What do you expect after bankruptcy?
Bankruptcy can provide a new lease on life by paying off unsecured debt and making your monthly living expenses more affordable. But bankruptcy is not something to enter into lightly or choose without first thinking about the long-term consequences of filing. For many people, a low credit score is a small price to pay for being debt free, especially when they are well informed on how to move forward and rebuild their credit after bankruptcy.
Start over
Most people who file for bankruptcy have credit card debt, so the thought of getting a credit card again can be scary. It is of course best to live within your means and save up to make purchases to avoid debt. However, your credit score is important, and it will only improve if you take steps to rebuild your credit. Immediately after you file for bankruptcy, your credit report will show the bankruptcy itself, as well as any late or missed payments from your past. By making full and timely payments of any bills you have, this positive history will soon outweigh the negatives. It’s wise to apply for a small credit card, even if you have to start out with a secured account with a high interest rate. Make small purchases and pay them in full each month, and you’ll see your credit score improve. Soon, you’ll be able to negotiate a better interest rate, which can make a difference when you use the credit for larger purchases in the future.
future purchases
If possible, it is best to wait some time after bankruptcy to finance a car purchase. If that’s not an option, (eg you lost your car in bankruptcy and you don’t have enough money saved to make a cash purchase) be prepared to pay a high interest rate after making a large down payment. The longer you wait to do this, while using your micro credit card, the lower payments you’ll end up with. Just like taking on any debt, be sure to closely review your budget to ensure payments are easy to manage.
You may be in a position to purchase a home within a few years of declaring bankruptcy. The lender will review your credit score and history before applying, as well as your current income and situation. Most lenders will require a hefty down payment, and you may need to jump through approval hoops and more paperwork than other buyers, but home ownership is definitely an option.
make a move
Every bankruptcy is different, but sometimes plaintiffs also have to deal with an eviction or foreclosure as part of their case. Others may choose to move into an affordable rental to make monthly expenses more manageable or want to upgrade after their debt is paid off. No matter the reason for moving, a new lease always includes a credit check. Bankruptcy won’t necessarily disqualify you from renting a home, but that depends on the landlord or rental company. It’s best to tell the potential owner ahead of time so they’ll be ready when they pull your report. Some people even include a letter explaining their circumstances and certifying that they are now able to make their rent payments.
No need to delay
Filing for bankruptcy can be disappointing, but for many people, it’s the best possible option. Instead of having a credit report that shows massive debts and delinquencies, you could have bankruptcy followed by clean credit. If scoring is unavoidable, the sooner you register, the sooner you will go in a positive direction.
