How To Rebuild Credit after Bankruptcy and Live Within Your Budget
The rate of people, companies or organizations that are declared bankrupt has increased in recent years. This has become everyone’s concern since bankruptcy can be as a result of uncontrollable circumstances such as divorce, the death of the bread winner in the family, job loss, medical emergency or any other unavoidable circumstances.
Many people view bankruptcy as a very bad thing. Over the years it has been branded a very bad reputation, but in the today’s economy, it can give the debtor a very new and healthy beginning. Bankruptcy gives you a new hope; is a ray of light after a long, dark tunnel. If you are in a situation of bad debt, you can understand well the stress associated with having debts and bills you are unable to pay.
The process of filing for bankruptcy can be very hectic and frustrating. This is because you are already in a financial distress and your hopes are almost dead. You don’t need to go through this journey alone. There many law firms which can assist you to file for bankruptcy and take you through the process, but more importantly assist you with rebuilding credit after bankruptcy and living within budget.
If you are about to file for bankruptcy and you don’t know where to start from, you should seek advice from a personal bankruptcy attorney who is conversant with bankruptcy and credit counseling. Try getting a free consultation from a bankruptcy law firm who will talk to you without any obligation like 1800 Debt Relief and assist you to get your life back after being declared bankrupt.
You should always bear this in mind; Filing for bankruptcy never means that you can never regain credit, yes, bankruptcy can stay on your credit up to ten years but this does not mean that you cannot buy a house or borrow a car loan. There are several credit opportunities for people after being declared bankrupt. Oddly enough, filling for bankruptcy lowers your debt to income ratio hence making you a more attractive borrower.
Chapter 7 Bankruptcy
If you choose to file chapter 7 bankruptcy, your non-exempt assets will be liquidated and the money used to pay off all your creditors. The unsecured debt is usually discharged. Most of the people who fill for chapter 7 bankruptcy usually do not have any non-exempt assets meaning that they keep everything that they have. A good bankruptcy attorney will assist you in knowing which chapter of bankruptcy to apply for. This chapter enables you to keep your vehicle, home and any other exempt property.
Chapter 13 Bankruptcy
Different from chapter 7 bankruptcy, chapter 13 bankruptcy is a debt re-organization bankruptcy. In this case, the debtor is supposed to pay his/her bills in monthly basis making it more affordable. The payments will be allocated for a period of 3-5 years. This is referred to as a chapter 13 repayment plan. It should be noted that in both chapter 7 and 13 bankruptcy, the debtor will enjoy instant relief since all debt collection harassment will have to stop.
Living within a budget after bankruptcy
Once the bankruptcy is discharged, there are certain strategies you can use in order to rebuild your credit:
1. Obtain a “secured” credit card
You should note that, even if your declared bankruptcy, credit card companies will still offer you with a credit card within a period of six months after the completion of bankruptcy case. It is good that you apply for a secured card if you are unable to get an unsecured one. A secured card is a very good way to start out. However, you should always keep your expenditure as low as possible, don’t spend money for the sake of spending money and pay your monthly bills on time!
2. Do NOT make late payments
It is always good not to make late payments. This is a common practice for everyone but more important to a person trying to rebuild his/her credit. Your main goal in rebuilding your credit is to prove to the lending institutions that your able to pay your debts in time and that your credit worthiness has improved. Only one late payment can put you in an untrustworthy situation to the credit institutions and negate all of the other payments you have made on time.
3. Apply for an “unsecured” credit card
It is a good practice to apply for an unsecured card after you have proved to make payments of your secured card in time. You should avoid high fee credit cards. If your application of an unsecured card goes through, try as before to make payments in time. If you are denied the unsecured card, it’s not a big deal, continue to rebuild your credit using the secured card and try to reapply for the unsecured one after six months.
4. You should apply for a car loan
After at least one year, you should consider applying for a car loan if you need a new car. Most car dealers are very aggressive and will not mind lending to a person who has filed for a bankruptcy case. A car loan will be a great way to rebuild your credit since having a car loan will mean that your credit worthiness has improved. Again, make sure that you make repayments on time.
5. Always practice budgeting
After you have filed for bankruptcy, you should think about adopting a bit of frugal living. You should come up with a monthly budget and try your level best to stick to it.
You should make sure that you save a certain percentage of your income every month. Try and save at least ten percent every month. Saving is very important because it ensures that you do not live beyond your means. Saving will also cushion you from any emergencies such as loss of job or illness.
