A financial disaster will hurt your credit. Move here, avoid there and you’ll get back on track.
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.
The best and worst cities to start over after bankruptcy
By your mid-30s, adulthood is no longer around the corner and there won’t be much change in the person you’ve become. But by that point in life, one setback from a medical emergency, job loss, or divorce can leave you facing a financial catastrophe that calls for a clean slate.
Filing for bankruptcy may be a solution to those woes without destroying your future finances, like saving for retirement. And getting away from your troubled past may help you flourish on your road to recovery.
Loan marketplace LendingTree conducted a study to determine the best cities in the U.S. to start over after bankruptcy — limiting the age group to 35-64-year-olds, to leave out those too young and old to start over. The findings are based on some of the factors that contribute to recovering from bankruptcy most, such as…
- Income
- Rent
- Marital status
- Unemployment
- Health insurance status
- School enrollment status
- State laws to protect debtors from aggressive collectors
- And the credit scores of debtors three to four years after bankruptcy
Data is sourced from the 2016 American Community Survey from Census, the National Consumer Law Center, and LendingTree’s own customer data.
Click or swipe through to see which cities are the best and worst...
1. Buffalo, New York
People in this city may not have the highest earnings, but the majority of residents over the age of 35 are insured. And the average credit score that bankruptcy filers have three years after is one of the highest on this list. The rent is cheap in Buffalo, New York. It could be all the money bankruptcy filers are saving on rent that helps them make payments on time to keep their credit scores ticking upward.
- Median income: $52,303
- Unemployment: 4.6%
- Median rent: $738
- Average credit score after bankruptcy: 664
- Not married: 40.1%
- With health insurance: 94.2%
- Enrolled in school: 1.9%
- Debtor friendly score: B
Best place for a fresh start overall score: 67.6
2. Minneapolis, Minnesota
The unemployment rate is low compared to other cities on this list. On top of the majority being employed, the typical income is higher than the national average of $33,205, according to Census data.
- Median income: $70,915
- Unemployment: 3.7%
- Median rent: $963
- Average credit score after bankruptcy: 656
- Not married: 33%
- With health insurance: 93.9%
- Enrolled in school: 2.8%
- Debtor friendly score: C
Best place for a fresh start overall score: 62.9
3. Salt Lake City, Utah
This city has the highest amount of residents over 35 enrolled in school, and the level of those who aren’t married is also in the top bracket on this list. The median income of this age group is near twice the national average. When you match that with lower rent costs, getting a firm financial footing on a single income is more than possible.
- Median income: $64,564
- Unemployment: 3.6%
- Median rent: $967
- Average credit score after bankruptcy: 646
- Not married: 41.4%
- With health insurance: 85.6%
- Enrolled in school: 3.6%
- Debtor friendly score: D
Best place for a fresh start overall score: 62.6
4. Austin, Texas
There isn’t one factor that stands out for why this city is one of the best for starting over. However, the rankings it makes among all eight explains how Austin, Texas placed in the top five. There is a higher percentage of debtors over 35 who aren’t married, have health insurance, and enrolled in school. Also, it's located in one of the few states that gets a B grade for consumer debt laws.
- Median income: $66,093
- Unemployment: 4.1%
- Median rent: $1,098
- Average credit score after bankruptcy: 658
- Not married: 36.4%
- With health insurance: 84.5%
- Enrolled in school: 3%
- Debtor friendly score: B
Best place for a fresh start overall score: 61.4
Last year, Debt.com reported Austin, Texas as one the five most affordable cities in the country.
5. Hartford, Connecticut
There really is one major factor dragging this city's ranking down, and that's the unemployment rate. It's the highest out of the best cities. However, most are insured and earning a high income. Where's the proof that bankruptcy filers recover in this city? Take a look at the average credit score three years after filing. It's tied with Buffalo, New York — the best city on this list.
- Median income: $71,379
- Unemployment: 5.8%
- Median rent: $1,028
- Average credit score after bankruptcy: 664
- Not married: 36.4%
- With health insurance: 93.3%
- Enrolled in school: 2.6%
- Debtor friendly score: C
Best place for a fresh start overall score: 58.9
6. (1.) Birmingham, Alabama
With the all-around lowest overall score — 33 percent — there are a few reasons why Birmingham, Alabama would be a horrible place to move for a fresh start. Being the only city on this list to score an F from the National Consumer Law Center, bankruptcy filers will be most at risk of having more of their wages and property seized to pay back their obligations.
- Median income: $50,529
- Unemployment: 5.1%
- Median rent: $806
- Average credit score after bankruptcy: 633
- Not married: 38.4%
- With health insurance: 87.3%
- Enrolled in school: 2.3%
- Debtor friendly score: F
Best place for a fresh start overall score: 32.9
7. (2.) Riverside, California
This city has the highest unemployment rates on this list. Moving to a city with the typical monthly rent being a little lower than $1,200 and unemployment rates so high, it will be more than difficult to keep up with your bills to avoid any more damage to your credit in the future.
- Median income: $56,295
- Unemployment: 8.1%
- Median rent: $1,176
- Average credit score after bankruptcy: 651
- Not married: 36.1%
- With health insurance: 81.7%
- Enrolled in school: 3.2%
- Debtor friendly score: C
Best place for a fresh start overall score: 35.8
One trap to luring bankruptcy filers back into debt is retail store credit cards. Debt.com has previously reported that Riverside, California is one of the cities in the country where Americans use retail store cards most often.
8. (3.) Miami, Florida
Miami, Florida has the lowest rate of residents with health insurance. Overdue medical bills make up one of the most common reasons people file for personal bankruptcy. Medical emergencies can lead to time off from work, which often snowballs to using credit cards for regular bills. Before they know it, debtors end up in too deep of debt to climb out.
- Median income: $50,064
- Unemployment: 6.8%
- Median rent: $1,176
- Average credit score after bankruptcy: 658
- Not married: 44%
- With health insurance: 74.7%
- Enrolled in school: 2.8%
- Debtor friendly score: C
Best place for a fresh start overall score: 36.4
It's no wonder bankruptcy filers struggle to recoup in Miami, Florida — it's the least affordable city to live in, according to previous Debt.com reporting.
9. (4.) Orlando, Florida
It seems that bankruptcy filers should just stay out of the state of Florida. Orlando, Florida is the second city located in the Sunshine State to come in as the five worst cities to get a fresh start after bankruptcy.
The median income will be stretched thin to meet the rent costs. Debtor protection laws definitely have some gaps and weaknesses in the state of Florida, so it’s not promising that you won't be subject to debt collector harassment.
- Median income: $50,183
- Unemployment: 6.4%
- Median rent: $1,063
- Average credit score after bankruptcy: 654
- Not married: 39.6%
- With health insurance: 80.4%
- Enrolled in school: 2.9%
- Debtor friendly score: C
Best place for a fresh start overall score: 37.3
10. (5.) Chicago, Illinois
Moving to the Windy City won’t provide you with the same kind of assurance to rebuild your finances after bankruptcy as other northern cities like Minneapolis, Minnesota or Milwaukee, Wisconsin. The income level is double that of the national average, according to Census data. However, if you can't find a job due to high unemployment rates, how can you rebuild your credit?
- Median income: $63,327
- Unemployment: 6.6%
- Median rent: $1,005
- Average credit score after bankruptcy: 646
- Not married: 36.4%
- With health insurance: 86.6%
- Enrolled in school: 2.7%
- Debtor friendly score: C
Best place for a fresh start overall score: 38.8
This article by Joe Pye was originally published on Debt.com.
Published by Debt.com, LLC
