Many people who are up to their necks in debt put off filing for bankruptcy because they worry that they will no longer be creditworthy after filing for debt relief. While your credit rating is sure to take a steep hit in a bankruptcy filing, if you are considering filing for bankruptcy, you are already in serious financial distress.
There are a lot of myths surrounding filing for Chapter 7 bankruptcy relief, and one is that you will not be able to obtain future credit. In actuality, you will likely be bombarded with offers of credit after your debt is discharged. True, the interest rates will be higher than those you might be used to, but the offers are real.
Read on to learn how you can rebuild your credit after your debts have been discharged.
Offset the negative
Since your bankruptcy filing will ding your credit for a decade, it's important to do some damage control on your end. By taking on a light debt load and repaying it promptly, you show potential lenders that you are indeed creditworthy.
To do so, you should only take on small debt loads that you can easily repay with your income. Creating a budget allows you to stay on top of your finances. All who file for Chapter 7 debt relief must attend credit counseling in order to have their debts discharged.
Put your new money management skills to work for you. Set up your monthly budget and stick to it religiously. Eventually — and often sooner than you anticipate — you will conquer the spending monster that led you to the brink of financial ruin.
Build an emergency fund first
According to the Urban Institute, everyone should have a minimum of $250 in savings for emergencies. While this is not a large amount, in most cases, it can cover minor unexpected expenses that were pitfalls for you in the past.
Don't accept every credit offer that comes your way
Those in precarious financial positions should refrain from signing up for every credit offer that arrives in the mail. Be discriminating about the offers that you accept and save the plastic for true emergencies.
Check your credit score regularly
Many consumers mistakenly assume that checking their own credit scores is detrimental to their credit ratings. It's not, and, in fact, you should get in the habit of checking your credit several times a year. That can alert you to fraudulent activity or false reporting that can adversely affect your creditworthiness.
Your Tyler bankruptcy law attorney can offer you other valuable tips on recovering from a bankruptcy discharge.