Filing for bankruptcy can be embarrassing and intimidating, especially when you think you’ll become a financial pariah when it’s all over. Don’t lose hope. There is life after bankruptcy and many Americans can achieve financial stability with just a few habit changes. If you’ve filed for bankruptcy recently, take these steps toward a brighter financial future.
Create a Budget and Safety Net
After a bankruptcy, you’ll have to create a stable financial situation from scratch. This means building healthy money habits all over again. The best way to begin saving is by writing out all your necessary purchases for each month. The goal is to dedicate as much of your monthly take-home pay to savings as possible so you can rely on those savings as an emergency fund if anything disastrous comes up. Building a healthy emergency fund keeps you from relying on credit cards and payday loans when your car needs to go into the shop or you need medical attention.
You should have received budgeting instruction during your bankruptcy proceedings, but if you are struggling to budget responsibly, seek out help from a credit counselor. Budgeting your money for all your most important expenses and tucking away a little extra for a rainy day can help you feel more confident in your money management skills as you move on with life.
Open a Credit Card
This may sound counterproductive, but opening a new line of credit can help you prove to potential lenders that you’re a more responsible borrower now. You’ll be hard-pressed to find a major credit card company that will approve you for a line of credit due to your past history, but you can start rebuilding your credit score with limited lending options like a secured credit card.
Secured credit cards allow you to pay a deposit to the lender and be approved for anywhere from 50 to 100 percent of your deposit in credit. The interest rates on secured cards may be higher than unsecured ones, but temporary, responsible use will prove invaluable for boosting your credit score. As long as you pay off your balance every month you should avoid accruing any interest. Use it for small purchases like groceries or oil changes and pay the debt on time. Make sure you’ll be approved for a card before you apply though, as credit inquiries can slowly lower your score.
Even something as simple as a retail loyalty credit card through a department store can improve your credit score over time. Take advantage of any borrowing opportunities that may prove you’ve adopted more responsible financial habits.
Make a Large Purchase
Once your credit score has recovered well enough, borrowers who have filed for bankruptcy can consider making large purchases and financing a loan. Whether you’re applying for a mortgage or a car loan, consistent repayment of big-ticket items like a house or car will do wonders for your credit score. Because your bankruptcy will be visible on your credit report for up to a decade, you’ll likely receive slightly higher interest rates from lenders, but you should be able to refinance after a few years of faithful repayment.
If you’re in the market for a loan soon after bankruptcy, you may qualify for an FHA loan if you can prove financial stability and responsibility for one year. However, the longer you give yourself to rebuild credit before taking out a large loan, the more attractive your interest rates will be.
Bankruptcy Attorney in Orlando, FL
Filing for bankruptcy is inarguably stressful. It can feel like your entire world is ending. With the right team of bankruptcy professionals on your side, though, you’ll be able to confidently navigate the confusing process of a Chapter 7 or Chapter 13 bankruptcy.
At Bartolone Law, our attorneys understand that you need a compassionate partner that can help you get a fresh financial start. We aim to make the process as straightforward as possible so you can start rebuilding your finances and reputation with creditors. If you would like to learn more about bankruptcy law, contact us online or call 407-292-4440 to schedule your free consultation.