Many overwhelmed consumers seek refuge through bankruptcy. The protections of bankruptcy offer a fresh start, a new beginning. Yet for millions of individuals and families, a discharge of debt isn’t the only thing they’ll need to turn their new beginning into a successful “take two.” If you are a Chapter 13 bankruptcy filer, you should beware of predatory lenders. They may attempt to push and prod you into making financial moves that could damage or destroy your financial “fresh start” post-bankruptcy. In addition to obtaining a discharge of debt, bankruptcy filers need to seek positive financial change and avoid adverse financial decisions (like predatory loans that could leave them back where they started).

Debt forgiveness is vital, but it’s not enough to alter the cycle of debt unless filers adopt new habits, learn new skills, and change their lifestyle. If you want to avoid the cycle of debt, seek a sustainable income, and maintain adequate health care. And beware letting the bankruptcy discharge turn into an open door for predatory lenders.

Many bankruptcy experts not only think that more consumers should file bankruptcy , but that the consumers who do file should file sooner. Before filing bankruptcy, many consumers wait – pulling from their 401k’s or borrowing money from family. They extract wealth in ways that hurt their long term financial health instead of seeking the protections of bankruptcy immediately. After filing, some consumers continue to struggle—those who don’t tend to actively build a stable financial future directly after receiving their discharge.

Why do so many debtors end up in financially unstable positions again post-bankruptcy? Contrary to popular belief, it’s not necessarily misuse of credit fueling the cycle of debt post-bankruptcy. Most families don’t need anything outside of the typical mortgage, rent, utilities, and car payment to keep them struggling to stay above water. The culprits are more often declining household income due to illness, unemployment, or simply advanced age.

While many fear they will never have access to credit again if they file bankruptcy , the lending industry is eager to offer credit to recent filers. But the credit is often available through predatory loans that continue the cycle of debt. Recent bankruptcy filers receive (on average) 10 credit card offers per month (and they receive additional solicitations for payday loans, mortgage refinances, and auto loans on top of the traditional credit card offers). These offers are usually low-limit, high fee cards with interest rates that should probably be illegal.

While the existence of “predatory lenders” may leave a bad taste in the mouth of recent bankruptcy filers who feel they are being taken advantage of, the need for credit to repair credit post-bankruptcy is also real. Be aware that predatory lenders are out there and that they want to loan you money at exorbitant rates and fees, but don’t assume every lender is out to get you. Carefully consider the fine print of any offer of credit you are seriously considering post-bankruptcy and choose the option that is best suited to helping you repair your credit while avoiding stepping back into the cycle of debt.

If you are buried in debt and facing financial catastrophe, we can help. Trust the experienced Tennessee and Georgia bankruptcy attorneys at Kenneth C. Rannick P.C. to help you determine your best options. We help good people through bad times every day, and we can help you, too.

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