You’ve filed a bankruptcy in Georgia, and now you want to settle down and purchase a house. Contrary to popular belief, filing bankruptcy is not going to destroy your credit for life.  While it is true that filing for bankruptcy will ding your credit to the tune of about 150 points, you will begin to receive credit card offers from lenders soon after you receive your discharge. Why, you ask? Because if you receive a discharge under Chapter 7, you cannot receive another discharge to wipe out your debts for another 8 years.  Taking a credit card offer is not always the best option for someone who just got out of debt, so only apply for a credit card if you have the discipline to pay off the balance in full every month.  Here are a few things you can do to reestablish your credit to qualify for a mortgage at a decent rate:

1. Pay Your Bills on Time

This is the most important step you can take in rebuilding your credit after bankruptcy.  Rent, utilities, and any payments you may continue to have throughout your bankruptcy, such as your home mortgage and car note, should always be paid on time.  I recommend setting up automatic payment deductions for all expenses so you don’t even have to think about it.  Payment history is one of the most important factors in determining your FICO score, so never make a late payment.

2. Take a Credit Card Offer, ON ONE CONDITION!

Everyone falls on hard times, and after bankruptcy, you will have credit card offers coming in the mail.  If you absolutely know that you will pay off the balance in full every single month, then apply and use this to your advantage.  This is a quick way to rebuild your credit after filing a Georgia bankruptcy.  I recommend charging only one item per month on this card in the beginning, such as your cable bill or your car’s gas usage.  If you pay it off in full every month, charge a little more.

3. Cash is King

If you want to purchase a house, cash will always be king, and saving up for a 20% down payment will make it much easier to qualify for a mortgage with an interest rate you can afford.

4. Verify Your Credit Report

Four months after your bankruptcy case closes, check your credit report to ensure that any pre-bankruptcy charges are still includes and talk with your attorney about disputing them.

5. Get a Second Card
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If you prove to yourself that you can pay off the entire balance on the first card at the end of each month, apply for a second credit card and do the same.

A Chapter 7 case is a “liquidation” proceeding in which the Chapter 7 trustee is tasked with the administration of your case.  The trustee’s job is to maximize the amount of property in the bankruptcy estate for the benefit of unsecured creditors.  The bankruptcy estate is defined as all legal and equitable interest the debtor has as of the date of filing.  The estate is subject to the control of the trustee, and the trustee has the ability to reach back and void certain transfers that were made prior to a debtor filing bankruptcy.  A common scenario is when a debtor transfers title to a residence to his or her spouse or child shortly before filing.  Some debtors will attempt to be clever and transfer a residence to a family trust a few months before filing.  None of these techniques will work to exclude your residence from the grasp of the Trustee.  Under Section 547 of the bankruptcy code, the Trustee may avoid any transfer of property to an insider (family member or business partner) made within one year of filing.

​Think you can just wait a year and be safe? Think again.  Under Section 548 of the bankruptcy code, the Trustee may reach back two years if he can prove that the transfer was made with the intent to hinder and defraud creditors.  The aforementioned code sections are called Preference sections, and they were enacted to prevent the “preference” of the debtor to pay one creditor over the other.  The entire bankruptcy system is designed to give the Debtor a fresh start and an equitable distribution to each unsecured creditor.

We are often asked how long a “typical” Chapter 7 case will last after filing.  What most people mean by a “typical case” is a “no-asset” case, or a case in which there are no assets for the Chapter 7 Trustee to distribute to unsecured creditors.  Most cases are “no-asset” cases, and if your case happens to fall into this definition, then you will likely receive a discharge within 120 days of filing.
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A few weeks after filing your petition, you will have to attend a meeting of creditors in which the Chapter 7 Trustee will verify the accuracy of your bankruptcy schedules and determine if there are any assets to liquidate for the benefit of unsecured creditors.  In most cases, this meeting will last 5-10 minutes and the Trustee will shortly thereafter file his “Report of No Distribution”.  If the Chapter 7 Trustee finds any errors or omissions in your bankruptcy documents filed with the court, he or she will hold the case open as long as it takes to verify each piece of information. The key to receiving a quick discharge and case closure is to hire a competent attorney to help you file Chapter 7 and appear at the meeting of creditors with you to ensure everything goes smoothly.   Also, attempting to hide anything from the Trustee is a recipe for disaster and will only open the door to litigation and extra time spent in the bankruptcy process.