Filing Chapter 7 bankruptcy may be an option to consider if you are drowning in debt that you are unable to pay due to the loss of income or other financial issues. Not only will this filing reduce your monthly bills and free up much-needed income, but bankruptcy also stops harassing calls and letters from creditors. Bankruptcy will affect your credit score for seven years, but you can rebuild your credit slowly. Here are a few step-by-step tips to rebuild your credit after filing bankruptcy.
Organize Finances and Set a Budget
Chapter 7 is a liquidation type of bankruptcy, which wipes out unsecured debt, such as credit cards or medical bills. While you will no longer have this debt, you will still need to pay certain expenses each month.
Your attorney will discuss the importance of paying your rent or mortgage, auto loans, utilities, and insurance premiums promptly each month. After filing with a chula vista bankruptcy , make sure to organize all of your finances and determine a budget to ensure you do not go beyond your means again. Setting a budget will reduce your risk of further credit complications.
Apply for a Secured Credit Card
After losing control of your finances and credit accounts, you may never want or need a credit card again. However, applying for a secured credit card is an important first step for rebuilding your credit after bankruptcy. Of course, you may not be familiar with this type of account.
Contact your chula vista attorney to apply for a secured credit card. You will need to pay a cash deposit to receive this credit card. This deposit will serve as your credit limit. Use this credit line to make and then quickly pay off small purchases to help reestablish your credit after filing bankruptcy.
Unfortunately, there are a few negatives associated with secured credit cards. In most instances, your bank will charge you an application fee and a small annual fee each year. Also, interest rates are much higher on secured credit cards compared to traditional credit accounts, so it is important to make sure you make and subsequently pay off small purchases before interest accumulates.
Open a New Bank Account
If you do not have a checking or savings account, make sure to open one while you are at the bank applying for your secured credit card. Make small deposits into your account upon opening and continue making deposits each week or month. Setting up automatic withdrawals is a great way to improve your ability to save, but avoid making excessively high deposits that you may not be able to afford every month. Opening a new account shows credit stability, which is imperative for rebuilding your credit after filing chapter 7 bankruptcy.