                    Never, never, never use a credit card again. Pay cash only.
Make prompt payments 100% of the time  Hey, I agree with one piece of advice. Pay prompt by paying cash.
Ask for lower rates                                   Take advantage of the no debt, cash only, 0% interest plan
Avoid “credit repair” schemes                  Avoid anyone who cares more about improving credit more than improving your finances.
View a car loan as the next big step       View a savings account and budgeting as your next big step.
Keep balances under control                    Spend less than you make.
Plan for a mortgage                                Rent to save until you are in a better financial position.


Three recommended articles for getting out of debt.

Getting out of debt your simple first step

Getting out of debt step two

Get out of debt step three.

Photo by Nesster.

Anyone else things the above mentioned article is way off base?


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