Make a plan to rebuild credit after bankruptcy
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Are you drowning in debt? Are your days consumed by figuring out how you can pay your bills and dealing with aggressive debt collectors? There is a better way. If you can’t afford to service your debt, your credit cards are maxed out, and you’re living paycheck to paycheck, Chapter 7 or Chapter 13 bankruptcy may be the solution to fix your finances. But before you file, it’s wise to plan ahead on how you will make the most of your fresh start and get started rebuilding your credit.
Here’s a five-step plan to consider for rebuilding your credit after North Carolina bankruptcy:
#1 Get your credit report before you file bankruptcy
Pulling your credit report before filing bankruptcy is important because you want to make sure you get the most complete debt relief. You may not remember all your older accounts and having your credit report in hand when you meet with your bankruptcy attorney can ensure your petition (and your debt relief) are as complete as possible. You don’t want to leave anything off and shouldn’t. You can’t hold out certain accounts – all debt is weighed equally – and no creditor can be treated preferentially.
#2 Get your credit report after your discharge (or repayment plan starts)
With a Chapter 13, you will be on a three to five-year repayment plan. Pulling your credit report a few months after your payments began will allow you to see that all accounts are properly reflected as being in bankruptcy and are not showing as continuing unpaid. With a Chapter 7, a bankruptcy discharge comes a few months after you file. Pull your credit report again after you get the discharge so make sure all your accounts in the petition show “in bankruptcy” and no balance owing (for unsecured debt).
#3 Establish good bill-paying habits
To make the most of a financial fresh start from bankruptcy, you should start with the basics. Paying your bills on time and in full is the foundation of a better financial future. You’ll still have monthly bills after your bankruptcy – utilities, cell phone, rent/mortgage, etc. Make a spreadsheet or use a basic budgeting program to track the due dates and track your paychecks so always allow time for bill payments to be processed. Consider putting as many bills as you can on auto-pay.
#4 Set up a budget and stick to it
According to Forbes, roughly 60% of American households don’t use a budget, yet a budget is a key to financial stability. There are many free and low-cost budget apps and programs. Which one you use isn’t important – what’s critical is that you learn to budget, set a budget and stick to it. This will teach you the habit of controlling spending, living within your means and help you avoid future financial trouble. Be sure to build a line item into your budget for emergency savings and retirement savings.
#5 Reintroduce credit slowly and thoughtfully
Credit is a necessary evil in life. Even if you feel like you were burned by credit when you got into too much debt, you still need a good credit rating to help lower expenses. Your credit score can determine how much you pay for natural gas, car and homeowner’s insurance and what interest rate you pay for a car or home loan (or whether you can get one at all). Start a few months after your discharge with a secured credit card. Use it sparingly, pay off in full every month then work up to a secured card.
To most effectively rebuild your credit score after bankruptcy, slow and steady wins the race. You won’t be able to rebound your score overnight but can see a vast improvement within six months to a year after your North Carolina bankruptcy if you make wise choices and don’t over-utilize the new credit you get.
To find out more about Chapter 7 or Chapter 13 debt relief, contact the Law Offices of John T. Orcutt today. Call +1-919-646-2654 for a free North Carolina bankruptcy consultation at one of our offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.