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Surviving Post Bankruptcy

Bankruptcy

All financial experts agree that bankruptcy, by itself, cannot save a debtor from financial ruin in most cases. There are a number of steps debtors need to take post bankruptcy to begin to restore their credit rating and ensure that actions that led to the bankruptcy are not repeated.

Embrace Financial Counseling Post Bankruptcy

If the bankruptcy was caused in part by poor financial decisions, then the court-required credit counseling and debt management courses become vital for the debtor. Under the 2005 bankruptcy law changes, debtors must attend credit counseling within 180 days of filing for bankruptcy and debtor education before receiving a discharge. Those sessions are intended to introduce financial concepts to debtors, help them put together a realistic budget and learn how to handle credit cards. These sessions can help debtors emerging from bankruptcy change their lifestyle and begin handling their finances with care.

Restore Credit Scores Post Bankruptcy

Bankruptcy, which remains on a credit report for up to 10 years, will cause a credit score to plummet. Restore the credit score is important because businesses, banks and employers rely on that three-figure credit score. Improving the score means reducing the cost of debt, making car loans and mortgages more affordable.

  • Debtors should quickly pick up a credit report. Credit scores cannot improve unless goods are purchased on credit and repaid in full each month. If an unsecured credit card is not available, a debtor should pick up a secured credit card and make sure the card reports regularly to all three credit bureaus.
  • Make only a single purchase every month and immediately pay that off in full. That activity will cause credit scores to slowly increase month after month.
  • Get a copy of your credit report to make sure there are no errors that could be hurting your score. Errors are fairly common, particularly after a personal bankruptcy. The three individual credit agencies have rules for requesting that errors be corrected on reports.

Find a Way to Save Money Post Bankruptcy

The first person to pay after eliminating debts in bankruptcy is you. Put money away every week or every month and let it build up as much as possible. Break the habit of spending all your income and more and replace that with a plan to build savings as quickly as possible. Obviously, savings are crucial to handle future rocky financial times. In fact, many financial experts recommend between 3 to 6 months of income in savings. Additionally, while future credit for cars or a home is possible, significant down payments are all but certain.

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