There were more than 730,000 chapter 7 bankruptcy filings in Q3 of 2013, according to the U.S. Bankruptcy Courts statistics. The climb back up to financial security will be slow. But by knowing a few key steps, you can increase your savings, repair your credit and rebuild your standing with banks, mortgage companies and other lending agencies.
Have a Good Attitude
Remind yourself that the bankruptcy gave you a chance to start over with your finances. See it in a positive light, because you will have to work to build up your financial stability. A positive outlook will get you through the tough moments better than lamenting your situation.
Adopt A Minimalist Lifestyle
You have almost no debt. You have no credit. It’s time to minimize your daily spending and put something away in savings. This will be the cushion for those things you need that you relied on a credit card for before, such as an emergency car repair.
You may have already taken some steps before the bankruptcy to reduce your monthly expenses. Get rid of expensive cable TV. If you have both a cell phones and a land line, stop the land line and just use the cell phone. Go out to eat less often. A few dollars saved here and there are dollars you can put into savings.
Your rent may be the highest expense you have each month. Consider moving into a more affordable space to save some money over the next couple of years. Services such as ForRent can give you a number of options to compare. Even saving a hundred dollars a month on rent helps to build up your reserves quicker.
Monitor Your Credit Report
You can get one free credit report each year from Experian, Equifax and TransUnion, the three reporting companies in the U.S. Check that everything on the report is correct. Companies do make mistakes or don’t record payments or settlements.
You can also include a comment on your report regarding the circumstances causing the bankruptcy. A note about a family illness or job loss won’t affect your credit rating, but it will be information that other reviewers of the report will see. It may help when applying for a job or obtaining insurance, both of which may check your report.
You can start building up your credit rating right after the discharge of your debts through the bankruptcy. A secured card, which requires you to place money in an account as a deposit, is one approach. Some credit card services offer unsecured cards at a higher rate to people who have just gone through a bankruptcy. You can also try to get a department store card or gas card.
The key to this working is to use only a minimum of your credit, such as 10 to 15 percent suggested by MSN Money, and pay off the total balance each month. This is one step to showing creditors that you can manage your money. Your goal should be to pay off the balance each month.
Pay all your bills on time. Any late payments will show up on your credit report and make it difficult to get extended credit for larger purchases, such as for a car or major home appliances.
Consumer Affairs recommends waiting 24 months before attempting to finance a home purchase. That gives you two years to build up a good credit score, which will get you a better interest rate on a home loan. Until then, you may find that any type of loan will be at a much higher than average interest rate.