10 Things to Do After You File Bankruptcy

Welcome and Today’s Ten Steps

Steve Rhode: Hey, you’re back listening to the Get Out of Debt Guy podcast. I’m Steve Rhode, the old original Get Out of Debt Guy. With me is Damon Day, the new Get Out of Debt Guy with a big smile on his face, and the guy you can reach at damonday, D-A-M-O-N-D-A-Y dot com, if you want to have a free consultation and have a little chitty chat about your financial situation. And Damon, don’t be surprised, I published a piece today. It was money management for strippers, escorts, and OnlyFans creators. Of course, so you might be getting, you know, some interesting phone calls. But let me get the housework, the cleanup, what we need to first. You can reach me at getoutofdebt.org. You can talk to me through the free Ask Steve chatbot, based on my 30-plus years of experience. You can always get on my free weekday email at yourmoneyactually.com. And I already mentioned how you can reach Damon. If you are listening to our podcast today, you may find it we’re doing a video podcast. You’re listening to the audio part. The video part is going to be on YouTube, on the Penny Stupid Project, and my YouTube channel, Get Out of Debt Guy, on YouTube, and also Old Guy Insights. I spread the love everywhere, Damon.

Steve has his hand in many pots. I’ve got many pots. Yeah, luckily the Amazon delivery people came just before we started this, so we don’t have the big disruption with the— The mail slot opening. And I have learned now, so when I hear the parcel door open, I have learned now not to open my office door, like, immediately, because I’ve watched so many Amazon people go— So now I just open it gently. Give them some snacks. Yeah, I do. I love it. In fact, my FedEx driver, who, her name was Toni, and she would come by and she would get snacks and drinks. And on her last day as a FedEx driver, she came by and she said, I don’t have anything to deliver for you. I just wanted to come by and tell you it’s my last day, and how special it was, you know, being here and you giving me drinks and snacks and stuff. And she said, Can I give you a hug? You don’t have that happen very often, where your delivery driver wants to give you a hug. But those must have been some special snacks. Well, we got fruit bars, peanuts, Milky Way bars. I’m running low now. You’re giving out Milky Way bars up in there? Yeah. I’m going to start getting me some Amazon Flex routes in North Carolina.

Steve Rhode: So today we’re talking about—I should get right to it, because we’ve got ten things to cover. Today’s podcast is all about ten things to do after you file bankruptcy. And we’re going to go through them. Hopefully we’ll get through all ten. That’s my goal. You know what? In fact, I’m going to promise this: we are not going to stop till we get through all ten. This time we’re going to finish the damn list.

Damon Day: Yeah, because we talk a lot about, you know, bankruptcy and how it works and da da da, but everybody is still just freaked out about, Oh, it’s going to ruin me. My credit’s going to be gone for 10 years. I’m not going to be able to recover. And there’s just so much misinformation out there and confusion that we thought it would be good to do a whole episode on, here’s exactly what to do after you file bankruptcy to rebuild, and it’s not as bad as you think. In fact, it can be quite pleasant.

Steve Rhode: Yeah, if you’re prepared for it.

Step 1: Take a Breath and Let Go of the Shame

Steve Rhode: Now, yesterday on Substack, I had somebody post a note to me who said, It’s been 20 years since my bankruptcy, and I still can’t let go of the shame. That is why, number one here on our 10 steps, what to do after bankruptcy: take a breath. Let go of the shame. The thing that, I will admit, it took me four years after my bankruptcy to finally come to this realization because I didn’t have anybody helping me. I didn’t have anybody guiding me, you know? At least after your bankruptcy, you might not have needed me, but I was there for you anyway to try to help you.

Damon Day: Maybe I’m just a sociopath. I don’t know. I was fine with it. I was like, Well, it’s just part of it.

Steve Rhode: Well, you were fine with it. You were fine with it because it took like three years to convince you to file.

Damon Day: That is true. So I guess I went through all the stages of grief before I did it.

Steve Rhode: Before you did, yeah.

Damon Day: So by the time I was done, I was like, Well, that’s done. Let’s go. That’s done.

Steve Rhode: Yeah, I mean, you went through all that denial. So, yeah. Anyway, let’s keep it moving. Take a breath. Here’s the thing that I told the guy on Substack. I understand how you’re feeling. I went through four years after my bankruptcy, lost a loan, afraid, confused, you know, feeling all the same feelings everybody else has, until one day I came to the realization that why do I need to be ashamed or feel less or have lower self-esteem because I used something under the law which gave me legal protections and is enshrined in the Constitution of the United States, and all these businesses are doing it and their stock’s going up. Why am I feeling bad about it?

Damon Day: Yeah.

Steve Rhode: And so, you know, I always—it’s hard for people to hear the message, but if you just filed bankruptcy, you didn’t fail. The math failed, and shit happens. You know, I’ve used the example for years, Damon, of farmer goes out, plants a field full of corn, and it doesn’t rain and the crop doesn’t come up, or it hails or something and the crop’s damaged. That doesn’t make the farmer a failure.

Damon Day: Yeah. So, and right now, I mean, bankruptcy filings are going way up, so I think this video is timely. I mean, people are just—they’re maxed out. They can’t make ends meet anymore. Everything is expensive as hell, and people are living on credit cards for the most part. And then when that dance is done and those cards are maxed out, you know, it’s just, at the end of the day, it’s a cash flow issue. You don’t have enough coming in to cover what needs to go out, and bankruptcy is just an option to give you a reset.

Steve Rhode: Bankruptcy numbers are up 11% in the last quarter. 7% of that is personal bankruptcies. I absolutely hate—I detest, hate is always a strong word, I don’t hate anything—but I object to people out there that tell people to avoid bankruptcy, because all you’re doing is you’re making them feel bad because they’re in an unsupportable mathematical situation. You’re causing them to live less safely, to forego saving for retirement. For what? What’s the advantage? So let go of the shame. You know, this happened. What, you know, move on is hard words. All right, keep it moving.

Step 2: Finish the Second Course

Steve Rhode: The next thing you’ve got to do is—I never had to do this when I filed, but I think neither did you. You didn’t have to do the debtor education course?

Damon Day: Well, I did the course, but not the one—you said there’s one after.

Steve Rhode: There’s a—yeah, there’s a second course.

Damon Day: I did not do the second course. Yeah. I did the first course. It was a total joke.

Steve Rhode: Oh, it’s bullshit. I don’t even—it was—look, I was involved in credit counseling. I was running a credit counseling agency when those rules and laws were promulgated. And even back then, because I lived and worked near Capitol Hill, and so I was down there when this whole bankruptcy reform law was being passed, and I said the same thing then, and I’m saying now: what are you doing? What’s the purpose of this stupid class? You’ve got somebody on the verge of bankruptcy, and you’re trying to do what?

Damon Day: Make 50 more dollars. That’s the purpose.

Steve Rhode: Well, unfortunately, so they can collect 50 more dollars before you file bankruptcy.

Damon Day: That’s the purpose.

Steve Rhode: Well, unfortunately, I was able to see the way the sausage was being made. And the reality is, the whole bankruptcy reform thing, the reality is the reason that credit counseling became part of that, where you have to have a debtor education course, and primarily it was from a nonprofit credit counseling group. I shit you not. One day, I had another credit counseling president tell me that he was so in love with the new law because it was going to cut his marketing budget. It was going to force people to come to him, and he would be able to separate, his words, separate the wheat from the chaff for free.

Damon Day: Yeah.

Steve Rhode: It was bullshit then, it’s bullshit now.

Damon Day: Well, I love how back in ’05 when they changed the laws, where they did it under the guise of it’s consumer, it’s pro-consumer, it’s helping the consumer. And really all it was is it just made it a lot harder for most people to file a Chapter 7. That’s all it did. It just—and it was not pro-consumer at all. It was anti, but that’s how it was pitched and sold and voted on, and there you go.

Step 3: Keep Your Discharge Order and Case Papers Forever

Steve Rhode: Yeah. All right, step three. This is a really important one. Keep your discharge order and case papers forever. Put it wherever you put your most important papers. Save a copy of that. You may need it if a creditor decides to pursue you later, and you’ll need it to correct credit reports. It comes in handy that way. So either take a picture of it if you’re not good at storing paper, or put it with your other important papers.

Damon Day: Yeah, I never needed mine, but it’s good advice just in case. You never know what can happen. I didn’t have any issues on the credit reports that I had to dispute after my bankruptcy. It was smooth, smooth and easy. I’m sure I still have the papers somewhere, but I haven’t seen them in 15 years.

Steve Rhode: Well, I knew after my bankruptcy, I knew that the bankruptcy was on the credit report. And it was a year later where we applied for a mortgage, and, you know, the mortgage broker went, Eh, whatever. I got a market rate on the mortgage. It was great. It was an FHA-backed mortgage. Didn’t hurt me. It was on there. And the only thing that held me back about that was how I felt about it. Again, it’s a shame.

Damon Day: So you might have just kind of glossed over that one. You want to repeat what you just said? Because I think that’s important.

Steve Rhode: Which part?

Damon Day: The part that you got a mortgage soon after you filed the bankruptcy.

Steve Rhode: Yeah, I mean, most people are going to be shocked by that statement, and you just kind of glossed right over it, like, I got a mortgage a little after.

Damon Day: Well, yeah. Well, that’s the thing. People are going to be like, Wait a minute. You can get a mortgage before 10 years? Wait, I didn’t know that. The credit counseling sales guy told me that my credit was going to be bad for 10 years. I want to buy a house, so I’m going to get in credit counseling.

Steve Rhode: Well, isn’t that the funny part that, like, you talk about some of these debt settlement groups out there where it’s going to take you—even credit counseling—where it’s going to take you like four or five years if you ever repay the debt.

Damon Day: Yeah, like in bankruptcy, you could recover faster if you’re going to drag it out that long.

Steve Rhode: Yeah. In fact, the Federal Reserve has done studies and said those that file bankruptcy do better in the future and move forward faster, and their credit scores improve faster than those that don’t.

Damon Day: Yeah. It’s because you took the pain, and now you’re going to rebuild.

Steve Rhode: And I need to look quickly at my list because—

Damon Day: You promised we’re getting through all 10.

Steve Rhode: Yeah, I know. I know. I’m trying. We’re only 13 minutes in.

We got it. We got it. Yeah, we got it. Okay. Step eight is what we’re going to—I wanted to talk about. It’s on there. Oh yeah, we cover a lot of good stuff at the end, at the last couple of steps. That’s the meat and potatoes, as they say. Yeah, I don’t want you to trip over any of these steps. First couple steps are housekeeping. The meat and potatoes is at the bottom. Now I’m hungry.

Step 4: Pull All Three Credit Reports and Fix the Mistakes

Steve Rhode: All right. Step number four: pull all three credit reports and fix any mistakes. So you can get a free copy of your credit report at annualcreditreport.com, and don’t need to pay anybody for it. You can look at it online these days, all three bureaus, I believe. Yeah. And each discharged debt on your credit report that was included in your bankruptcy should show a zero balance or discharged or included in bankruptcy, not past due, not charged off, anything else. Damon, how easy is it to dispute something on your credit report?

Damon Day: That’s pretty easy. You just have to—these days you can do it digitally. You just, if you go to annualcreditreport.com, it’ll send you to each of the three bureaus. You can pull your report, and then you can just log into Equifax, TransUnion, Experian, whatever one you think there’s an error on, and you can submit a dispute right through the website digitally. Back in Steve’s day, for sure, and then even back in my day, we used to have to print it off and, you know, send a letter.

Steve Rhode: Yeah. Put a stamp on it.

Damon Day: Put a stamp on it and mail it off. You know, wait a month, hope they got it, you know, wait another month to see if they respond. Now, yeah, exactly. You just click, click, it’s done.

Bonus Tip: Pay It Forward Instead of Repaying a Discharged Debt

Steve Rhode: There’s no step 4.5, but I want to stick one in here. So this is a bonus step. All right. It’s immediately after your bankruptcy, you feel you morally need to repay your creditors, right? So before you send any payment to your creditor that was included in your bankruptcy, call them, because they can’t accept payments from you for debts that were discharged in bankruptcy. If you want to repay your debt, you know what? Pay it forward in your retirement account. But we’re going to get to that. So if you feel compelled to pay, don’t.

Damon Day: You know, I’ve heard of this myth. I’ve heard of it floating around there, but I don’t really think there’s a lot of people clamoring to figure out how to pay their creditors after the bankruptcy.

Steve Rhode: I told you my stories.

Damon Day: I did. Yeah, you’re weird. You’re weird, bro.

Steve Rhode: Well, that’s true. I like dirt.

Damon Day: You and Dave Ramsey, supposedly.

Steve Rhode: Yeah, we both filed about the same time.

Damon Day: Yeah, it’s the old people. The old people, like Steve’s, that’s like, I just, you know. But I don’t get that. I’m trying to think if I’ve ever had anybody in the last 25 years ever call me and/or email me or anything and say, Hey, you know, I filed bankruptcy and I just really feel like I want to pay my creditors back now, even though the bankruptcy was a year ago. But they won’t take it. Yeah. I don’t think anybody’s ever asked me that question, ever.

Steve Rhode: But wait, no, no, wait, wait. You have had that question many, many times, but you’ve always had it on the front end.

Damon Day: Oh, yeah. Never on the back end. Never when someone’s actually in a position to do it and is like, You know, I’m backstroking like Scrooge McDuck in all this money I’ve been saving. I want to start sending it to my creditors, even though I don’t need to, and even though they already forgot my name.

Steve Rhode: Yeah. Well, it’s funny. It’s funny, you and I, over the decades, have had the same consultations where somebody says, I refuse to file bankruptcy because I have a moral obligation to repay my creditors. Yeah. To, you know, which you say, Look, you can file bankruptcy and try to repay if you want. And the universal answer to that question, after people understand the reality, is, Why would I do that?

Damon Day: Yeah. Yeah. So Steve is correct. I get that a lot from people on the front end. Like, they’re still in that, I want to make sure I pay it back. But then once it’s done, they never go, So about that paying the creditors back, how do I do that again? Never, never, never, never. They’re like, Sweet, I have extra money. I can eat. This is nice. I like my life again. I can save. I can build a savings account, emergency fund. Yeah. I’m 50 years old. I can throw, you know, I can get my retirement fund started finally after I, you know, drained it all. I can start it over. And then they realize that’s a bigger priority than, you know, Chase Bank getting your $100 payment or whatever it’s going to be.

Steve Rhode: Chase Bank is going to be fine. You’re the one that’s going to be eating dog food in retirement, you know, and Chase Bank is not going to be calling you and saying, You know what? We feel bad for all those payments we collected from you, all that interest over the years. We’d like to send you some free gifts and some coupons for the food bank. They’re not going to do that. And you know why Chase Bank is going to be fine is because they priced their losses into the interest. Straight that you paid while you were still able to. So they’re doing them, so don’t worry about them.

Steve Rhode: Yeah. So number five. And the other thing is, when you called them, when you saw the writing on the wall, you saw you were going to start to fall behind. You couldn’t afford it. You drained your savings. And when you called them to ask for help, they gave you a so. You know, they made their decision at that point. They could have helped you, but they didn’t. Any manipulation that you experienced going into the bankruptcy from creditors or collectors or something about pressuring you to feel obligated to repay debt that you couldn’t, the only thing that I’ve seen that do—it’s been very powerful for collectors and creditors—but it’s caused so many people to drain their retirement savings, their 401(k), whatever money they had, to continue to make another month’s worth of payments that got them nowhere. Yeah.

Why Ask Why Before You Decide

Damon Day: You know, when people call me for advice, my favorite thing, right, is my favorite word to use is why. And it’s awesome because it causes people to pause and go, Well, that’s a good question. Like when they say, Well, I really need to do this, or I need to make my payment, or, you know, whatever it is, I can go, Why? You know, or, I don’t want to file bankruptcy. Why? Right? And it’s like, it’s a valid question. I want to know from you why you think this, this, and this. And oftentimes we can unpack what your reasoning is, and oftentimes it’s based on misinformation or just when you take the emotion out of it, it just doesn’t make financial sense and is not in your best interest. So we can unpack that. And I’m not one of those guys that’s like, My way is right and your way is wrong. It’s just like, whatever way we’re going to go, let’s understand why we’re going to go that way. And as long as we know why we’re doing something and we determine it makes sense, then we can do it. So it’s not like you call me and I say you have to file bankruptcy because bankruptcy is always good. I’m not a bankruptcy attorney. That’s what a lot of bankruptcy attorneys do, right? Because they sell bankruptcy. Steve and I don’t sell bankruptcy. We’re one of the few people that are out there just talking about Pros and cons of the options, even though we don’t sell the option. And it’s, like, kind of nice to, like, just, okay, well, yeah, why is that? Why do I think this? Why do I feel that way? So why is a good question to ask yourself. And if you can’t answer why, probably shouldn’t do it, or at least figure out why before you do it. But the why is important.

Steve Rhode: The classic unable to answer the why question was that woman that hung up on you.

Damon Day: Oh, she did not like me because I asked why. And I asked in a very nice way, but she was uncomfortable because she really had her heart set on doing something a certain way, which is fine. It’s not my money. It’s not my credit. It’s not my life. You can do whatever you want. You’re the one that has to live with the consequences, not me. My job is just to help guide you so we can minimize those consequences that you’re going to have to live with on the decisions that you’re making if they don’t make good sense, right? So my job is to ask why and make sure you understand what you’re doing. And a lot of times when people want to avoid a bankruptcy, I ask why, and sometimes there’s very good reasons for avoiding the bankruptcy. Yes. Yeah. Right? And we’ll unpack those, and that’s fine. You might call me, you listen to the show, and I’m going to call Damon. He’s going to make me feel good about filing bankruptcy because I’m hung up on it, and it’s going to be great. And then you call me, and we look at your situation, and I go, Huh. Yeah, you can’t file bankruptcy. And then you go, What? It’s like, Yeah, here’s why.

Repairing the Past or Protecting Your Kids?

Steve Rhode: Well, the ones that always make me ponder are those that want to spend the next five years repaying their debt. They’re trying to repair the past instead of the future. And so they’re going to spend 40, 50 grand trying to repay their old debt, and yet it’s going to cost them $400,000 or more in lost retirement savings when they’re going to need it most. Which answer there is more morally powerful? You want to screw over your 80-year-old self? Trying to repair the past? No. Let’s take charge, do better.

Damon Day: Well, here’s a lot of people would say, and again, Steve and I aren’t out here advocating, just don’t pay your debts because you don’t want to. I mean, you know, the math is the math. But to answer that question about who’s really screw over, the bank, number one, the bank doesn’t get screwed over anyway. But the bank or your 80-year-old self, a lot of people would still say, Well, my 80-year-old self, I got myself into it. I got to take personal responsibility. Yeah, right. I totally get that, but that’s the wrong comparison. You’re not screwing over your 80-year-old self. You kind of are, but you’re really screwing over your kids, because your kids are the ones that are going to have to pick up that burden. And I’m a parent myself. Steve’s a parent. I know I might make decisions where I’ll be like, Hey, look, I made this bed. I’m going to lie in it. Whatever it is, what it is. But when it comes to screwing over my kid, now I’m like, No, no, no, no, no. Sorry, Chase, you’re out. I’m not going to put that burden on my kid when they’re, you know, 50 years old, trying to save for their own retirement, trying to raise their own kids, got their own kids in travel ball, got their own mortgage, all that. And I’m like, I don’t have a place to live. So that is going to put a burden on your kids. So when you’re thinking about trying to do whatever you can to throw whatever money you can at this, you got to stop, ask yourself why, ask yourself what’s the end game? How is this going to play out? Whatever decision you make, you have to figure that out. How is it going to play out? What’s the end game, right? What’s my life going to look like if I go down this path, this path, and this path? And that’s how you decide what is the right strategy. And if you’re going to end up broke at 80 years old, that’s screwing over your kids. That’s putting the burden on your kids. And if you’re willing to do that. That’s what it is. But if I have a choice between the bank and my kids, my kids win every time.

Step 5: What to Do If a Collector Calls About a Discharged Debt

Steve Rhode: Right. Yeah. All right, step number five. Now, I know there’s some parents that would be like, My kid’s an asshole. Those are the exceptions, I think. Know what to do if a debt collector calls about a discharged debt. There’s a very clear answer here, and you can handle it extremely simple. So after a discharge, creditors are barred, not allowed, from trying to collect discharged debts. That is correct. Yes. Don’t pay just to make it go away. You can ask them to contact your bankruptcy attorney. You can give them a copy of your discharge papers. You can just politely hang up on them. This is a problem where they’re either ignorant or attempting to manipulate you into doing something that you legally don’t have to do.

Damon Day: Yeah, so it depends on the situation. If it’s just a random phone call here and there, I just ignore it. That’s what I would recommend. If it gets persistent and now it’s bothering you, it’s interrupting your day, then yeah, you can answer the phone and I would say, Hey, look, I filed bankruptcy and, you know, whatever, 2025. Here’s the number of my bankruptcy attorney if you have any questions about it. Other than that, if you want to send me something in writing after that, that’s fine, but do not call me again. Right. And that’ll usually put the kibosh on it. And if it doesn’t, they actually do send you something in writing, contact your bankruptcy attorney. Say, Hey, look, I got this debt. I believe it was discharged in the BK. I’m gonna send it over to you. And then the bankruptcy attorney will take care of it.

Steve Rhode: The other thing I’ve seen over the years are these bankruptcy discharged debts in bankruptcy turning up as zombie debts in the future, right? Some debt buyer will purchase or say that they purchased a portfolio of these debts that were discharged in bankruptcy and then try to collect on them. And it might come up five or seven years later. So this is why it’s so important to keep a copy of your bankruptcy discharge papers. If it ever happens in the future, just keep it with your other important papers.

Damon Day: Yeah. In my experience, real quick, 98% of collectors are actually really easy to deal with. Most of the stuff is recorded. It’s by the book. You hear these horror stories, and there may be some one-offs here and there. But over the years, I’ve had maybe a handful of issues for clients where we had a debt that was settled. Is that your dehumidifier coming on or something? Oh, okay. So we’ve had instances, again, a handful of them, where a client would get a letter from a collector on a debt that was settled two years ago or whatever it was, and I’ve called the collector and, Hey, this was already settled. Here’s a copy of the settlement, and boom, done. Like, I’ve never had a situation where they were continuing to pursue it after you show them a bankruptcy discharge or a settlement letter or whatever. It’s usually just like, Oh, it was a mistake. It got, like Steve said, it got lumped into a batch of debts that they bought. But usually, just making them aware that it’s already been resolved, it’ll go away, especially if it’s a bankruptcy. Creditors are very sensitive.

Steve Rhode: Yeah, they have legal liabilities. It’s like a magic word. You go, Bankruptcy, and they go, Whoa, shit. Done.

Steve Rhode: Yeah. Well, that’s the difference between settlement and bankruptcy, because I’ve seen plenty of people over the years that settled a debt. And then lost the settlement letter, right? They have no proof that it was ever.

Damon Day: Well, I keep it for my clients.

Steve Rhode: Well, right, but I mean, people don’t. It will resurface years later, and, you know, I’ve seen so many people come back in a panic. How am I going to prove this? Where’s the letter? Yeah. And at least with bankruptcy, hey, I can log on right now, go to the federal court, look up my name or any name, and see what the bankruptcy filing— it’ll give you all the details. And I think there’s a copy of the discharge paper in that court filing too, so you can always find it that way if you ever needed to.

Damon Day: Yeah, it’s very unusual, though, but it’s good to have your bases covered. You know, save the paperwork.

Step 6: Keep Paying on What You Kept

Steve Rhode: All right, number six: keep paying on what you kept. So if you have a car or a house or anything that you worked out an agreement— your bankruptcy attorney worked out an agreement with your creditors that you were going to carry through the bankruptcy, you need to continue to make whatever those original payments were. You can what’s called reaffirm, so that debt will not be discharged in bankruptcy, but you can keep the car, the house, the boat, the plane, whatever. And you need to know where that signed copy of that reaffirmation agreement is kept. Hopefully, you put it with your bankruptcy discharge papers. And if you did not reaffirm and you’re still making payments and the lender says, Okay, we’re not going to repossess that car, make sure it’s reported with on-time payments on your credit report.

Damon Day: Yeah, yeah, and there’s a lot of misinformation there too, Steve. You mean, what are you talking about keeping your house and keeping your car? A lot of people think, Oh, I’m gonna lose my house. I can’t file bankruptcy and lose my house. And every state has different rules. You have to look at those. In some states, there’s an unlimited homestead exemption, so you could have a $5 million house paid off, paid in full, and you can file a Chapter 7 bankruptcy and they can’t touch the house.

Steve Rhode: Why do you think OJ moved to Florida?

Damon Day: Right. He was living in L.A. California sucks, man. Actually, they’ve gotten better in the last few years on their homestead exemption, but it still ain’t Florida. It’s still not unlimited. OJ moved to Florida to protect his money from, what was it, the Goldberg? They got a $300 million judgment against him, and poof, moved to Florida, put all his money in a house. That’s protected. He used the homestead exemption to protect himself from the money judgment that he had. And then some states really suck. It’s like $35,000 exempt. So if you have a house in a state that doesn’t have a big exemption, yeah, it could cause a big problem. Now, you wouldn’t lose your house. We’d just look at that and say, Oh, well, if you filed bankruptcy, you’d have to pay all your debt in full in order to keep your house. Then we’d say, Yeah, bankruptcy is not gonna work. We’re not gonna file the bankruptcy. But that’s one of those instances where you look at it and you go, Oh yeah, you can’t file bankruptcy. So you don’t have to worry about filing bankruptcy because we’re not gonna do it. We’re gonna find a different answer.

Steve Rhode: Well, the funny thing is, if you take that moral question that we started with, and you live in a state where you only have a $30,000 homestead exemption versus Florida that has unlimited, does that make you a moral failure for living in your state?

Damon Day: Yeah. Hey, sometimes geographic relocation comes into play on my strategy session. Hell yeah. Yeah. And there’s even been some, it sounds crazy, but there’s been some where it’s like, Well, I’m not suggesting this, but if you guys were divorced, the rules would change here and this would happen. And when you start getting into the way the laws work in certain states, and then you start getting into stupid crazy stuff like, Wait a minute, you mean I can wipe this out if I was divorced, but because I’m married I can’t? It’s like, unfortunately. Yeah. Like, so I get a divorce. I’m like, I’m not saying that. Right. That’s telling you what the facts are. That’s not the optimal strategy, but, you know, talk to your congressman on that one. Yeah, right. Well, I mean, talk about crazy shit.

Steve Rhode: So I just did a post today. Those of us that get Social Security, we’re getting a cost of living increase, 3.6%. And because you’re on Social Security getting a cost of living increase, if you are needing any benefits like housing assistance or SNAP, you know, food stamps, any sort of food, those benefits are reduced because you got more. So while you’re talking to your congressman, clean up that shit.

So here’s what we’re going to do. We’re going to put 3.5%, Steve, in this pocket, right? Then we’re going to take 3.5% from this pocket. You’re welcome. But only from the people who need it most. Sometimes it just makes my head hurt. Right. So that’s why this whole— But they’ll bury the headline. It’ll be, You’re getting an increase. That’s the headline. Yeah. You’re getting a 3.5% increase in a world where we’re going up by 10%. Thanks.

Step 7: Build a Real Budget and a Cushion

Steve Rhode: All right, number seven. Hey, we’re doing good here. Number seven: build a real budget and a cushion. Now we’re getting into the meat and potatoes. Yeah. So let me start. Budgets suck. Totally suck. Got it. Damon and I both hate budgets. I don’t like budgets. I don’t like turtles. Well, because at the end of the month, the goal is you paid your bills, you put money in savings, put money in investments, whether it’s a 401(k) or a matching fund or whatever it is, and they had some fun. All right. Here’s what people don’t realize is before bankruptcy, you were living on beans and rice. You file bankruptcy and you don’t have to pay those debts anymore. All of a sudden, you have a lot of disposable income. And, you know, just don’t reallocate that just going crazy. You can learn from your bankruptcy. I always say there’s no sense wasting a perfectly good mistake. Learn from your bankruptcy. Do better moving forward. So after your bankruptcy, my suggestion is just look at what you’re paying, okay? Evaluate where your money is going. We’re going to call that the budget, and make sure you’re participating in your employer’s 401(k) if they provide you with matching money for your contributions, because that’s free money to you, and start building up that savings account.

Damon Day: Yeah, so this is the most important part of the bankruptcy, is after the bankruptcy, is in this moment where you hopefully have some freed-up cash flow, because the bankruptcy was really caused by just a lack of cash flow, because you had so much debt, servicing the debt, car payments, house payment, food going up, everything. You just couldn’t service it. You didn’t have any free cash flow. Right after the bankruptcy, actually before the bankruptcy is even over, as soon as you’re going to file, you stop paying all your debts. So even before you file the bankruptcy, you’re going to be in a window where you are going to have extra cash. That you’re not used to having. And if you don’t make a plan for that extra cash, you don’t really—and budgets don’t work on the day-to-day, but what budgets are good for is planning. Figure out the budget, track your spending for a month, see what you should be able to save. Yeah, what you’re really spending. Yeah, and then sit down and figure out, okay, if I should have an extra thousand dollars a month now that I’m not paying these debts, how do I want to allocate that? How do I want to make sure that’s allocated? Emergency fund, investment, 401(k), whatever that is, you split that up. Because if you don’t use that time right during that bankruptcy to do that, your lifestyle will inflate eventually because you’ll have extra money, and when people have money, they tend to spend it. And if you don’t have a plan for it, it’ll get spent. And by the time you get your discharge, you know, there could be a six-month— Period. From the time you actually stop paying your debts, meet with the attorney and figure it all out, and then file the paperwork, and then do your credit counseling bullshit course, and then have your 341 hearing, and then wait two months after that to get your discharge, there could literally be a six-month window. For me, it was three years from the time I stopped paying all my debts until the time I actually filed, and it was a three-year window. Now, I’m not going to get into that story. There’s some strategy there. Strategy is important. But you could have a six—whoa, hit my mic—you could have a six-month window there where you could be in a situation where by the time you actually get the discharge, you don’t have any free money left if you fail to make a plan for it because you just spent the last six months with this extra money and didn’t plan for that. And by the time it’s done, you’re like, I don’t know where the extra money went, right? It’ll just—it’s like Mandrake the Magician. It just kind of disappears. You’re like, I should have $1,500 a month, but it’s gone. So as soon as you stop paying your debts because you know you’re going to file bankruptcy or whatever, you need to come up with that plan, and then you need to set up a mechanism to automatically start moving that money, whether it’s an Acorns account or whatever it is. So $500 goes into savings and $200 goes into my retirement. That’s the time you need to do it because now you can put money towards your goals, towards the things you know you need to be doing when it’s not going to have a huge impact on your lifestyle because you’re not used to having that money. That money was going to creditors, not going to future lifestyle, right? So that’s the period that you need to buckle down, track your spending, figure out what you should be able to save, and then allocate that money because you need to build up that emergency fund so when something happens post-bankruptcy, you don’t go to the credit card well that you don’t have anymore. Oh, I’ve got $5,000 saved up in my savings, so the tires that I needed on the car, since those weren’t in the monthly budget. I’m going to go take a thousand bucks out and do it. And the whole goal is to always have cash moving forward. So even when you start to build up your credit, which we’re going to talk about next, you don’t end up falling back into, I used my credit for the emergencies. I used my credit for the unexpected expenses, because that’s how you got into the mess in the first place. You got to have the cash.

This is why people that try to pay off their debts using every available dollar they have every month, you know, they work, work, work for six months, they’re paying down their debts, they’re applying everything they’ve got, and all of a sudden, like you said, the tires go and you need to replace them. It all goes back on the credit. All the progress you made gets, you know, erased. And then you feel defeated. You know, and it’s like a diet. Like whenever I do a diet, I do really good for like two weeks, and then my weight will start to plateau. And then it’s like, I haven’t lost a pound in two weeks. And then I’m like, screw it. Why am I working so hard? And I’ll have a Snickers bar. And then I’ll be like, well, I already ruined my diet, so now I might as well have a donut. Might as well enjoy myself since I’ve been holding back for two weeks. And then three days later, all the weight’s back, and I’m like, damn it.

Steve Rhode: Now, one of the things that you can do is you could immediately take those payments you were limping along on, those minimum payments, when you decide that you’re going to file, you could start putting that in a savings account. Now, let’s not put that in just a standard bank savings account. Let’s put it in—there’s Acorns, there’s Betterment. You know, these are high-interest-rate money market accounts that are paying three and a half percent or more, and your local bank is paying 0.01 percent. Nobody should have any money in a, you know, local brick-and-mortar bank savings account. If your savings account is not paying at least three and a half percent, get on Google and start looking for some other banks. You can keep a little bit of money in your local account if you want to, at a quarter percent or whatever.

Damon Day: I don’t even understand why they even offer it when you could easily go online to like an Acorns or a Betterment, or there’s several high-yield savings accounts. They’re FDIC insured, legitimate banks, and you just click, click, click, transfer the money over there, and now it’s earning 3.75 instead of 0.25. I mean, and if you need the money, it’s click, click, and it comes right back. Yeah, it might take a day or two to transfer back, so you can leave some money in your local bank if you had to rush down and, I need the money today, or whatever. But anything over like a thousand or two thousand dollars, shift over. You go, you build up a, you know, $10,000 savings account, might as well have an earning three and a half percent, you know, rather than a quarter percent. I mean, it’s free money. You might as well take it.

Step 8: Step Back Into the Credit Game

Steve Rhode: Damon, let’s get to number eight: getting back in the credit game. After bankruptcy, you hear people like Dave Ramsey and others that say, Avoid credit at all costs. You only use a debit card. Do not get back in the credit game. But the reality of that is—

Wrong. Yeah, reality is wrong. I feel like Trump. Wrong. That’s my argument. Wrong. It’s wrong. Wrong. Yeah, it is bad advice. I don’t need to say anything else. Wrong.

Steve Rhode: This might seem like we live in opposite land, but the reality is, if you have just filed bankruptcy, you need to get back in the credit game, not so that you can get yourself overextended, but so that you can build your good credit back, which is ridiculously stupid easy to do. And within a year, you can start having the best credit score that you ever had. You don’t have to use that to borrow, but it will not only help you to save on things that you pay, like insurance, etc., but when you do go to get a mortgage, you’ll have the best interest rate available. So don’t be afraid. Don’t hide from getting credit again.

Damon Day: Yeah, you know, like I said, I don’t get stories of people after bankruptcy calling and, you know, trying to figure out how they can pay back their creditors, now that they don’t have to. But I do get lots of stories about people a year later, two years later, I can’t believe how good my credit is so fast after filing bankruptcy. It will absolutely amaze you how quickly the— you know, the bankruptcy will stay on your credit for 10 years. That is true. But the practical result of that, you will be amazed how quickly lenders go, Meh, we’ll loan you the money.

Steve Rhode: You know, and I tell the story—

Damon Day: What was that?

Steve Rhode: It’s funny, after, I don’t know, five years or so after my bankruptcy, I bought a motorcycle and I financed it. And I’m sitting in the financing office, and the woman goes, Oh, you got a bankruptcy on your credit report. And I went, Yeah. I said, Is there something you need to know about it? She went, Eh.

Damon Day: Yeah. Well, I always tell the story. When I got my discharge papers back in 2012, I had a brand new Capital One credit card in the mailbox the same day. And this was not a secured card. This was, they called it a fresh start card. I don’t know if they still offer that service, but Capital One traditionally is one of the easier creditors to use to rebuild your credit. They’re a little bit more lenient, so I would always start there. But when I filed a bankruptcy, I got an unsolicited offer, and we’ll talk about that in, I think, step number nine. But I got an unsolicited offer after I filed the bankruptcy, before it was even done. Capital One, Oh, it’s our fresh start card. We see you filed bankruptcy. We know bad things happen to good people, you know, the whole marketing thing. We want to offer you our fresh start card. It’s a thousand-dollar line of credit, 0% interest for 12 months, and if you pay on time, it’ll double your line of credit after six months or something like that. And I was like, Oh, okay, why not? Filled it out and sent it in, and it was just coincidence. I got approved, but they mailed me the actual card. And it was just coincidence that it literally was in my mailbox the same day I got this packet from the court, which was, Congratulations. I don’t think it said congratulations, but my discharge papers, a couple hundred thousand dollars wiped out. And then the next thing I pulled out, Capital One credit card, the actual card. Like, it took, I guess that would be zero time from the time I officially had everything discharged till the time I had another credit card in my hot little hand ready to go. Like, there was zero waiting period. It was like, Let’s go again, round two, baby.

Steve Rhode: Well, here’s the irony is that after my bankruptcy in 1990, I got an MBNA secured card. So I put up a $500 deposit. This is how crazy it is. I put up a $500 deposit. I got a $500 line of credit—well, credit, you know—that I could use. And then I would make more deposits to that account and increase my available credit. And then they exchanged that for an unsecured credit card, gave me back my entire deposit plus interest. So I rebuilt my credit and got paid to do it.

Damon Day: Yeah, yeah, yeah. Secured cards are great to use too. I mean, you just put cash down and they’ll give you a card, and that starts rebuilding your credit. The other thing I did, because, you know, proactively rebuilding your credit helps, right? You want to start good positive history moving forward. You don’t just want to start just willy-nilly applying for all kinds of accounts that you’re going to get denied for. So you have to be selective with what you’re doing. But one of the things I did too is a good trick where I had $1,000 cash and I went to a credit union and I told them, Hey, look, I know I got bad credit, but I’d like to get a secured loan that’s going to get reported on my credit. So I gave them the $1,000, and then they gave me a $1,000 loan right back, and then they’re going to report that on my credit. And so now that $1,000 just sits in the bank account, and when I’m done paying off the loan, I get the money back, right? So I walked in with $1,000, walked out with $1,000, essentially. It was just a quick exchange. And now essentially I’m going to pay interest on my own money. And people think, Why in the hell would you do that? It makes no sense. Well, the interest essentially was the fee to start getting something positive reported on my credit so I could start rebuilding it. But here’s what I did. So I took that $1,000, I went down to another credit union, same day. Did the same thing. I got a thousand bucks. I want to open up a… So, the same thing, walked out with a thousand, went to a third credit union, got a secured loan, walked out with that. So in one day, I took a thousand dollars, and I ended up with $3,000 in secured loans for only $1,000. So I was leveraging that $1,000. So now I had three loans reporting on my credit report. Now, obviously, I had to make the payments. It was, you know, they were like 12- or 24-month loans or whatever they were, so they were like 70 bucks a month, 80 bucks a month. Obviously, you got to make sure you can afford those loans. But now I had three credit unions reporting positive history, building that credit. I had my Capital One unsecured card. I’d opened up a Capital One secured card as well. These days, you can use Credit Karma as a great tool to go on, and Credit Karma will basically—what’s the word I’m looking for?—aggregate data, right, from millions and millions of users, so they can kind of look at your credit profile and they can make suggestions and say, Hey, people with your credit profile applied for this card and this card, and you have a good chance of getting approved with that credit profile based on what other people in similar situations. So that’s a good tool to use. So don’t, again, willy-nilly apply for stuff. Be strategic about it and try to only apply for things that you’re very likely to get. And don’t just do it all at once, but you can slowly start doing it, start rebuilding that credit score. And what most people find is, you know, 18, 24 months after bankruptcy, their score is back in the 700s, especially they’ve been actively adding things. They can qualify for a mortgage at good rates. They can qualify for an auto loan at good rates. And unless you told somebody, people looking at you would never even knew you filed bankruptcy. Oh, I financed a car. I got my mortgage. I’ve got credit cards again. You know, I mean, within two or three years of my bankruptcy, I had probably 10 or 15 credit cards unsecured. It’s, I mean, it’s just, it’s stupid, like Steve said, stupid easy.

Steve Rhode: Yeah, it is stupid easy.

Step 9: Watch Out for the Post-Bankruptcy Predators

Steve Rhode: Number nine, watch out for the post-bankruptcy predators. I feel like you wanted to say something about this.

Damon Day: Yeah, so, you know, like I said, I got that Capital One letter, which was awesome and it was fine. But you got to be careful. There’s one creditor out there that really pisses me off, Credit One.

Steve Rhode: Yeah, and they’re pretty predatory, pretty predatory.

Damon Day: Yeah, but what pisses me off about them is they purposely design their logo and the stuff they do to make you think it’s Capital One. I mean, it looks—I don’t know how Capital One hasn’t sued them over it. Maybe they have and it was different slightly enough. I don’t know, but I almost fell for it at one point. It’s like I see this stuff every day. I remember, I don’t—this was years ago. I was getting—I was like, oh, and I was trying to rebuild my credit after the bankruptcy. And this is back when it was, I’m filling out the form, right? It’s like an actual paper, you know, form. And I’m filling it out, and I’m like, oh, this would be good. I could get another Capital One card. I got the whole thing filled out, and I was getting ready to send it in, and I happened to like, wait, this says Credit One. Yeah. The whole time I thought I was applying for a Capital One card, and I saw it, ripped it up, threw it away. But you do have to watch out because obviously when people know you’re in a situation and, you know, they can monitor public record and things like that, so they have lists, and so you’re going to get all kinds of junk mail after you file bankruptcy. Oh, fresh start, this, that, and the other. Read the fine print. Yeah, just be careful because there will be plenty of companies that are looking to take advantage that think, oh, they’re vulnerable. They’re thinking their life is going to be over. We’re going to offer them this. And then before you know it, you’re in some kind of a predatory loan that’s now choking off all the cash flow that’s supposed to be going into your savings account, and now you’re in a situation a year later, back in debt, can’t even file a bankruptcy again for six and a half more years. So you need to be careful with what you’re applying for after the bankruptcy because the predators will come out. And if anybody’s trying to sell you, we can erase the bankruptcy from your credit report, hopefully by now that we’re up to step 10, you know it doesn’t matter. You don’t need to worry about that. And that’s mostly bullshit anyway, so don’t worry about it. Yeah.

Step 10: Restart Your Retirement Savings

Steve Rhode: Number 10, I hit on it earlier, but it is probably one of the most important things. We buried the lead. Made it last to make you stay. That’s right. As you get older, you really appreciate step 10, not when you were 30, but when you’re 70. Yeah. Step 10 is restart your retirement savings, because the thing that gives you the most money at the end of the day is time. The more time that can pass between when you start saving to when you need it will magnify your savings, your balances, you know, manyfold.

Damon Day: Yeah, and the thing with this, because Steve, what’s our favorite word? Hyperbolic discounting. Here’s the thing with this. I feel like we say this all the time. Everybody knows it, but it’s so hard for people to do it because of that hyperbolic discounting factor, which is not putting the proper importance on the future and focusing on the here and now. So I don’t think there’s anybody listening to this where we would say, Oh, it’s important to put money in your retirement account, and they go, No, it’s not. Like, everybody knows how important it is, but we have this coming up and we have this thing and I’m going to get to that tomorrow, and you have that whole hyperbolic discounting thing going on. So we know it’s important, duh, but we just can’t seem to do it.

Steve Rhode: Right when you’re going through the bankruptcy, that is the easiest time in your life for you to make this change. This is the single most important thing. That can come out of the bankruptcy. If, you know, if you’re going to file, don’t squander the opportunity, because that’s what bankruptcy gives you. That’s a gift, an opportunity. And if you don’t take advantage of it right away, you will lose the opportunity to take advantage of it, because life will be lifeing, as they say. And six months later, you’ll say, I have no money. I can’t afford it, because your lifestyle crept up even just a little bit. And all of a sudden—dang, I keep hitting the damn microphone—all of a sudden, that money is gone, and you’ll be right back to where you were, feeling like, I can’t save, I can’t invest. I’ll do that next month when things get better. And before you know it, you’ll file the bankruptcy, and five years later, you’re back in debt, still doing the same thing and thinking about how long until I can file a bankruptcy again, because I’m right back in that situation. So get it started now. Get it started right away. Emergency fund first, then long-term savings. You have to have enough saved in the emergency fund so you don’t ever have anything come up that you feel the need to put it on a credit card. Anything you put on a credit card needs to get paid off immediately.

Steve Rhode: We just gave you ten things that are easy to do after you file bankruptcy to restart your financial life. Let go of the shame. Finish that second course. Keep the discharge papers. Look at your credit report. Know that you can tell the collectors to go pound sand if they call you. Keep paying on what you kept. Build a real budget. Step back into the credit game, please. That’s really, really important. Yeah. Do not fall for any post-bankruptcy predators and restart your savings account. Sounds very easy, but if, Damon, if everybody just did those ten steps, their lives after bankruptcy would be so good.

Damon Day: Yeah, a lot better than it is right before you file bankruptcy, I can tell you, and a lot less stressful.

Steve Rhode: Oh, hell yeah. All right, listen, we have gone over our usual limit. If you want to talk to Damon about your situation, you can visit him at damonday, D-A-M-O-N D-A-Y dot com. If you want to get on my weekday email that I send out, you can go to yourmoneyactually.com. Damon, before we go, anything you want to add?

I think we all stated this one up. All right. You know, seen it, covered it. I think that’s Allstate, isn’t it? I don’t know. I have no clue what you’re talking about. I’m just— The commercial. Seen it, covered it. I think that’s Allstate. Maybe it’s State Farm. Farmers or something? Oh, Farm— no, I thought Farmers is, We are Farmers. Dun dun dun dun. I will see ya. Peace.