Bankruptcy is a legal procedure, created to provide a fresh begin to financially challenged individuals. Although bankruptcy can provide help in many instances for individuals in financial burden, many individuals are skeptical about filling bankruptcy.
Many people are worried about filling bankruptcy due to their lack of knowledge on bankruptcy. Most individual’s fears in filing for bankruptcy are: the fear of losing assets/property, the negative effect on their credit and concerns over the involvement in filing for bankruptcy.
Fear of Losing Assets/Property
If you file for bankruptcy, you can rest assure knowing you won’t be left out on the street with nothing to your name other than your underwear. Most assets owned by debtor’s in a bankruptcy filing are exempt, and debtors hardly ever lose any of their assets or belongings. Assets exempt from creditor claims varies from state to state, but your private home, vehicles, and many other assets are free of the reach of creditors.
Even the items that debtors have that are not exempt are normally of no interest to lenders. Your lender does not want your flat display TV and smartwatches are worthless to a creditor. Most of these assets either have little intrinsic value to a defaulted creditor.
Fear of Negative Impact on your Credit
Filing for bankruptcy will undeniably have an outstanding effect on your credit score but you will be able to keep your assets and rebuild your credit. Although much of your outstanding credit will be discharged through bankruptcy (student loans debt, alimony, child support, criminal fines are not canceled through bankruptcy). With the discharge of unsecured debt, like credit cards, will give you a fresh start. With the freeing up of income from discharged unsecured debt, you will be able to work on rebuilding your credit and save for retirement of other family goals.
Bankruptcy will not adversely affect your credit. Those who file bankruptcy experience a 50 -100 point increase in their credit score. The loss of crippling debt opens up credit to new bankruptcy filers. New lenders will not loan money to those debtors with judgments, tax liens, or large credit card balances. The new creditors looking at the prospects of repayment are reticent to lend money to those debtors who have large amounts of debt owed and subject to garnishments, judgments, or repossessions. After filing bankruptcy, it will take a year to get a credit score that would allow you to buy a vehicle or a house, at favorable interest rates. With frugality and prompt payment of debt, your credit score with rise quickly. Individuals filing bankruptcy should self-examine spending habits and start working on rebuilding their credit score. Below are a few recommendations to help rebuild your credit after filing for bankruptcy.
Payday loans should be the last thing you resort to and should be avoided at all cost! The interest fees are excessive, and the credit bureaus disfavor the use of such credit arrangements and diminishes your credit score.
Learn to live inside your monetary limits. Spend your money wisely and do not purchase luxury objects that are not a necessity. This is an essential lesson to learn and live by to gain financial stability in the future.
Open a new checking and/or savings account. Lenders will consider this a positive when figuring out if you are responsible enough to lend cash to.
After you file for bankruptcy, you will get numerous unsolicited credit cards in the mail. Some of the card will have fair interest rates (10-14%) for those rebuilding their credit and others will carry 29.9% interest. The high interest cards should be discarded. If by chance you are unable to get decent interest rates on a credit card, apply for a secured credit card and make payments on time. This will reflect positively on your credit score and assist you in establishing a reliable payment history. When applying for brand new credit, try to begin with a gas card or store credit card. These cards are easier to qualify for and can help rebuild your credit with a low monthly payment.
Pay all your credit card and utility bills on time!
Use a co-signer to qualify for loans and/or credit cards. This can help you get a lower APR and help individuals have lower monthly payments.
These few small suggestions will help you to reestablish your credit score records after filing for bankruptcy. Don’t give up hope; it’s going to take about a year, self-discipline, and determination and you will have low interest rates and the ability to buy a home or vehicles at favorable interest rates.