Having financial problems can be like a dark cloud over your head. For many people, filing for bankruptcy gives them much needed relief from mounting debt that they cannot pay, as well as peace of mind.
But this piece of mind comes at a price, and before making the decision to file for bankruptcy, you should be aware of the ramifications that it will have on your finances and credit. For example, a bankruptcy will show up on your credit report for several years and can negatively affect your ability to get credit – as well as certain jobs. In addition, when you do get credit after bankruptcy, you will be subject to higher interest rates because you will be deemed a higher credit risk.
Life after bankruptcy
If you are considering filing for bankruptcy, keep in mind that you are far from alone. According to the American Bankruptcy Institute, in the second quarter of 2010, over 400,000 people went through a bankruptcy. And although it is difficult, there is life after bankruptcy and you can bounce back.
Evaluate your circumstances. After going through a bankruptcy, it is a good opportunity to evaluate what went wrong and why your financial problems occurred. This way you can face your credit future with both eyes open.
Know where you stand. Be sure to check your credit report to make sure that everything on it is accurate. The National Association of State Public Interest Research Groups reports that as many as 79 percent of credit reports have some kind of error listed on them. The last thing you want to do is leave a mistake lingering on your credit report that can prevent you from moving on from your bankruptcy.
Rebuild your credit. It can be difficult to get credit after a bankruptcy, but not impossible. You may be able to get a credit card with a small credit line that will help you rebuild your credit history. If you are unable to get an unsecured credit card, getting a secured credit card, where you put down money upfront that is used as your available credit, can go a long way toward showing that you can handle credit.
Pay your bills on time. Future creditors will want to know that you are able to pay your bills, so it is important to make sure that your rent and utilities are always paid in full and on time.
Get legal help
If you are considering bankruptcy, contact a qualified bankruptcy attorney who can advise you of your rights and help you get through the legal steps you need to take to get the relief that you need. Bankruptcy can be a complicated process, and you do not want to go through it without an experienced advocate on your side.