Whether you file for chapter 13 or chapter 7 bankruptcy, you know that there are going to be repercussions for going through this process. Although your past might show that you weren’t financially stable, now is your chance to rebuild your credit. There may be several different paths to bankruptcy recovery. It may be a long road, but there is always hope and room for self-improvement.
One of the first things you are going to want to do after you file for bankruptcy is collect and preserve all of your paperwork. You should have received a copy from your attorney of the bankruptcy petition which is 40 – 50 pages of detailed financial information. You will want to keep any paperwork that the court gave you such as a notice of bankruptcy filing and a copy of your discharge order. The reason why you will want to do this is because some lenders like to see a copy of these papers when considering you for new credit. This is especially true for mortgage loans.
The next thing that you will want to keep in mind moving forward is the importance of creating a budget. You will want to have an understanding of your expenses and how much money you are spending on what. It is key to review this every week. The point of filing for bankruptcy was so that you can dig yourself out of this financial hole. You may even want to consider starting an emergency fund.
If you are new to this experience, you may be wondering how bankruptcy will affect your credit. The reality is it will lower your credit score by 200 +/- points. This is due to late payments on your account. If you continue to have these habits moving forward, you will pay the consequences.
If you decided to keep some of the debt that you previously had, and you keep up with your payment, then you have the potential to preserve your credit score. During this time frame there may be credit card companies that try to solicit you. It’s important to be cautious. Having a credit card after bankruptcy is a way that you can rebuild your credit history though. You will have to make sure you are extremely responsible in a situation like this.
If you have gone through bankruptcy, you may be wondering how this will make an impact on your living situation. Since you have no debt after the bankruptcy that you filed, there are plenty of landlords who will be open to your situation. If you happen to own a home, reaffirming your mortgage is a way to keep your home. Keeping your home will help your credit and you won’t have to worry about having a roof over your head. If you include your home in the bankruptcy, then you are choosing to forfeit your home to the bank.
Understanding how bankruptcy will affect your credit currently and your living situation are key, but of course you are also going to wonder how this will affect your future. Now that you are keeping up with your payments, you are going to want to also keep a regular check on your credit score. It may take you several years to qualify for a loan. If you are going to want to apply for a loan potentially in the future, the only way you’ll be able to is if your credit score is around 620 or higher. Your score will need to be even higher is you want to have the best mortgage rate. When the time comes, you will definitely want to talk with a financial advisor or mortgage banker.
If you are debating filing for bankruptcy, you will definitely want to speak to an attorney at Palacios Law Group. Our team can give you the legal advice you need in order to get back on your feet.
Sources: Wise Bread