We all know that the bankruptcy process has a bad rap. Many financial “experts” recommend bankruptcy only as a last resort however, at that point it could be too late.
People assume that if they file for bankruptcy, their credit will be permanently ruined. They wrongly fear never being able to get future credit, a car loan or a home mortgage.
These fears are completely unfounded.
While bankruptcy does temporarily damage your credit, the process is designed to provide a fresh start.
By clearing your credit report of negative items and wiping out your debt, bankruptcy paves the way to a new financial future.
Regrouping and Starting Anew
The hard part is already over. You have made the difficult and courageous decision to file bankruptcy.
Assuming your case was successful (as most are), your debts have been discharged and you have a chance at a fresh start. It is time to regroup financially and start rebuilding your credit.
A first logical step in this process is to apply for a secured credit card. A secured credit card is a low limit card where you are required to place a deposit with the issuing bank.
The credit limit will usually equal your deposit amount. While this ensures that you will not accumulate extensive post-bankruptcy debt, it is still important to use the card responsibly.
While a secured credit card could be the first step in establishing future credit, more doors will open as your credit improves.
I truly believe that bankruptcy shows that you took affirmative steps to resolve your credit issues and therefore, you are less of a credit risk post-bankruptcy.
Be Proactive but Cautious
After bankruptcy you want to do everything possible to rebuild your credit but you want to be careful and calculated.
It is important to monitor your credit report to make sure it is accurate. You can request one free report per year from www.annualcreditreport.com.
You will want to spend cautiously and within your budget.
Finally, you should be wary of credit repair services promising to clear your credit report and magically improve your score. These companies do nothing that you can’t do on your own and they sometimes charge outrageous fees.
So, be patient methodical and steadfast post-bankruptcy. The road to financial recovery is a lot shorter and smoother than the ruinous road that led you to bankruptcy in the first place.
Bankruptcy is not the end of the line. It is a new financial beginning for you and your family and it is important to regroup and make the most of it.
Image courtesy of Nicholas_T (Flickr).