There is life after bankruptcy
Bankruptcy is a word that scares many people, and those who have already filed bankruptcy often think their life is over for the next 10 years. This couldn’t be further from the truth.
Let’s start off with the most commonly filed bankruptcies: Chapter 7 is full liquation dismissal of all debts; Chapter 13 ids debt reorganization, where your debts are paid back through a court trustee; and Chapter 11 is a business bankruptcy debt reorganization.
Although bankruptcy should be your last resort, it is a provision that is necessary for consumers who are at the end of their financial resources and their debt outweighs their income. But there is life after bankruptcy, and quicker than you think.
I send about 10 consumers a month to file bankruptcy because they don’t have the income to settle their debts, but I can help them restore their credit after filing. My average client, after filing for bankruptcy, will be back in the 600 range within 80 days of discharge and in the 700s within one year.
In rebuilding your credit after bankruptcy, pull your credit report to make sure all your creditors are reporting zero balances and delinquencies after bankruptcy you will need to contact the credit reporting agencies to get your credit report corrected.
The next step is to re-establish your credit. First thing, stay away from companies who offer you a credit card with a large processing fee. These accounts usually do not end well. The best thing to do is open a secured loan, first for $500 with a bank or credit union; they will give you a loan against your own money. Once you have completed this, go to another bank or credit union and open a $500 secured credit card. This will give you one installment loan and one revolving account to start building your credit. (If you don’t know where to establish credit, U.S. new Mexico Federal Credit Union will open both accounts at the same branch using the same deposit.)
Within 60 days or less of completing these steps, your credit score should go into the 600s. It is very important not to use 30 percent of the credit card limit, because if you do it will drop your score. The upside: Within two years of bankruptcy, you can buy a home if was not included in the bankruptcy. If it was included, then it is three years. You can purchase a vehicle right after discharge, in most cases for less interest than the one included in bankruptcy.
As you can see, bankruptcy is not the end of your financial future, it’s the beginning of a new one. Folks, remember, just because you have credit issues does not make you a bad person. You’re just one of thousands caught up in the pitfalls of suffering economy, and it is your time to do well with new credit.
Don’t forget, if you need help we have a free credit education workshop and free credit manuals on the second Saturday of every month from 11a-1p. Call our office at 505-899-1448 to RSVP.