Is There Life After Bankruptcy?
Traveling through the "bankruptcy maze" is not an easy journey. Just trying to understand the bankruptcy process; what schedules to fill out, gathering all the required documentation, what is exempted and what is not..... what a headache! That does not include the months or years prior to the bankruptcy in which you had to haggle with creditors, scrimp together enough money to file and deal with the fear that something might go wrong or you might be denied. Anyone who survives bankruptcy can either come out stronger or be mentally damaged for life.
The statement we most often hear from clients is " I'm never getting another credit card again!" While this may seem to be a way to simplify your financial life, the reality is you will probably need one somewhere down the road. So now the question "Is There Life After Bankruptcy?" becomes important. Here are some steps to take to rebuild you credit.
Get a credit report review within six months of your bankruptcy discharge.
1. Make sure all of the creditors listed in your bankruptcy have been "rolled up" in the public section of your credit report. Creditors are listed as trade items in a credit report. If you filed bankruptcy on them they should not show as a trade item in your credit report but will be part of the public record. If you find one listed, dispute the item with the credit bureaus as inaccurant information and have it removed. You will need to send a copy of your discharge papers to the credit bureaus as part of the dispute.
2. If you missed a creditor when filing bankruptcy you cannot put them in now. You will need to call them and make payment arrangements. Make sure they were actually missed when filing. Get out your discharge papers and compare them to your credit report.
Prepare for rebuilding your credit by getting your financial issues under control.
1. Build a budget. List your monthly income and expenses to make sure you have enough money coming in to meet expenses. You don't want a credit card that you can't afford. Been down that path before..remember? Personal finances take time to manage but it is well worth it. Setting a budget and even starting a cash envelope system are great tools to help you stay on track and get your credit back as well as your good name.
2. Plan for your emergencies. Set aside a savings as an emergency fund that can be used when financial troubles happen (and they will happen). Don't use that new credit card to help fill in the gap between income and expenses. Use it only to rebuild your credit.
Managing your credit card 101
1. Now you are ready to start rebuilding your credit. Start with making on time payments on homes, cars and utilities and cell phones. Having a credit card is not the only thing creditors look at to determine whether to loan you money. Mortgage payments and car payments hold a much higher value and can help rebuild credit without ever obtaining another credit card.
2. Wait one year after your bankruptcy to apply for a credit card. There are cards you can load with your own money like Greendot but, most do not report to the credit bureaus and therefore will not rebuild your credit. Credit Bureaus are developing products, such as pre-paid debit cards they can track. However, it is not set yet, so don't jump into that product. Remember you want to build credit.
Types of credit cards
1. There are two different types of credit cards; secured and unsecured. For unsecured credit cards, there are several websites ( www.bankrate.com, www.creditcards.com ) for information on which creditors are giving the best offers. Secured cards are harder to find. You can talk with your bank about obtaining a secured credit card. You would be required to open an account with generally $500.00 to cover the "risk" the bank would incur by giving you credit. These cards can be reported to the credit bureaus but make sure to check with your bank.
Just remember building your credit after bankruptcy will take time and discipline. The good news is bankruptcy is not the kiss of death and life does go on.