So you made the tough decision to file for bankruptcy, and you survived. Now what? How do you make the most of the second chance you’ve been given? Follow these 10 bits of advice and you will be well on your way to living your best life after bankruptcy:
Dwelling on the self-doubt and negative thoughts that can come with bankruptcy won’t do a thing to help you recover and rebuild. Make peace with your financial past, and leave it where it belongs: in the past. Make sure you understand fully what led you to bankruptcy in the first place so that you can make different, better financial decisions the second time around.
Yes, bankruptcy can remain on your credit report for up to 10 years, but that doesn’t mean you’re stuck with a low credit score for the next decade. If you take advantage of the fresh start bankruptcy affords, you can rebuild your credit score and financial life much faster than you may think.
The first step to bouncing back after bankruptcy is to know where you stand so that you can plan where you’d like to be. Request your credit report from each of the three credit bureaus:
Equifax: Call 800-685-1111 or Visit Equifax’s Report Request & Dispute Page
Experian: Call 888-397-3742 or Visit Experian’s Report Check or Experian’s Dispute Page
TransUnion: Call 800-888-4213 or Visit TransUnion’s Report Request & Dispute Page
Each credit bureau will give you one free copy of your credit report each year. Check each report for errors or inconsistencies (like how much you owe, if at all, on each debt), and report any errors you find. Each agency may have different information, but each agency will investigate and revise your report accordingly. Mark your calendar the day you request your reports, and set a reminder to check your reports again a year from that date.
One of the best things you can do to protect yourself from future financial calamity is to create a realistic budget for yourself and stick to it vigilantly. This doesn’t mean spending only as much as you make; this means spending less than what you make. This way you can begin building a savings safety net, should any medical emergencies or big life changes catch you off guard. You may not be able to save much in your present financial state, but every little bit adds up over time. Budgeting apps like Mint are great for planning and sticking to a budget.
After declaring bankruptcy, you may be tempted to swear off all credit cards and credit in general. Don’t. While closing all lines of credit eliminates the temptation and option to misuse credit, it also damages your credit score. You want to increase—not decrease—the amount of credit you have available to you. The key is to use that credit wisely.
You may have a few select debts remaining after bankruptcy (like student loans, car loans, or mortgage payments). You can use these debts to start rebuilding your credit. Your creditors will report your diligent payment history to the credit bureaus, and your credit will regain its strength over time.
Your payment history makes up 35% of your credit score, so the more positive payment history you have, the better. Keep in mind that any late payments that would have resulted in a negative mark on your credit report before bankruptcy result in double the negative marks after bankruptcy. Bankruptcy offers a (relatively) clean financial slate, but the stakes are high in its wake. Make sure you don’t squander your second chance by making the same financial mistakes twice. Set up automatic payments, or payment reminders, so that you never miss one. Apps like Mobilligy are great for this.
It’s difficult to build credit without any debt. If bankruptcy wiped out all of your debts, you should obtain new credit, cautiously. It will likely be difficult to get a new credit card following bankruptcy, but many banks will offer you a low-limit or secured card (a secured card requires a deposit). If you opt for a secured card, read the fine print and choose a card with as few fees as possible (fees will eat into your available credit), and make sure your payment history will be reported to all three credit agencies. Click here for more info on secured credit cards.
Only use your credit card on things you can afford without it, and never rely on it for essentials like utilities. Remember that you do not have to spend your limit every month. Pay at least the minimum every time, and pay it off as often as possible. Contrary to popular belief, carrying a balance on your card does not necessarily help build credit (this is especially true after bankruptcy). When you have low credit, the credit bureaus like to see you are capable of paying down your debts whenever and as often as possible.
Finance companies are in the business of making a profit, and don’t necessarily have your best interests in mind. Don’t be swayed by their grand promises and offers. Focus on maintaining your budget, saving when you can, and slowly building up your available credit and credit score. If you need help, consider enlisting the services of a financial advisor, rather than a finance or debt relief company. Any promises to raise your credit score quickly are likely empty; it took time for you to get to the point of bankruptcy, and it will take you time to recover, but that’s OK! Your efforts will pay off in time.
If you decide that bankruptcy is your best option and you’re ready to get started; if you think it might be your best option but you need a second, professional opinion; or if you’ve decided that renegotiating your debt rather than discharging it is your best bet, give us a call. Whenever you’re ready to forge a fresh financial start, we’re ready to help.
To get in touch with us, give us a call! In Kentucky, call (270) 388-9951, or for our Tennessee office call (931) 647-9976. You can also like our Facebook page, or shoot us an e-mail! We would be happy to assist you.
Copyright © 2022 Wilson Law Firm, PLLC. All Rights Reserved
DISCLAIMER
The information on this site is not legal advice, and it is not intended to be legal advice. No one should rely upon the information contained in this site without consulting an attorney. Viewing this site is not intended to create an attorney-client relationship. Contacting this firm through this site is not intended to create an attorney-client relationship. Please, do not send any confidential information to this firm through this site.