Have you faced insolvency and don’t know what your next steps should be? You may not even know if any steps are possible after filing for bankruptcy. Keep reading to discover if life after bankruptcy exists and what it looks like.
12 Tips on How to Recover After Bankruptcies?
Each person who experienced the inability to pay off outstanding debts wants to recover after bankruptcy as soon as possible. Here are a few ways to start your new life and regain control over your financial situation.
1. Open a New Checking Account:
Changing bank accounts may often be the right decision after filing for bankruptcy. Although many banks won’t agree to open an account for a person after an insolvency, it is still possible. There are various second-chance programs for individuals in such a situation.
As a rule, when applying for a loan, you allow lenders to withdraw funds from your bank account automatically. And after your bankruptcy, creditors may still have access to it. Therefore, changing accounts can save you money from other people.
2. Open a Savings Account:
Once you have experienced what it is like to lose everything, you don’t want to face it again. That is why implementing good financial habits is essential to starting a new life after bankruptcy. An example of such practices is regular depositing to your savings account.
You can open a savings account at traditional or online banks or credit unions. It allows you to store money and earn interest at the same time. Determine a monthly sum or percentage you can deposit into your savings account and protect yourself from repeat bankruptcy.
If you want to increase your interest, consider depositing funds to a high-yield savings account, which generally pays more to its customers.
Another option is to establish an emergency fund. An emergency fund is a type of savings account that can help you prepare for unexpected costs. Making regular payments will develop your financial habits and help you feel confirmed in case of an emergency.
3. Get a Personal Loan for Bankrupts:
Getting a loan looks challenging after bankruptcy. People are sure they will never be able to get approved because of their bad credit scores. However, bankruptcy can be a fresh start for many debtors. Getting a loan may be more complicated than before bankruptcy, but it is still possible. Personal loans for bankrupts are one of the best examples of rebuilding credit options. Many lenders have lower requirements for people who have overcome bankruptcy. However, these loans often have higher interest rates and fees, so before you apply, ensure you can pay off the debt.
4. Pay Bills On Time:
On-time payments for utilities, debts, and other bills can be significant in building a good credit score, especially after declaring bankruptcy. You can contact a utility company to check whether they report your payments to the credit bureaus.
Regular payments reported to the credit bureaus can show your future lender or employer that you are financially responsible and help you slowly rebuild your credit.
5. Create a Budget:
Building a budget is a great option to achieve your financial goals and prepare for emergencies. It shows how you spend money and lets you prioritize your finances. To create a plan, try to calculate your monthly expenses. Take into account your outstanding debt, all bills, entertainment, grocery costs, rent or mortgage, and other factors.
If you feel the management of your finances is complicated, consider using budgeting apps, spreadsheets, or even writing all your expenses on paper.
6. Set Financial Goals:
Setting financial goals is a helpful element for effective time management. You can spend less and save more money when you have a purpose. It can be, for example, purchasing a home or car. Most importantly, you need to have a goal that will motivate you.
Create short-term and long-term goals. The first ones require their sooner realization, while the second ones can be accomplished in some years.
7. Apply for a Credit Card:
A credit card is a tool that can damage or rebuild your credit after bankruptcy. Credit card companies often require additional fees. Therefore, ensure you have enough money to pay for them before applying. Otherwise, failure to meet these expenses may lead to another debt. Try to make all payments on time, and soon, you will see improvements in your credit report.
Applying for a traditional credit card may often be complicated after bankruptcy. However, even if you don’t qualify, you can consider a secured credit card option. A secured card works similarly to the unsecured one. The difference is that you need to make a security deposit to open an account. This deposit becomes your credit limit.
A secured credit card is a great option to start your post-bankruptcy life. It is generally designed for people with bad credit, so a responsible attitude and on-time payments can help your credit score rise again.
8. Save the Documentation About Your Bankruptcy:
Don’t treat your documentation from bankruptcy just as a reminder about the worst period in your life, which you need to remove as soon as possible. It can be proof for your debt collector or future lenders. Many loan providers may ask you about your bankruptcy case, so it is better to be prepaid to provide all the necessary copies.
9. Monitor Your Credit Reports:
Regularly monitoring your credit reports is especially important after a bankruptcy proceeding. Bankruptcy damages people’s credit scores, so their improvement becomes significant. You can check your credit report for free online once per year and even set up fraud alerts through your banks.
Monitor your report regularly to ensure there are no errors. Every mistake can hurt your credit score, so check all details carefully. Contact the credit bureaus that made errors if you see any inaccurate information. All credit reporting agencies have dispute forms where you can explain your situation and point out the mistake.
The investigation can take up to 30 days. Then the credit bureau will contact you in writing and send you a free copy of your credit report.
10. Get a Job:
If you are unemployed now, start to find a job as soon as possible. Having a workplace is essential after filing for bankruptcy and can significantly improve your financial future. Your employment history is one of the most important factors for your potential lenders or employers. Therefore, start working to demonstrate your financial stability.
11. Get Affordable Housing:
If you declare bankruptcy, be prepared to have difficulties with renting accommodation. Landlords pay attention to your credit report, so you may have problems being approved as a tenant after the bankruptcy filing.
However, you can start small and share the rent with somebody else. Renting a room is generally much simpler than the whole apartment and landlords for such individuals lower requirements. Making on-time payments for your room is a great way to begin rebuilding your credit. It will allow you to afford better rent options in the future.
12. Find Help for Mortgage and Car Loans:
Filing for bankruptcy damaged your plans for buying a car or property? Don’t worry, and start saving money for the down payment! Regardless of your credit history, you can still get approved for a car or mortgage loan. Several lenders approve borrowers with unfair credit if they have a cosigner. Your parent or relative with a good payment history can help you get a car loan or buy a house on favorable terms.
Some lenders can approve you even without a cosigner. If you fill out Chapter 7, you can apply for such a loan in four years. In the case of Chapter 13, the waiting period takes two years. However, you need to start rebuilding your credit history to get a loan after bankruptcy. Borrowing money, in your case, may lead to a higher interest rate, but at least it is still possible.
Another issue you may face after declaring bankruptcy is getting car insurance. Many companies may refuse you because of your bad credit. However, if you are ready to pay more, consider getting insurance from high-risk organizations.
What Are the Most Common Types of Bankruptcies?
Declaring bankruptcy can be the right choice if you understand you can’t pay off your outstanding debts. Analyze different types of bankruptcies and choose the most suitable one for your situation.
Life After Bankruptcy Chapter 7:
Chapter 7 bankruptcy is a typical case among Americans that remains on the credit report for up to ten years. It is longer than in the case of, for example, chapter 13, where the bankruptcy disappeared from the report within seven years.
However, chapter 7 bankruptcy allows you to discharge your debts if you can’t return them. Debtors generally sell their assets to creditors to repay as much of their debt as possible. The remaining amount is dismissed. Depending on your state, after filing Chapter 7 bankruptcy, you can liquidate your property by selling a car, jewelry, home, personal belongings, and other property.
However, it is necessary to understand whether you meet the eligibility requirements for Chapter 7 bankruptcy discharge. You can consult a bankruptcy attorney, which will help you understand your chances. As a rule, people with an income below the median for their state are more likely to fill Chapter 7.
Life After Bankruptcy Chapter 11:
Chapter 11 bankruptcy may be the necessary decision for individuals and businesses. It is often called reorganization bankruptcy because it helps small and big companies to continue working while the owners make repayment plans for their debts. It means that a business owner can still complete contracts, maximize profits, and sell items regardless of specific limitations.
However, chapter 11 bankruptcy may not be affordable for everyone. It often has a long timeline and is too expensive. Chapter 11 can be repaid for five years, and its costs can reach $100,000 because of the necessity of legal advice.
Life After Bankruptcy 13:
Chapter 13 bankruptcy makes repayment of your debt more manageable and allows you to return it according to a repayment plan for three to five years. During this period, you pay a fixed sum on a monthly basis to the bankruptcy trustee and need a court’s permission to apply for a new debt. In this bankruptcy case, you need to strictly adhere to the plan and make on-time payments to avoid losing your assets.
Chapter 13 bankruptcy can hurt your credit score by nearly 200 points and will stay on your credit reports for seven years. Thus, after filing for Chapter 13 bankruptcy, you need to devote enough time to your financial recovery.
Bottom Line:
Even if you lose all your money and property, life after bankruptcy still exists. There are many options for surviving with damaged credit and recovering after personal bankruptcy. Pay your bills on time, save money, look for a job, and start a new, debt-free life!
Disclaimer:
CBD:
Qrius does not provide medical advice.
The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) outlaws the recreational use of cannabis products in India. CBD oil, manufactured under a license issued by the Drugs and Cosmetics Act, 1940, can be legally used in India for medicinal purposes only with a prescription, subject to specific conditions. Kindly refer to the legalities here.
The information on this website is for informational purposes only and is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or another qualified health provider with any questions regarding a medical condition or treatment. Never disregard professional medical advice or delay seeking it because of something you have read on this website.
Gambling:
As per the Public Gambling Act of 1867, all Indian states, except Goa, Daman, and Sikkim, prohibit gambling. Land-based casinos are legalized in Goa and Daman under the Goa, Daman and Diu Public Gambling Act 1976. In Sikkim, land-based casinos, online gambling, and e-gaming (games of chance) are legalized under the Sikkim Online Gaming (Regulation) Rules 2009. Only some Indian states have legalized online/regular lotteries, subject to state laws. Refer to the legalities here. Horse racing and betting on horse racing, including online betting, is permitted only in licensed premises in select states. Refer to the 1996 Supreme Court judgment for more information.
This article does not endorse or express the views of Qrius and/or its staff.
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