Although filing for Chapter 7 bankruptcy can eliminate most of your debts and allow you to make a fresh start, it will also have a long lasting impact on your creditworthiness. Did you know that a bankruptcy discharge will remain on your credit report for ten years? Nonetheless, an experienced bankruptcy attorney can advise you on all of your options. In the meantime, this article is a brief discussion on the steps you can take to restore your credit rating.
Credit Restoration: 101
Although there are many reasons why people go bankrupt, including loss of a job, divorce, and unexpected medical crises, people who are facing insurmountable debts often spend beyond their means. With this in mind, it goes without saying that it is crucial to develop and maintain better spending habits.
It is worth noting that those who intend to file for bankruptcy are required to attend and complete credit counseling through a court-approved program. These courses provide information and training on creating a budget and understanding income and expenses.
While you are in bankruptcy, it is crucial to live within you means and maintain a budget.
By tracking your spending, you can figure out ways to cut your expenses. Some of your options include using coupons, purchasing generic or bulk items, and most of all, curtailing unnecessary shopping.
Once you’ve established a budget, it is important to start saving money. In short, the rule of thumb is to save 10 percent of your income. The objective is to create a “rainy day” fund to cover living expenses for 6 months in the event of unexpected events, such as a job loss, sustaining an injury in an accident, or suffering a serious illness.
Finally, it may be possible to start rebuilding your credit by obtaining a secured credit card. Generally, these cards require that you deposit money as security, with the amount of the deposit being the amount of the credit line. By carefully using the secured card and making monthly payments on time, you can begin rebuilding your creditworthiness.
In the end, filing for bankruptcy is a serious consideration that requires the advice and guidance of an experienced bankruptcy attorney. Nonetheless, you can get back on your feet before your bankruptcy is discharged by taking steps to rebuild your credit rating,