3 Things You Must Do To Cope With Bankruptcy

Many people look at bankruptcy as an easy debt relief tool. Though it is true that bankruptcy provides protection to consumers against their debt problems, but only when it is used as a last option. When you go bankrupt, you have to work hard to regain your financial footing and to rebuild your credit worthiness. The journey to financial recovery after bankruptcy is not at all an easy one. The good news is that there are still plenty of ways available out there that can help you cope with bankruptcy in a very efficient manner. However, it is important to note that your success here depends on how determined you are in your approach and whether you are consistent or not in your serious efforts. The process requires you to demonstrate a great sense of financial responsibility. If you are confident that you have all these qualities in you, you can handle the negative consequences of bankruptcy quite successfully.

Understand The Consequences Before Filing The Petition

If you are considering filing a petition for bankruptcy, you must first have a thorough understanding of how your life will be affected after you become officially bankrupt. This is the first step when it comes to developing strategies on how to cope with bankruptcy. It is very important for you to understand that not all types of debts are discharged under bankruptcy. There are certain debts, such as taxes and student loans, where you get no relief at all. Even after you are declared bankrupt by a court, you will still be liable to make payment toward such non-dischargeable debts. Likewise, you will also have to look into several other crucial things, such as whether you will be able to keep your home, car, and other important assets or not. Though exemptions are available for these types of properties, but in most cases, the exemption limit is not high enough to allow you to retain the properties. For example, if you have $3000 of equity in your car but if the exemption limit is $2000 only, the trustee will sell off your car and pay you $2000 in cash. As per the bankruptcy laws applicable in the United States of America, you may still be allowed to keep the car if you agree to continue making the payments toward car loan (but for this, you will first have to show proof of regular income that you are financially sound enough to ensure timely payments, which is a very difficult task). When you do a thorough review of the possible consequences in advance, it will help you prepare both mentally as well as financially. The more prepared you are, the better you will be able to handle the negative outcomes of bankruptcy.

Make The Bankruptcy Payments In A Timely Manner

The best way to cope with bankruptcy is to be financially disciplined, which is possible only if you follow a strict budget plan. The idea is to save as much extra money as you can so that you can make faster payment toward the debts that you still owe after getting bankrupt. The court will issue a payment plan for you to follow. You must follow this plan thoroughly without making any default. This will not only help you achieve a completely debt-free life, but it will also help you improve your credit score. Do not acquire more credit as long as the previous debts are pending in your name.

Rebuild Your Credit

Once you pay off all your previous debts, this is the time to acquire new credit so that you can start rebuilding your credit worthiness. It is very difficult to cope with bankruptcy as long as you have a low or bad credit score. Therefore, after regaining the financial foothold, the first thing you have to do is to work on strategies to increase your credit score. You can start by obtaining a secured credit card. You can easily qualify for it at a low rate provided you are in a position to make a decent amount of security deposit. At this point of time, when your credit score is very low, you will neither be able to qualify for a conventional unsecured credit card nor you are recommended to go for it (even if you manage to qualify for it). A secured credit card is a safer option, as there is very little room here to acquire high debts. You spend from the money you already have deposited. If you fail to make the payments, the lender will deduct the same from the deposit you have made. However, you can use this secured credit card in your advantage if you make the full monthly balances in a timely manner. When this timely payment of your credit card balances will be reported to your credit report, you will see a significant increase in your credit score within 3-6 months.

While you are busy working on your strategies to cope with bankruptcy, you must also monitor the entries on your credit report. You are recommended to review your credit report every six months. If you find some errors out there, you must get the same rectified immediately by filing a dispute with the three major credit bureaus that prepare your credit report.

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