The Best Cities to Start Over After Bankruptcy

The road to financial recovery now comes with a self-guided map.

LendingTree analyzed their customers’ data and found where those with the highest credit scores 3-4 years after filing for bankruptcy live, according to its Best Places for a Fresh Start survey.

“New beginnings are an American tradition, and it’s not uncommon for people to lose so much that they have to start over with new jobs and careers, new finances, and even new relationships,” the study says. “The likelihood of success can depend in part on social and economic conditions.”

How are they ranked?

The study looked at the cities with the best local median income, or income between the lowest and highest, and best rent costs.

It also took into account whether the city was in a state that enforces laws to protect people in debt from aggressive collectors and penalties, like the Fair Debt Collection Practices Act.

The FDCPA is a federal law that protects debtors from overly-aggressive phone calls from collectors. Though this law is federal, each state has different laws on the statute of limitations on a debt, meaning different states all have different timeframes for creditors to file a lawsuit to recover debts.

Every state also has what’s called “exemption laws.” Like the FDCPA, these state laws are designed to protect those in debt from extreme poverty while paying back their debt, according to the National Consumer Law Center. The NCLC gives a letter grade to how states perform in being debtor friendly.

Aside from these laws, LendingTree took a look at how well those who declared bankruptcy were doing with their credit score, 3-4 years after filing. Here are the five best cities to start over in…

1.  Buffalo, New York

• Median income: $52,203
• Median rent: $738
• Average credit score: 664
• Debtor friendly grade: B

2. Minneapolis, Minnesota

• Median income: $70,915
• Median rent: $963
• Average credit score: 656
• Debtor friendly grade: C

3. Salt Lake City, Utah

• Median income: $64,564
• Median rent: $967
• Average credit score: 646
• Debtor friendly grade: D

4.  Austin, Texas

• Median income: $66,093
• Median rent: $1,098
• Average credit score: 658
• Debtor friendly grade: B

5. Hartford, Connecticut

• Median income: $71,379
• Median rent: $1,028
• Average credit score: 664
• Debtor friendly grade: C

5 worst places to start over

Then there are some cities you’d want to avoid, given the option.

1. Birmingham, Alabama

• Median income: $50,529
• Median rent: $806
• Average credit score: 633
• Debtor friendly grade: F

2. Riverside, California

• Median income: $56,295
• Median rent: $1,176
• Average credit score: 651
• Debtor friendly grade: C

3. Miami, Florida

• Median income: $50,064
• Median rent: $1,182
• Average credit score: 658
• Debtor friendly grade: C

4. Orlando, Florida

• Median income: $50,183
• Median rent: $1,063
• Average credit score: 654
• Debtor friendly grade: C

5. Chicago, Illinois

• Median income: $63,327
• Median rent: $1,005
• Average credit score: 646
• Debtor friendly grade: C

What to do if you need a “fresh start” financially

There are multiple options to get out of debt, and each should be explored with professional help to ensure you make the right choice.

You can speak with a credit counselor to set up a Debt Management Program. This is for those who are probably in the least severe amounts of debt. Your debt will be evaluated and a counselor can help you work out a payment that best fits your budget. This option will not damage your credit score.

You also might consider debt settlement, but first consult with a credit counseling professional. This option will damage your credit score, and you still must pay a reasonable amount to your collectors. If this is an option you choose to pursue, approach with caution and be leery of anything too good to be true, since there are plenty of debt settlement scams out there.

Then of course there is filing for bankruptcy, which is a major decision and should absolutely be made in consultation with a credit counseling professional. This is for the most severe of debt problems and will absolutely damage your credit score for a long time.

Whatever choice you and a professional decide on, make sure you know your rights, and don’t allow collectors to bully you.