There’s a lot of negative associations with personal bankruptcy. Some people think that it’s symbolic of financial failure, while other are afraid of being left destitute after their divorce is finalized. These understandings of divorce are way off base. The truth of the matter is that bankruptcy, whether Chapter 7 or Chapter 13, can provide you with significant debt relief while still leaving you with some assets through bankruptcy exemptions. Therefore, you can be secure in your financial life post-divorce without the overwhelming stress associated with significant amounts of debt.
Worries about credit score
Some people are concerned about their credit score post-bankruptcy. This is understandable. After all, you may need credit to purchase or rent a home, buy a car, or to assist in times of emergency. While it’s true that bankruptcy will affect your credit score for some time to come, it’s really not significant enough to put off seeking bankruptcy if you’re already drowning in debt. Additionally, there’s a lot you can do to rebuild your credit score after bankruptcy. If you’re worried about how bankruptcy can affect your credit score, then you should take comfort in your ability to take the some or all of the following actions.
Compare your credit report with your bankruptcy
Credit reports are known for containing mistakes that can negatively impact your credit score. So, after your bankruptcy is successfully discharged you should pull your credit report to ensure that charges that were discharged are reflected as such in your report. If they’re not, then you might want to follow up with the credit reporting agency.
Stay current on any outstanding debt
There are some debts that can’t be discharged through bankruptcy, or they are only discharged under extraordinary circumstances. Student loans fall into this category. There may be other instances when you simply wanted to reaffirm a debt to keep an asset such as a car. One way to increase your credit score is to continue to make payments on these remaining debts and make those payments on time. Missing payments will just set you back further, so hopefully the debt you shed during bankruptcy will free up the funds you need to stay current on your other debts.
Acquire new lines of credit, but do so sparingly
New credit often is available to people who have just successfully pursued bankruptcy, but your options may be more limited. You might be able to obtain credit lines at retail chains and gas stations, though, which give you an opportunity to secure new credit, pay it off regularly, and show that you’re responsible with your finances.
Seek a co-signer, if necessary
If you need a line of credit but simply can’t get one due to your credit score, then think about having a co-singer look for credit with you. A co-signer with a good credit score can make it much easier to acquire credit. But, again, do so sparingly. You don’t want to overstretch yourself or your co-signer, and you certainly don’t want to damage your reputation with your co-signer.
Repairing your credit will probably take some time, but it can and will improve if you follow the steps mentioned above and avoid financial mistakes. So, be patient with the process. Slow and steady wins the race.
Bankruptcy is too scary for some people, but those who feel that way often have misconceptions about the process and what it really means for them. Don’t make this mistake. Instead, inform yourself as much as you can about bankruptcy so that you can make the financial decision that is best for you.