Steps to repair your credit after bankruptcy

Posted by Katie Miller - June 3, 2013 - Bankruptcy - No Comments

Although bankruptcy has never been an option you thought you would have to face, you may have found yourself considering walking down that road.  Many people find the decision to file bankruptcy to be much more than just financial and very difficult.  One concern I get asked about all of the time is the effect it will have on your credit and how you will be treated by creditors and society in the future.

You should always keep in mind that bankruptcy is not the end of the road.  It is a way to obtain a fresh start.  It is a way to end the sleepless nights.  It is a way to terminate the stress that financial problems can cause in your personal life and/or your marriage.  There is life after bankruptcy.  One of the key steps to getting your life back on track is to take steps to rebuild your credit after your bankruptcy.  Rebuilding is not going to happen overnight and will take some hard work, planning and dedication to not only repair, but to rebuild effectively without putting yourself in the same position.

To start to rebuild, the first thing you need to do is create a budget.  Analyze your income and expenses.  When listing your expenses, put them into two categories:  Must haves (such as mortgage/rent payment, utilities, car payment, groceries, etc.) and what I call electives (such as cable TV, eating out, shopping, recreational fun, etc.)   Make sure you budget to save a little each month as well.  You should try to achieve to have at least 6 months of your living expenses saved at all times.  This analysis should help you create a budget that you can adhere to and realize expenses that must be paid and expenses that can possibly be eliminated in order to help you succeed.  Hold yourself accountable every month.   At the end of every month, reconcile your receipts and bank statements against your prepared budget.  Were you able to live within your means?  What could you fine turn in order to help you stick to your budget?  Were you able to save any money? Preparing and sticking to a budget is imperative for financial success and rebuilding after bankruptcy.

It is also very important that you pay attention to the credit counseling classes you would be required to take before and after you file your bankruptcy.  Those classes offer you tools to help you create a budget, live within your means and rebuild after bankruptcy.  You are required to take these classes and you pay for them, so you might as well take advantage of all they have to offer.  You should always attempt to pay your bills on time or a few days early.  If you plan an appropriate budget, you should have the dates your bills are due in your budget book so that you are aware of when you need to send payment.  By doing this, creditors will take notice that you are able to pay your bills and pay them on time.  

You will qualify for credit after bankruptcy although it will be at a higher interest rate.  I suggest that you get a credit card with an extremely small limit on it (less than $500.00) and use it like a debit card.  Put the transactions in your budget book and then pay the balance in full every month so that you are never charged interest.  By doing this, that company will report to the credit bureaus that you are in good standing and more importantly have a 0 balance (even after use).

Two years after bankruptcy, you may be able to qualify for a mortgage; however, in most situations you will need to put 20% down.  If you plan on buying a home, take the two years after bankruptcy to stick to a budget to prove to yourself that you are able to stay on track.  Also, attempt to save the 20% you will need to put down on the purchase of your home.  Pick a home that you can afford keeping in mind that the utilities might fluctuate.  Remember that owning a home also comes with paying property taxes, homeowner insurance and repair/upkeep of the house.  Prepare for this in your budget and make sure that it is something you can financially do.  If you are prepared, you should have no problem staying on track.

I hope you found these suggestions useful.  Please call my office at 407-217-5807 if you would like to explore your options in bankruptcy and the steps to help you get back on track.  There is a solution!

Remember, taking care of yourself and your loved ones is most important in life. I care about you and your future! ~ Katie


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