Bankruptcy offers many debtors the fresh start they need to achieve financial stability. In order to take full advantage of this opportunity, however, it is necessary to start rebuilding your credit once the bankruptcy process is complete. Here, the attorneys at Long & Long provide advice on life after bankruptcy.
The Bankruptcy Stigma – Truth or Fiction?
What do Larry King, J.C. Penney, and Abraham Lincoln all have in common? Before they were rich and famous, they went bankrupt. These examples prove that no matter how bleak your situation is right now, it is possible to drastically improve your future.
One of the most common concerns clients have when they come to Long & Long is the stigma related to bankruptcy. However, any stigma against bankrupt debtors has greatly diminished over the last 20 years, and there is no indication these debtors will be treated less favorably in the future. Therefore, do not count out Chapter 7 or Chapter 13 bankruptcy as an option until you have fully explored the subject. In fact, the ability to reestablish your credit after bankruptcy is better than ever before.
Rebuilding Your Credit after Bankruptcy
Although bankruptcy can remain on your credit report for up to 10 years, you can start reestablishing your credit immediately. When lenders determine whether or not to lend you money, they examine your debt to income ratio, which is how much outstanding debt you have compared to your income. Often, lenders would rather loan money to a person who has already filed bankruptcy and has no remaining debt than to a person who has $20,000 in credit cards and could file bankruptcy at any time.
Some clients are able to purchase a vehicle on financing the day they receive their bankruptcy discharge. You will probably pay a percentage point or two higher than a person with unblemished credit, but ask yourself how low of an interest rate would you be able to get in your present situation. You should also be able to finance a home within two years after receiving a bankruptcy discharge, as long as you can provide a minimum down payment and show the ability to make the monthly mortgage payment.
Positive Steps to Get You Back on Track
Repair your credit report – First, ask the credit bureaus to correct any errors in your credit history. Second, ask for the addition of information such as current and previous employer, current address and telephone number. All this positive information will help repair your credit report and provide creditors evidence of stability.
Utilize credit cards – Many consumer debtors receive credit card solicitations within months of receiving a bankruptcy discharge. Use your newly acquired credit cards every month for small purchases and then promptly pay the balance to avoid interest charges. If your credit card application is rejected, find a co-signer or apply for a secured card.
Get and stay current on all your accounts – If you are behind on any of your accounts, creditors will send your accounts to collectors and this will negatively impact your credit score. If you fall behind on payments, contact your creditors or see a credit counselor and let them know your situation. This will give you a chance to work something out with the creditors, possibly delaying reports of delinquencies to the credit agencies.
Contact Us Today & Take the First Step Toward Becoming Debt Free!
We understand that life after bankruptcy can be intimidating for clients, but with diligence and care, a better financial future is possible. For more information about bankruptcy, contact Long & Long PC today. We will schedule an appointment to meet with you as soon as possible. Since we have offices in Denver and South Metro, we likely have a location convenient to your home or business.