You are drowning in debt and know bankruptcy is ultimately what you need to get some relief. You know that bankruptcy can eliminate all or most of your debt, but that it may have severe credit ramifications. But that’s all you know, and you’re scared to move forward.
What does life after bankruptcy look like?
Ultimately, you will feel like a weight was lifted from you. You have likely been plagued with debt and it’s stressors for several years, and any repercussions the bankruptcy may cause are well worth it. Take a deep break and take comfort in your decision. However, filing bankruptcy doesn’t mean that you can turn your back on your finances. This is your time to Start Fresh and make sure that going forward, your finances are in order.
You have heard that filing bankruptcy is horrible for your credit score. But chances are, your credit score was already struggling. Depending on the type of bankruptcy filed, it can remain on your credit report anywhere from 7-10 years. That’s why Operation Credit Clean-Up is pivotal.
Check your credit report for mistakes, and contact any credit bureaus with any faulty information you may find. Additionally, if there was a compelling reason to file bankruptcy (divorce, lay off, sick child, etc.) list it on your credit report. Insurance companies often scour credit reports and use that information as a baseline for their rates; having notes regarding your bankruptcy may discourage them from increasing your rates.
Reestablish Good Credit
Once your bankruptcy is discharged, you will be inundated with offers from credit card companies with the promise to help rebuild your credit. Be very careful in selecting future lenders! Most of these companies have high activation & membership fees, along with corresponding high interest rates. These fees can push you close to your credit limit before you even use your card.
You may have difficulty getting a loan in the short term. Try to wait about 6 months, and then apply for at least one secured credit card from your bank that you can charge small amounts on, and then immediately pay off. You are essentially paying your own interest and rebuilding your credit at the same time.
You may need to make changes to your lifestyle, especially if you filed a Chapter 13. This may include buying cheaper groceries, changing your data plan or losing cable. Entertainment and fun money will be minimal. Start to coupon and research ways to get the things you love at a lower cost.
It’s key to establish an emergency fund to prevent yourself from racking up debt again. Have money from your paycheck automatically drafted into a savings account each pay period – even if it’s just $10. That money will add up quickly and will come in handy should you need it since you will likely not have credit cards to rely on in the short term. Savings are especially important if you filed a Chapter 13, since you cannot incur any new debt over a certain limit without the court’s permission. You’ve got to learn how to live on cash without reliance on credit.
Break the Pattern
Educate yourself on the patterns that got you into financial distress in the first place. Sometimes there are reasons completely out of your control (medical condition, divorce, business failure, natural disaster) and you are left with hefty and unanticipated debt. However, if excessive spending was the culprit of your financial collapse, you need to correct your spending habits so you don’t find yourself needing to file another bankruptcy down the line.
Bankruptcy isn’t a fun process but it’s one that can bring order and peace to a stressful and disorderly financial situation. If you’ve been toying with the idea of filing bankruptcy, give us a call today for a free consultation at (757) 276-6555. You deserve a Fresh Start.
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