You just declared bankruptcy and you are now having second thoughts because you are terrified of what life will be like after the process. This is a common concern from many consumers when considering bankruptcy as an option. There are a million questions running through your head such as: Can I get a loan? Can I buy a car? Can I qualify for a credit card? How long will it take to restore my credit score? Reality is—you will be faced with new challenges coming out of bankruptcy.
It will be a difficult road ahead but nothing that is unmanageable. Once you declare bankruptcy, your credit score is going to take a hit, which you were likely advised about prior to filing. You won’t be able to qualify for a home loan for 2 years. You’ll be able to finance a car but the interest rate won’t be the greatest right away. Moreover, depending on the type of case you filed, the bankruptcy could remain on your credit report for the next 7 to 10 years. Nonetheless, after you file bankruptcy it is critical to start rebuilding your credit. How quickly you rebuild your credit will really depend on you.
STEPS TO TAKE AFTER YOU FILE BANKRUPTCY TO REPAIR YOUR CREDIT
PULL YOUR CREDIT REPORT. After filing bankruptcy and completing your case, one of the things you will want to do is pull your credit report. You can obtain a free copy of your report by going to annualcreditreport.com. The report will provide you some important information about all of your prior debt included in the bankruptcy. If there are any errors with your credit report, you will be able to find out about them right away and dispute the information with the creditor to avoid it affecting your credit score. It is probably wise to wait approximately 60 days from your discharge date to pull the report to ensure everything is up-to-date.
Further, you will want to monitor your credit report regularly—once every few months is sufficient. The reason you want to regularly review your credit report is to ensure that the responsible steps that you are taking to improve your credit is being reflected on your credit report. Although, you will have to pay a minimal fee to obtain regular credit reports but it is worth knowing than not knowing.
BE ON TIME WITH PAYING BILLS. Make your monthly payments on time. Payment history accounts for little more than 1/3 of your credit score. As such, on-time payment is a must in improving your credit. You should stay on top of all of your bills including those that are not listed in your credit report because as soon as they become past due, the bill will go into collections and affect you in a big way.
BECAREFUL OF HIGH-INTEREST LOANS. Be conscience of high-interest loans as you probably want to steer clear of them as you are trying to rebuild your life post-bankruptcy. The reason being is you want to be able to afford all of your bills and if you are thinking about making a big purchase, consider borrowing money from family or even from retirement funds. The high interest loans can become crippling and place you in the same position you were pre-bankruptcy.
BE WEARRY OF CREDIT REPAIR SCAMS. Do not fall into the trap of credit repair scams. If it is sounds too good to be true—it is. If a company is persuading you that they can remove negative credit history, it is possibly a big lie and you can actually suffer hefty fines or even prison time by participating in scams. The seriousness of the illegalities is even expressed by the Federal Trade Commission as they have listed several warning signs to be mindful of about these credit repair scams. Remember, there is no quick fix to damaged credit. However, being financially responsible and repairing your credit the right way will get you to where you want to be in due time.
OBTAIN A SECURED CREDIT CARD. In rebuilding your credit score, you will likely need to obtain a secured credit card and can do this immediately after your discharge is entered. If you are not familiar with secured credit cards—they are credit cards where you are essentially using your own money as collateral. The amount you put down as a deposit will be your credit limit. Although not the traditional credit card, they operate like a credit card and can be a tool to vastly improve your credit score. By using it responsibly it will show lenders you are able to manage your finances. Also, make sure to get the secured credit card at a bank that reports the payments to the credit bureaus.
BUDGET. You will want to keep your balances low and as stated above, pay your bills on time. Budgeting is key during this phase of the process. Although it might be difficult and you may hit a bump here and there, remember this financial setback is short term.
START SAVING. Although obvious, it is important you start putting some money aside for emergency situations. You do not want to be placed in the same financial situation pre-bankruptcy, as such, you will want to save enough money to cover three to six months of your necessary living expenses. It is difficult if you are living paycheck to paycheck but it is doable. By saving money it will provide you the financial means to deal with the next emergency situation rather than borrowing money from somewhere else.
MAINTAIN A JOB. The most important thing moving forward is to maintain gainful employment. Your employment history will show creditors that you are reliable. Moreover, it will provide you the financial means of paying off your debts. As such, if you do not have a job already, definitely start looking for one.
CONCLUSION
Life after bankruptcy can be a difficult journey; however, using post-bankruptcy income and credit responsibly will be critical to rebuilding your credit and providing you that financial stability again.
If you are considering filing for bankruptcy, it is advised that you discuss your particular situation with a highly trained bankruptcy attorney. Here at Sacramento Bankruptcy Lawyer, we would love the opportunity to discuss your case with you and assist you in choosing the most beneficial option.
We help clients in the following areas: Sacramento, Elk Grove, South Sacramento, West Sacramento, Natomas, Citrus Heights, Antelope, Fair Oaks, Gold River, Rancho Cordova, Roseville, Rocklin, Lincoln, Wheatland, Yuba City, Marysville, Woodland, Davis, and Lodi.
