When you were younger, you made a lot of financial mistakes. While you tried to get ahead and pay back what you owed, the reality was that you were really just treading water. No matter how much you worked, you were never really financially secure.
Today, you’ve decided to enter into bankruptcy to get back the financial security that you should have. You work hard, but you just aren’t getting anywhere with paying back your debts the way you’re doing it now. Fortunately, bankruptcy can be a good solution.
After emerging from bankruptcy, your life will be different in a few ways. Here’s what you should know about how bankruptcy can affect you.
Life after bankruptcy: Rebuilding your credit
Bankruptcies do sometimes tank your credit. In some instances, bankruptcy helps stabilize your credit score, especially if you already have bills in collections.
After bankruptcy, you can immediately begin to build your credit back up. You’ll need to focus on building up your credit in a sustainable way, though.
To rebuild credit, one option is to take out a credit card that requires a full deposit. For example, you may get a $500 card when you give $500 to the company. If you ever default, the company already has the money it needs. If you don’t, the company simply holds onto that money as security. Why not just save that $500? Using a credit card immediately starts helping your credit.
Another good idea is to have a no-frills lifestyle until you get back on your feet. Try to avoid using credit cards (other than prepaid or those with deposits). Your end goal should be to eliminate debt from your life, so getting out of the habit of using these cards is a good idea.
If you do get a credit card to help build up your credit, remember to pay it off every month. At the same time, you should be building up a savings account, so you always have more money than you need, especially in an emergency.
These are some tips that can help you. After bankruptcy, you will probably find it difficult to get a mortgage or credit card for a few years, depending on the circumstances. A Chapter 7 bankruptcy stays on your credit report for 10 years, so you will need to start living on cash, build up an emergency fund and focus on recovering from the impact on your credit score.