by Erik M. Dell

Created on: July 07, 2008   Last Updated: August 05, 2010

I opened my business in February 2001 with my wife. I applied for a loan through the Small Business Association and was approved for a guarantee. During the course of the business I opened lines of credit with Fleet Bank and the Capital One. StarsDVD, LLC was the first all DVD rental store in Connecticut. Everything was going fine till I got divorced. The business suddenly went from a two-person job to a solo gig.

I was working about 80 hours a week and going to school full-time. I made some mistakes here and there, like forgetting to include my salary in the business plan. Money started shrinking from the bank account and the debt started piling up. Despite filing for a Limited Liability Corporation, the debt was mostly under my name. Creditors often insisted on a waiver or personal guarantee to establish credit.

In 2003 I was faced with a decision to get another loan or close shop. The DVD market had changed in those two years and the future for the format did not look that promising. I chose to close the doors to StarsDVD, LLC. By that time I was almost a quarter million dollars in debt and I was still a few years before my thirtieth birthday.

I had no choice; it was either a life of indentured servitude or a run through the bankruptcy courts. I got myself a lawyer and was whisked through the whole process rather painlessly. The funny thing is that lawyers want their money before they start the paperwork so I had to borrow that from friends and family to get the ball rolling.

Filing for bankruptcy was by far the smartest financial move I ever made. Credit card companies paint a grim picture of bankruptcy and the years of toiling it will take to get out of that mess. I'm not advocating bankruptcy; everyone shouldn't use it. However, if you do file, you are now stuck with the monumental task of building credit from scratch. Here are my five tips for surviving bankruptcy and building credit.

1) First thing you need to do is ensure you have an active checking AND savings account. If you don't have a debit card you should then apply for one immediately. Having a debit card will solve your immediate problems such as buying airline tickets or renting a car. True you have to have the money in your account but the MasterCard or Visa logo on the debit card can be a godsend in the future.

2) Second thing is to get a secured credit card with a Visa or MasterCard logo. You will find that you are getting credit card offers in the mail. Read these carefully because they

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