Posted by Advantage Tax Services, Inc.

How To Bounce Back From Bankruptcy

How To Bounce Back From Bankruptcy

To declare bankruptcy is an extraordinarily emotional moment in someone's life. If you have experienced what it feels like to be bankrupt, you feel like your credit is shattered without redemption. That might be the case, but the difference is that you can put it back. However, unlike some myths, bankruptcy is not the end of your financial life. You won't lose everything, but you will have the chance to rebuild your credit over time. To recover from bankruptcy is not easy. A note on your credit rating stating that you filed for bankruptcy stays with you for a minimum of six years after you have been cleared. However, during this period (the six years), you can start rebuilding your credit score. You will be able to borrow loans at standard rates with an improved credit that is free of debts. But to be able to take up loans after the six years, there are steps you need to take to help your credit rating.

How Bankruptcy Affects You as an Individual

Having a "bankruptcy" in your credit report can make your life a bit difficult. If affects your chances of renting an apartment, buying a house or a car, or even finding a job. And if you eventually get a loan, the perceived charges will be too much, when compared to those who are recognized to have a good credit history. However, after filing for bankruptcy, obtaining a credit card is not impossible. Credit card companies understand that individuals who filed for bankruptcy are not permitted to file again for the next six year from the date of the last filing. They also know that a bankruptcy survivor has had many corrective financial tricks, has more debt experience and is eager to start rebuilding credit, making them a good prospect.

Filing for bankruptcy is not the end

Bankruptcy is not only catastrophic financially, but it also has psychological effects, losing almost everything. You may experience the feeling of embarrassment, anger, and loss as a result of filing for bankruptcy, but it is essential to remark that this is only a temporary situation

Recognize and accept mistakes made with money

A good part of the transition from bankruptcy to recovery is recognizing the place where you made a mistake and taking responsibility for what you can control. Think of this as a self-induced rehabilitation program. The most challenging phase of doing this is to admit that there is a problem and indicate where it is wrong not to make the same mistakes. It is also advisable, if your expenses are uncontrollable, to identify the triggers to avoid them in the future and to increase your chances of success.

Create a budget

Track your expenses for six months to get an idea of how much you are spending on a daily basis, and where this money is going to. Once that has been sorted out, create a realistic budget that matches your monthly income. The first step in saving is to set your spending limits.

Take advantage of your credit counseling sessions 

During the bankruptcy process; you must have two counseling sessions with a credit counselor. These sessions provide valuable information and tools on how to prepare a budget, how to manage your money, and how to use credit appropriately to avoid the same mistakes in the future. Take advantage of it.

Get a Secured Credit Card

A secured credit card can be of help to you to establish your credit score before you are discharged. These credit cards require a deposit and the others have a monthly fee. However, if you use them occasionally and pay your balance at the end of each repayment period, you can start restoring your credit before resigning from bankruptcy. Of course, during bankruptcy, it is more difficult to acquire credit. However, regular payments create a record of evidence, not a financial summary, which creditors can analyze to show that you have diligently replenished your credit.

Observe Your Credit Report

Look at your credit report. You went through bankruptcy to get a blank piece of paper, and you have to make sure that it appears faithfully in your credit reports. You also want to take control of your finances and start taking sensible steps, which means you regularly monitor errors reported in your report. 

Get a new credit card

Getting a new credit card after filing for bankruptcy may seem like a paradox to rebuild your financial base, but you probably did not need a credit card more than now.

Create Emergency Funds

One of the best goals after bankruptcy is to start by creating a small emergency fund. It is possible that your bankruptcy is due to the need to resort to credit because you did not have enough savings to overcome the liquidity crisis. Now that your debts have been eliminated and your monthly payments are lower than they were before filing for bankruptcy starts saving money for a rainy day. 

Conclusion

The conclusion is that financial difficulties usually do not happen overnight. The process of rebuilding and improving the loan timeline will also take some time. Talk to a financial expert to help you out.

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