According to data from the American Bankruptcy Institute for 2017, there were approximately 44,407 personal bankruptcies in Georgia. If you recently had your debts discharged in Chapter 7 or completed a payback arrangement under Chapter 13, you may feel a sense of relieve. The challenge is how to manage financially after bankruptcy. Evidence of a bankruptcy will remain on your credit history for seven to ten years. Your poor credit will make it unlikely to obtain a mortgage in the short-term and also may cause difficulties in leasing an apartment, obtaining a job, finding affordable auto insurance, and other challenges. It is time to realistically assess your financial situation and proactively take steps to rebuild your credit.
Remaining Debt & Potential Credit Report Errors
During the bankruptcy process, your attorney likely explained that certain types of debts may not be discharged. Some of the common debts that remain include federal student loans, overdue child support or alimony and taxes. To improve your credit it will be necessary to work to get these debts in good standing. Those without such residual debt and a steady source of income are in a good position to begin restoring their financial health. Allow several months for the credit reporting agencies to update your credit history. Review your reports to be sure that all debts were properly discharged and contact the agencies to report any inaccuracies. Although negative marks remain on your reports for at least seven years; the Federal Reserve Bank of Philadelphia says that many consumers may see up to an 80 point rise in their credit score shortly after bankruptcy.
Changing Your Outlook Regarding Credit
It is important to learn from past financial mistakes and adopt a responsible approach moving forward. Establishing a written budget is extremely helpful. In drafting your budget you may want to consider the following:
Remain focused on boosting income, keep fixed expenses low and eliminated unnecessary spending
Consider training or education if necessary to obtain better long-term earnings.
Have a dedicated savings plan in your budget and strive to live below your means
Having savings on hand may prove valuable based on your poor credit. For example, utility providers may require you to make deposits in order to establish service in your name.
Commit to not using credit for unnecessary items such as holiday shopping or vacations.
Remember that if you resume the same poor financial decisions and habits, you are likely to encounter the same poor results
Pursue new opportunities to obtain credit for the purpose of improving your credit standing, not doing so to acquire “wants”.
Purchasing an Automobile
Financing the purchase of a vehicle is among the more likely options for post-bankruptcy credit and a vehicle is likely necessary for transportation needs. The automotive industry has a “sub-prime” financing segment geared for individuals with poor credit. The interest rates are going to be high, so shop around to find the lowest options. It is critical that this financing will be reported to the credit bureaus. There are “buy-here-pay-here” used car dealers that are essentially offering you an unreported, high-interest personal loan that will not benefit your credit. You will likely be unable to qualify for premium new vehicles, yet should be able to find something dependable and practical.
Secured credit cards are an option for boosting your credit. A secured credit card functions more like a debit card. You will need to deposit funds into the account to use the card for purchases. Keep in mind that not having a credit card may prevent you from access to some hotels and most rental car providers. Secured card accounts generally are reported to credit agencies and eventually enable you to obtain a traditional unsecured credit card. The strategy with unsecured cards is to make purchases and pay the majority back on the next due date; consistently using the card without exceeding 30% of your credit limit is optimal.
Credit & Programs to Avoid
As you rebuild, you will likely need to endure higher interest rates on credit. There are some types of loans and programs that should generally be avoided regardless of the circumstances. You may be tempted by offers from “credit repair” providers that sound too good to be true—and probably are. Other types of lending that tend to be predatory include payday loans, auto title loans and rent-to-own retail programs that should all be avoided.
Georgia Bankruptcy Attorney
Even those with the best intentions can potentially find themselves overwhelmed with an unmanageable amount of debt. Fortunately, there is a way for struggling consumers to legally pursue a “fresh start” through bankruptcy. If your level of debt has become unsustainable, contact the Law Office of Jeffrey B. Kelly for a consultation today by calling (770) 637-1756.