Saturday, May 24, 2008

Recovering From Bankruptcy - Re-Establishing Your Credit

If you have filed for bankruptcy you have been through a very stressful, and probably humiliating, time in your life. It can be traumatizing to realize that you have hit rock bottom financially and you may feel panicked or shaky about what this means for your future.

You may feel guilty for what you were not able to pay. Or you may still be working your way out of Chapter 7 non-dischargeable debt such as student loans. Or you're trying to keep disciplined about paying off what you owe under your Chapter 13 bankruptcy payment plan. If you declared bankruptcy before certain expenses hit, new expenses may now be coming due. Keep working with professionals until you are through the process and for as long as you need their services while you rebuild. Get the emotional support you need from family and friends and try to keep a clear head.

If an unexpected life event has caused your debt trouble, make sure you're taking care of yourself and accepting friends' offers of help while you're sorting out your financial situation. If unrestrained spending has created your debt problems, you may want to think about getting some professional counseling help to identify the root of your overspending and what potential "triggers" to look for so you don't re-create the problem in the future.

Regardless of what caused your financial crisis, once your debts have been discharged, you have done what you could. Give yourself an emotional clean slate. Allow yourself a new start. Focus on ways you can begin, step by step, to create a different financial future. Here are a few tips to get on good, solid footing for your new beginning:

  • Create a budget. Maintaining self-discipline over your spending is really important in order to re-establish your credit. Having a budget puts your financial reality on paper and keeps it right in front of you. Creating and sticking to a budget is a great tool to boost your money management confidence and to give you some real resources and hope for a new, financially secure future.

  • Keep things stable. Credit bureaus and future creditors like to see that you have a stable employment history, residence, payment habits, etc. Start by staying in your current residence and job for a few years. Pay your bills on time and keep receipts of all paid bills.

  • Open an account. If you don't already have a checking or savings account, open one up and keep more than the minimum required in the account. Creditors like to see that you can manage your money wisely.

  • Use your credit card...wisely. After you've filed for bankruptcy, or even if you're just trying to repair your credit, using a credit card or charge card wisely can actually help you. Creditors like to see that you use your credit or charge cards consistently, and that you pay the bill consistently - on time and more than the minimum. If you can't get a credit card because of your bankruptcy, see if you can find someone to cosign on the card or apply for a secured card. A secured card is when you deposit money into a savings account with your local bank and then they give you a credit card with a line of credit for the amount of money in your account.

  • Think ahead about future expenses. Part of managing money wisely means thinking ahead about potential expenses in the near or long-term future and planning for how you will be able to pay for them. For example, you could begin by making a list of your bi-annual or annual insurance premiums, car inspection renewal costs, magazine subscription costs, club or association dues, sports team fees, etc. Budget for those expenses! If you lost your house, or still want to purchase a home, use that as a goal for managing day-to-day and future expenses. It will be a few years before you will be able to build up sufficient savings and credit to be eligible for a mortgage, but you can start rebuilding your dreams now.

  • Consider planning for contingencies. If you've come right up to the edge of not being able to pay your debts, or even if you've crossed that line into bankruptcy, you know how life events can dramatically change your financial circumstances. To best care for yourself and your family, consider how you would answer the questions:

    • What would happen if you or a working partner lost your/their job?
    • What would happen if you or another family member experienced a catastrophic illness?

    • What would happen if you or another family member suffered major property loss due to theft, fire, or natural disaster?

  • Start saving. Make it a goal to save enough money to cover at least 3 months of expenses in the event of an emergency.
With persistence and self-discipline you should be able to rebuild your credit within 3-5 years. Don't lose heart! It probably took you a while to get into financial difficulty, but with a plan and some discipline you can turn it around and get on solid financial footing again.

Stay Vigilant and keep an eye on your credit...

For more information on Credit Repair or Bankruptcy visit my blog at http://creditprotector.blogspot.com/

Thanks, Donald Martin

Shaped Wood Shingle Siding

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