Monday, August 18, 2014

Burdened by Bankruptcy? 5 Quick Tips for Emerging from Debt

If you declared bankruptcy in the past couple of months or years and are still struggling to get back to normal, you can be proactive to improve your life. The whole point of enduring a bankruptcy is to get your life back on track. Let's take a look at four tips to help you rebound.

Chapter 7 vs. Chapter 13 Bankruptcy


Although filing for either form of bankruptcy means it will show on your credit record for the next 10 years, there are significant differences between the two. With a Chapter 7 bankruptcy you likely had barely any disposable income, so you will be forced to liquidate your non-exempt assets in order to appease your creditors. Though this type of liquidation likely won’t cover the full amount owed, the remaining debt will be discharged (in nearly all cases).

If you are eligible for a Chapter 13 bankruptcy, also known as a reorganization bankruptcy, you meet minimum income requirements to avoid a complete asset liquidation. Instead, you’ll be able to keep your home and other assets as long as you adhere to a court-approved repayment plan. You will still be expected to pay your regularly scheduled mortgage and car loan payments in order to keep those assets.

If you qualify for it, Chapter 13 is much preferable to Chapter 7 bankruptcy, but in both cases you will have to rearrange your life in order to meet your obligations.

Create a Detailed Budget


Once you've declared bankruptcy, you'll have to develop a plan to handle your finances. This means spending mainly on necessities, with only a few luxuries from time to time. Follow the advice of Greg McBride: “Track your expenses for three months to get an idea of how much you're spending and where that money is going. Then create a realistic budget that fits within your monthly income.”

Apply for a Secured Credit Card


In order to rebuild your trustworthiness with credit, you'll have to start out with baby steps. The first step is obtaining a secured credit card. A secured credit card lets you improve your credit score little by little as you spend what you've deposited on the card. Reach out to bankruptcy trustees like those with Keith G. Collins Ltd in Winnipeg to help you through the bankruptcy and credit counseling processes. Once you've brought your credit back up to a respectable level, you'll soon qualify for traditional credit cards and be able to pass employer and landlord credit checks without a problem.

Bring Cash Everywhere


While you'll be able to qualify for a secured credit card after bankruptcy, you should always carry cash wherever you go. You won't qualify for any lines of credit with significant spending caps, so you'll have to spend within reason for a series of years until you can prove that you are once again credit worthy.

Establish a Bill Paying Schedule


One of the best ways to rebuild your credit and avoid extra costs is to pay all of your bills on time and in full. If you run out of cash and are only able to pay part of your bills or make late payments, your credit will continue to suffer. Don't let that happen. Create a calendar that is specifically devoted to bill due dates. Rebuild your credit little by little and eventually you'll be able to qualify for loans and lines of credit once again.

If you've declared bankruptcy, don't wallow with hesitancy and indecision after the fact. You have a golden opportunity to get your life back on track. Follow the advice above and you'll be well on your way to a return to normalcy.

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