Get A Regular Credit Card
Getting a new credit card can of course help you build a good credit rating. Before the bankruptcy process is over, youâll likely get a number of credit card offers in the mail. Be careful with this, though, as many credit card companies charge a high interest rate for someone who just completed a bankruptcy filing. If you do take out this type of credit card after filing, only charge as much as you can pay off at the end of the month and avoid cards that charge a high annual fee.
Buying A Home After Bankruptcy
As noted above, a bankruptcy will linger on your credit report for up to 10 years. This, however, does not mean you cannot qualify for a mortgage for 10 years.
Still, lenders want to be confident about the borrowers ability to repay. Besides all the usual investigation into job and income stability, theyll scrutinize at the applicants payment history.
After a bankruptcy, then, youll have to temper your new-house fever for, probably, at least a couple of years. Meanwhile, you can distinguish yourself as someone who makes timely payments on your secured credit card, and possibly your secured loan or car loan.
Also, the longer you can wait after bankruptcy, and the better you can rebuild your credit, the more likely you are to strike a better deal on your interest rate. A half-point difference on a 30-year fixed-rate loan could add up to nearly $100 a month, and tens of thousands of dollars over the life of the loan.
Once youre in the market again, after about two years be sure to include government-insured loans in your shopping. These tend to be more forgiving of bad credit scores. Investigate FHA- or, if youre looking in a rural community, USDA-backed loans. Veterans whove been two years with clean credit post-bankruptcy can access their VA benefits.
What To Do After You Receive Your Credit Card
The tips below can help you to manage your credit card responsibly after youve been approved for a credit card:
- Make your repayments on time. Youll need to make all of your payments on time to build your credit score. It can help to set up automatic payments from your bank account or set up a monthly reminder on your phone to make sure you dont miss a payment.
- Pay your card in full each month. You can save money on interest and avoid your balance getting too big if you simply pay the amount you owe off every month. This can help you rebuild your credit and make sure you dont get sucked into another cycle of debt thats difficult to get out of.
- Avoid using your card for cash advances. Try not to take out cash advances using your credit card since these often come with higher interest rates and can be difficult to pay off. If you need emergency cash, you may be better off looking into a bad credit loan .
- Keep your card balance below 30% of your credit limit. Spend only a portion of your allowable credit limit each month to show the credit bureaus that youre in control of your spending. This can help to increase your credit score as well.
- Dont pay your credit card off with borrowed money. Avoid paying down your credit card debt with other forms of debt such as payday loans or cash advances from other credit cards. This is because your interest payments can quickly get out of hand, leading you to spiral into more unmanageable debt.
Read Also: How Many Bankruptcies Has Donald Trump Filed
Use What You Learned In Your Financial Management Course For All This
Remember that second bankruptcy course you have to complete before getting your discharge? Itâs all about financial management. Take what you learn there and apply it to your daily life. And donât forget, there are a ton of free tools available to help you stay on track! Find one that you like and make it work for you.
Bankruptcy Discharge What Happens Next
If you declare yourself bankrupt, or youre declared bankrupt, youll usually be discharged 12 months from the date the bankruptcy order was made.
The discharge process is automatic and will usually come to an end after a year. However, if youve not cooperated and been completely honest with your official receiver or trustee, or youve not acted responsibly during your bankruptcy, it might not end at this time. This is known as a delayed discharge or suspended discharge and can extend your bankruptcy for up to 15 years.
Once youve been discharged from your bankruptcy, youll be free of some of the financial restrictions imposed by the order, meaning:
- You can now act as a company director, unless there is another reason why you cant hold that position.
- You no longer have to worry about any assets, pay rises, bonus payments or other windfalls being used to pay creditors. An exception to this is any payment protection insurance mis-selling compensation payments, from claims made before your bankruptcy.
Its worth noting that you wont be sent confirmation of your bankruptcy discharge, but you can get proof of your discharge by getting a free confirmation letter by calling discharge queries on 0300 678 0015.
Here are some useful next steps for after bankruptcy:
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Make Your Other Payments On Time
Not all of your accounts will be included in your bankruptcy. Student loans, for example, typically cant be discharged. Any accounts that are still active will continue to impact your score, so make sure you keep paying down any existing loans on time.
Don’t ignore accounts that arent on your credit report, either. These could eventually be reported, especially if you fall behind on payments. Your goal is to show creditors that your financial mishaps are behind you and slowly raise your credit score over time.
What To Do First To Start Rebuilding After Bankruptcy:
Organize all of your bankruptcy discharge information: After the bankruptcy, you will need all the paperwork you were provided for your discharge. If you lose them you can pay to get them online. It is important to keep all the paperwork, notes and debt information along with all the certificates you earned. The three most important papers are: the petition, notice of filing, and discharge.
There are several reasons to have these papers on hand. Your new lenders will want to see exactly what kinds of debt you filed for. The second reason is an old collector may come calling and you can then prove the debt is discharged.
That information can be seen on the credit report, but you do not want to risk errors or any creditor seeing more than they need to see to satisfy another loan.
Develop Good Credit Monitoring Habits: You are able to obtain your credit reports free annually. Do this religiously and make it a habit to monitor every piece of information on it to ensure it is correct. Any little detail can cost you going forward and post discharge is not the time to have that happen.
Make sure you know what collection agencies were on your credit report prior to discharge. In checking your post discharge credit report, you should not see a new company there. Sometimes old debt gets sold, so they can dupe you into paying. Make sure you stop this as early as you see it.
Also Check: How To File For Bankruptcy In Indiana Without A Lawyer
The Bankruptcy Process Can Be Financially Turbulent But When Its Done You Can Work To Steer Your Finances In The Right Direction And Start Restoring Your Credit
Depending on the type of bankruptcy you file, a bankruptcy can stay on your credit reports for up to 10 years, but Ruth Susswein, deputy director of national priorities at Consumer Action, says your credit can rebound long before that point.
Here are five ways to help build credit after bankruptcy.
Make Affordable Purchases Only No Exceptions
With access to credit cards and bank accounts, it might be tempting to fall into old habits. Splitting unnecessary or large purchases into multiple payments, using payday loans, or waiting until credit is maxed out before seeking help are risky financial practices. Use this fresh start as an opportunity to develop new, more responsible habits and to always keep them in mind when shopping.
Recommended Reading: What Type Of Bankruptcy Did Trump File
Apply For A New Line Of Credit
Adding a new line of credit can demonstrate that you can responsibly make on-time payments. In turn, itll help your credit score. However, when you apply for new lines of credit, the lender will do a hard pull on your credit. Every time you apply for new credit, your prospective lender accesses your credit report, says April Parks-Lewis, director of education and corporate communications at Consolidated Credit. Those inquiries can drag down your credit score.
As too many hard inquiries will ding your credit score, try to apply for credit lines you know you can qualify for. You can also apply to get prequalified, which results in a soft pull of your credit. When youre trying to build your credit after bankruptcy, here are some types of credit for you to consider:
Why this matters: A new line of credit can help you build your creditworthiness.
How to get started: Choose one of the options from above that fits your situation best and work on keeping that line of credit in good condition.
Review Credit Reports And Correct Errors
As stated above, all accounts discharged in bankruptcy should have a zero balance. In most cases, the accounts note that they were included in a bankruptcy. If an account that was discharged in your Chapter 7 is not correct, notify the creditor and the credit reporting agencies immediately. One of the benefits of discharging debts in Chapter 7 is that the accounts are closed, the balances owed are zero, and the company cannot report failure to make payments.
Heres a place where you can dispute incorrect items for each bureau:
Recommended Reading: Getting Apartment After Bankruptcy
Check Your Credit Reports Regularly For Errors
Credit reports arent perfect. In a 2012 Federal Trade Commission study, about 25% of U.S. consumers identified errors on their credit reports that might have affected their scores. Checking your reports regularly can help you find and dispute any errors.
After your bankruptcy is completed, make sure
- The accounts that were discharged in bankruptcy are reported as discharged.
- The discharged accounts have a $0 balance.
- The bankruptcy filing date is correct.
Dispute any errors you find, and if the error is on your TransUnion® credit report, you can file a dispute through the .
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Establishing Good Financial Habits
How Long Do Accounts Included In Bankruptcy Remain On Report
If the accounts were delinquent prior to being included in bankruptcy, they will be removed seven years from the original delinquency date on the account.
If they were paid on time prior to the bankruptcy, then the accounts will remain on file for seven years from the filing date of your bankruptcy.
The good news is that as time goes by and you begin to reestablish your credit, the bankruptcy notations will begin to affect your credit less and less. Eventually, the bankruptcy and the accounts included in the bankruptcy will automatically be removed from your credit report.
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Are There Any Employment Restrictions
The Bankruptcy Act 1966 does not impose any restrictions on employment, either during or after bankruptcy. However some trades or professions may impose restrictions.
We recommend you contact the relevant agency or association to see if your bankruptcy will impact your employment. Common professions that bankruptcy may affect are listed under employment restrictions.
Applying For Credit You Can Use Wisely
Its normal to feel scared about getting a new credit card, especially if credit cards were what got you into debt trouble. But there are other forms of credit that can also help rebuild your rating. Here are 2 tips that might help:
Cell Phone/Internet Contract: Like credit cards, payments for cell phone and some internet contracts are put on your credit report . Unlike credit cards, you know exactly how much these cost every month. Just be sure to never go over your usage caps and avoid paying for roaming and other extras. Contact your service provider if youre not sure how to block automatic overages.
Its also a good idea to shop around for not just the cheapest plans, but the cheapest plans that fit your needs. A $40 plan is pointless if you pay $50 in overage charges every month, just as an $80 plan is overkill if you only need half the speed and data. It can be worth going for a lesser cost and only topping up the odd time as you need it.
Secured Credit Card: Before using a secured credit card, you have to first give a cash deposit that covers its whole credit limit. If you ever become unable to make payments, youll lose the deposit and the card.
Read Also: How Long After Filing Bankruptcy Can I Buy A Car
What Is Bankruptcy
Personal bankruptcy is a legally binding process in Canada, which is governed by a federal law known as the Bankruptcy & Insolvency Act. This act was put in place by the federal government in 1992, as a form of relief for both the people in serious debt and their creditors. To be able to qualify for personal bankruptcy, a debtor must have lived or worked in Canada for at least one year, must owe at least $1,000, and be judged as insolvent . Its necessary to note here that only unsecured debt will be covered by personal bankruptcy. Secured debt, such as mortgage payments and car loans, will not be covered.
Read this to know the differences between bankruptcy in Canada vs. The USA.
As weve mentioned in some of our previous articles, bankruptcy should only be used as a last resort, because of the damage it can do to someones finances and credit. However, once a debtor has indeed run through all other possibilities and decides that personal bankruptcy is the only option, heres how it will work.
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A Fresh Start After Bankruptcy
Mei Ling and Matt are a married couple who rent a flat in Gosford NSW. Both worked full time until two years ago when Matt lost his job. Mei Ling now works part time earning less than $40,000 per year.
For two years they tried to survive on Mei Lings wage, struggling to make repayments on their overdue credit cards and loans. They ended up with unsecured debts of over $65,000.
The only assets they owned were a car worth $5,000 and general household goods .
The pressure from their creditors became too much to handle. Debt collectors and process servers were constantly calling on them. Their electricity was turned off a few times and they stopped answering phone calls because it always seemed to be bad news. Matts health was also suffering and he was treated for depression. Most nights Mei Ling would end up in tears thinking about their situation.
They finally decided to see a financial counsellor. There was no charge for this service. The financial counsellor looked through their finances and suggested they consider filing for bankruptcy.
Matt and Mei Ling went home and looked in detail at the AFSA website. They read all about their options and the consequences of bankruptcy. The AFSA website showed that they would be able to keep their car because it was worth less than the set amount. They read they could also keep their household goods. In the end, they decided that bankruptcy would be the best option for them.