Life after bankruptcy is not easy. You have a fresh start, but you also have a lot of repair work to do with your credit, which has most likely taken a huge hit during the process. The good news here is that there are ways to bounce back after bankruptcy. While filing bankruptcy clears you of any obligation to pay past debts, it also leaves a mark that will be on your credit report for up to ten years.
You can recover and start working on rebuilding your credit immediately after your bankruptcy is discharged and get back on track so you can enjoy a sound financial future.
How to Recover From Bankruptcy – The Right Way
- Avoid Credit Repair Gimmicks
One of the most tempting options for those who have filed either Chapter 7 or 13 bankruptcy consider is credit repair services. Keep in mind, the only way to remove a bankruptcy from your credit report is to wait the required reporting time.
- Develop a Budget
If you have emerged from bankruptcy, you will recall being required to take budgeting and credit courses. Use what you learned and develop a sensible budget that you and your family can adhere to in the long-term. This will help you develop a more stable financial future.
- Establish an Emergency Fund
One of the best safety nets we have is an emergency fund. When you created your budget, you established how much money you have on hand after all your obligations have been fulfilled. Set aside an amount on a weekly or monthly basis to put into an account that will only be used if you face an unusual expense such as a broken appliance or automobile.
- Verify Your Credit File
Once your bankruptcy has been discharged, you should only see debts that have not been discharged. The debts which were discharged should show a notation there are no outstanding balances and the items are no longer in collections. If there are errors, your bankruptcy attorney can help you clear them up. Remember to check all three credit bureaus.
- Apply for a Secured Credit Card
Secured credit cards are a safe way to begin reestablishing your credit. Your credit line is based on the amount of money you deposit in a secure savings account. Regularly using the card for small purchases, paying the balance off monthly, and maintaining the account will have a positive impact on your credit score.
- Make Credit Payments on Time
For any debt you did not include in your bankruptcy, for example, your home mortgage, car loans, or student loans, payments must be made on time. This is the best way to recover following a bankruptcy.
- Apply for a Mix of Credit
Once your credit score begins to show improvement, attempt to apply for a regular credit card, a retail credit line, or a new car loan. Keep in mind, the mix of your credit will have an impact on your credit score. Do not panic if your score decreases slightly following a new application. Also, do not apply for multiple credit lines within a short period of time.
- Keep Credit Balances Low
Once you have established new credit lines, make sure you keep your balances low. In general, you should do your best to avoid using more than 30 percent of your open credit lines. Keeping balances low will have a positive impact on your credit score.
- Have a Plan for Setbacks
We all can face financial challenges at some point in our lives. Have a plan in the event you suffer a job loss, reduction in hours, or an illness that could keep you from working. Have a plan to pay down your credit cards and other debts in the event you face weeks or months out of work.
- Continue to Monitor Your Credit Report
One of the most important things you can do when rebuilding your credit following bankruptcy is to monitor your credit report on a regular basis. Each credit bureau will provide you with a free report each year. You should take advantage of this and make sure you have any errors corrected immediately.
Consult a Bankruptcy Attorney
Most people who have filed bankruptcy are concerned about their financial future. If you have questions about your credit score, need more information about financing, or secured credit cards, contact The Cornwell Law Firm in Duluth at (404) 791-4449. Our skilled bankruptcy attorney is more than happy to offer you a free consultation to help you learn more about your financial future.