What you should know about rebuilding credit after bankruptcy
On behalf of The Rollins Law Firm posted in Personal Bankruptcy on Thursday, October 9, 2014.
There are many misconceptions about bankruptcy that can make people in Mississippi feel embarrassed or ashamed if they are in the position of possibly pursuing this option. Some people assume that filing for bankruptcy is the result of irresponsible spending or that it will permanently destroy someone's credit and may therefore try to cover up their financial troubles or ignore them.
But these flawed assumptions can prove to be detrimental. To begin with, there are millions of people who file bankruptcy not because of irresponsible spending, but because of extraordinary expenses like student loans and medical bills. Secondly, while bankruptcy will have a significant impact on a person's credit score, there are ways to repair and rebuild your credit toward a better financial future. In this post, we will look at some of the ways that people can do this.
If you file for bankruptcy, your credit score will take an immediate hit. This is the consequence of having all unsecured debt wiped away through Chapter 7 or set aside for repayment through Chapter 13.
It will also be difficult to start borrowing again right away. This is because people who have declared bankruptcy will typically face significantly escalated interest rates for any loan.
However, after the initial shock of these penalties wear off, people can begin reestablishing their financial profile. In order to do this, people will often:
- Prioritize saving money
- Minimize the credit they take on
- Pay all bills on time
- Get a secured credit card
These and other steps can be very effective ways of repairing financial damage, raising a credit score and making the most out of a financial fresh start.
Knowing that there are ways to bounce back after filing for bankruptcy protection should allay some of the concerns that people have about pursuing this option. However, it is still a serious decision that should be made only after careful consideration and perhaps with the guidance of an experienced bankruptcy attorney.
Source: Investopedia, "Bankruptcy And Your Credit Score," Caitlin Kelly, accessed on Oct. 9, 2014