Life After Bankruptcy
While filing for bankruptcy is never an easy decision, it is important to know that there is life after bankruptcy. People who file bankruptcy can not only survive social stigma, but rebuild their credit and lead satisfying lives.
After filing for bankruptcy, you may find it difficult to obtain credit since your credit score will be negatively impacted; however, it is not impossible to do so. Many lenders will take a chance on someone who’s filed for bankruptcy, but will only offer a loan or credit at a higher interest rate.
Bankruptcy not only affects your credit score and ability to obtain credit, but may also make it difficult to rent a home or get certain jobs. Many employers and landlords run background checks on potential renters or employees; part of that background check may include a look at your credit. For employers, a bankruptcy may indicate that you are a risk to a company, especially if a security clearance is required for the job. For landlords, a bankruptcy may indicate that you will not pay your rent on time.
Bankruptcy can be included on your credit report for a maximum of 10 years. Once your bankruptcy is cleared from your record, you may still be asked if you’ve ever filed bankruptcy to obtain credit in the future. Failure to answer this question truthfully can be considered fraud.
Below are some tips to help you rebuild credit after bankruptcy:
- Create a budget and stick to it. Learn to live within your means; do not spend more than you can comfortably afford.
- Pay bills on time. Paying your bills on time will help boost your credit score and be a sign to potential lenders, employers and landlords that you are committed to being financially responsible.
- Get an installment loan (i.e., car loan). Getting an installment loan is another good way to start improving your credit. You may have to pay a higher interest rate, but installment loans are seen as “good debt” and can improve your credit as you consistently make monthly payments.
- Avoid credit card debt. Credit card debt is considered “bad debt.” If you choose to use a credit card after bankruptcy, it is important that you only charge as much as you can afford to pay back each month. Making only the minimum payment on a credit card can dig you into a deep hole of debt in a hurry.
- Refinance loans. If you take out a high interest loan soon after your bankruptcy, seek to refinance that loan a year or two later. You may be eligible for lower interest rates that can save you a lot of money in the long run.
- Review your credit report. You are legally entitled to one free credit report from each of the three credit reporting agencies (Experian, TransUnion and Equifax). Be sure to check your credit report for errors that may inhibit your ability to rebuild your credit.
Bankruptcy gives you a fresh start to live within your means and rebuild your credit with time. While there are definitely hurdles you will have to overcome as a result of your bankruptcy, those difficulties will not last forever if you make wise financial decisions in the future.
If you have questions about bankruptcy, or would like to learn more about how bankruptcy may affect your life, it is a good idea to talk to a bankruptcy lawyer. A good bankruptcy lawyer should not only be able to tell you what life may be like after bankruptcy, but help you determine if bankruptcy is the best option for you.