Life After Bankruptcy
THERE IS LIFE AFTER BANKRUPTCY
Part of the anxiety for anyone filing bankruptcy is the concern about his or her financial future post-bankruptcy. However, by taking proper and pro-active steps you can put yourself on the road to financial recovery and an ever-improving credit score. A Chapter 7 or Chapter 13 bankruptcy filing is not a burden that will forever ruin your prospects of buying a house or car. There is life after bankruptcy!
You can rebuild your credit within 12 to 18 months after a Chapter 7 or Chapter 13 bankruptcy case. People with good credit and bad credit are filing for debt relief daily. Divorce, medical bills and job layoffs can play a part in a controlled financial situation getting out of control. The negative stigma attached to those filing a bankruptcy case is not as prevalent as it once was. A bankruptcy filing showing up on a credit report does not stand out as much as it used to.
You can emerge from bankruptcy with the chance to secure low-interest home or car loans. Timely payments to secured debt and credit cards raise your score to levels you once only dreamed of enjoying.
During the 10-year period while the bankruptcy is on your credit report, you may receive credit card offers with very high interest rates (sub-prime rates). This is because lenders view you as a “high risk borrower” due to your past bankruptcy. You will need to work diligently to improve your credit score and re-establish trust with creditors by paying your bills on time.
If you’ve filed for bankruptcy, it is important that you understand how to improve your credit after the bankruptcy has been discharged. Improving your credit is an important step if you hope to qualify for financing in the future. The first step to improving your credit after bankruptcy is establishing a budget, and sticking to it.
Record exactly how much you spend each month on various categories such as rent/mortgage, food, utilities and other basic bills. Also include variable expenses such as clothing, leisure and hobby expenses and gas/travel. Establish a predetermined spending amount for each category and stick to it. Learn to control your expenses through discipline, tracking and budgeting.
Consider opening a secured credit card, which will also help you rebuild your credit score. Secured credit cards work very similarly to debit cards. You cannot spend more than you have on a secured card. This should help with budgeting, and will prevent you from spending more than you have. Keep your total balance on the secured credit card to 20% (or less) of your maximum credit line.
Six months after your bankruptcy, consider opening a new credit line (in addition to your secured credit card). By this time, you may be able to qualify for an unsecured card (though it will probably have a very high interest rate). Use this card along with your secured credit card. Keep all your balances small and make consistent, on-time monthly payments. In another six months, consider opening a third line of credit by applying for another unsecured credit card. In 24-36 months, your credit scores should be increasing and you should have more
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