A lot of people are seemingly blinded by the “fresh-start promise” usually associated with bankruptcy.
When they feel that they can no longer keep up with their credit card, medical, and personal debts, they often resort to the bankruptcy option. They rush into filing for bankruptcy thinking that they can immediately escape all their credit troubles. But rushing into bankruptcy can be disastrous especially to your credit history.
So if you are also considering bankruptcy, allow us to clarify some things regarding this debt option.
Things You Need to Know About Bankruptcy
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Bankruptcy will not discharge all your debts.
A bankruptcy may not cover all your debts. If you possess secured debts and student loans, you will soon realize that you cannot discharge them. These types of debt as well as taxes, child support, and alimony payments survive bankruptcy proceedings. You still need to pay each of these charges and credit accounts even after filing for bankruptcy.
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Not everyone can qualify for bankruptcy.
The latest bankruptcy amendments impose more stringent processes. You need to prove before a judge that you experience undue hardship that prevents you from paying your debts completely. This strict procedure is a way to properly identify qualified applicants for Chapter 7 or 13 Bankruptcy.
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Bankruptcy can inflict damage to your credit profile.
Bankruptcy mark can significantly reduce your credit rating. It can deduct as much as 100 points from your FICO score. Not only that; bankruptcy records are retained in your credit profile for a period of seven to ten years. And because of this, you may find it difficult to find lenders willing to extend you credit lines for the whole duration of your bankruptcy case.
Still, it is good to note that more and more creditors are now eager to lend cash even to those who have just undergone bankruptcy proceedings. This change is brought about by the slow recovery of our economy from the most recent financial crisis.
But what if you have already filed for bankruptcy? Can you still employ steps for you to achieve bad credit repair? Let us discuss the answers to these questions.
Steps to Repair Bad Credit History due to Bankruptcy
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Open new credit account.
You can only achieve bad credit repair if you will open a new credit account. Most credit counselors recommend that their clients take bad credit-credit cards like secured or prepaid cards.
Through these cards, people with bad credit and even bankruptcy records can have the chance to vindicate their credit reputation and prove that they are once again worthy to receive credit. If you will manage your bad credit-credit cards wisely,you can soon work on restoring your financial health. And in due time,you will attain thorough bad credit repair.
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Responsibly manage your new credit account.
If a person with bankruptcy records has been approved for a bad credit account, the next thing to do is to manage it responsibly. You need to pay your debts on time and in full. You should do this in a very consistent manner. Soon enough, you will discover that your efforts will pay off. You can re-establish your credit history and soon reinstate your standing as a credible borrower.
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Pay your remaining debts which are not covered in bankruptcy.
Of course you need to settle all your remaining credit accounts. Since they’re not covered in your bankruptcy, you need to make monthly payments on these debts. Try paying more than your minimum charge. Eventually you can completely retire all your credit accounts and soon regain your credit worthiness.
