Recovering After A Bankruptcy


Bankruptcy. Just the word makes you think of people who have lost everything they own: house, cars, credit cards, etc, and have practically no hope of getting anything in the future without paying cash for it for years on end.

Truthfully, the credit future for people who have financially caved-in, or may be considering it, isn’t a bleak as we’ve all been told. Although it certainly won’t be easy, it is possible get to floating capital again—even with the black mark of default on your record— in a fairly decent amount of time. According to the Consumer Reporting Act, a declaration of bankruptcy will completely fall off of a person’s record six years after he/she has satisfied the default. When you file bankruptcy, all the things you own, including your income, become the property of the person administering the default, i.e., the bank, the mortgage company, etc. Every month, you pay a set amount to whoever is in charge of your particular case, and possibly meet other requirements such as attending credit counseling, until the bill is paid off, or “discharged.”

Once you’re done settling your accounts, your focus should shift to getting things back on track again. The first thing you need to realize is that, while the record of a filed insolvency will be noted on any statement issued by a credit reporting agency, the more time has passed since it was requested, the less it matters. So overall, a default from 10 years ago, for example, would look better in to people in a position to lend money than a more recent one of say, 2 years. What’s more, it is actually possible to be viewed as a better financial liability once you’ve gone through the deficit and repayment process than you may have been in the first place!

Next, understand that even though you defaulted in the past, there are things you can do now to help get your standings back up, and many of them are pretty simple. The first step is just to talk to someone, like a banker, and let them know you hit a rough spot but now you want to start the credit repair process to get your standings back up. He/she will likely suggest that you open a savings account of some sort, because this is a big step in fixing things. Then save, save, save and save some more: when you get paid, take a small amount, as little as $5, and put it in your savings, if you get a pay raise or a bonus of any kind, bank it. If money seems to run through your hands like water, hide it from yourself; open a whole new account elsewhere and have the money sent from the regular account straight to the new one, without you having to touch a single bill of it.

Saving is an extremely important thing to do if you want to get a charge card, one of the more common ways that people recover after financial fallout. A lot of banks now offer what are known as “secured” credit cards, where the amount of money you have to spend is directly tied to some form of collateral, like a bank account. You’re generally given the bare minimum amount to begin with, and as you show that you are able to make the payments on time, the limit is slowly increased. A similar way to resurrect your rating would be taking out a small loan, also tied to your bank account, then paying it off on schedule. Finally, remember that it takes six years for the declaration to fall off your record, and while that’s a long time, it isn’t forever. There are financial institutions that are willing to offer homeowner’s loans to people who have been exonerated for at least two years, and can show successfully rebuilt credit going back two years or longer. In these cases, the amount of down payment you are able to provide, and the stability of your income are looked at more closely than are any past deficiencies.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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