If you find yourself strapped against a wall — inundated with credit and low on cash resources, bankruptcy may be a feasible option for you. Bankruptcy gives you the opportunity to press ‘restart’ on your finances and make better financial decisions on your next go around.
According to the latest report by the National Bankruptcy Research Center, approximately every one in 50 people have filed for bankruptcy at some point in their life. Last year 1.5 million bankruptcies were filed, which was about 9 percent more than was filed in 2009, according to the report. Most of these bankruptcies were cited as a Chapter 7, or a liquidation type bankruptcy, rather than Chapter 13, which is a rehabilitation bankruptcy.
This data shows that consumers are choosing to file for bankruptcy in order to trade in cash for their assets as a way to pay off other bills. From the data, it seems that consumers are not filing bankruptcy solely with the mindset of getting back on their financial feet. Either way, if you have to make the decision to file for bankruptcy it’s important to learn from your previous mistakes. Banks will not want the company of habitual “bankrupters”. After the first bankruptcy, banks may shun your credit card applications and you may find it hard to get a loan. Don’t let your bankruptcy ruin you, there a few ways to bounce back after a bankruptcy, and can help you on the road of getting your credit card history on the right track.
So here are some simple tips for a bankruptcy recovery:
1. Understand What’s Going On: It’s important to keep in mind that many banks will refuse your applications if you apply for credit or for a loan immediately after filing bankruptcy. A bankruptcy can haunt your credit history and score for seven to ten years. It is up to you to prove to the banks that you are worthy of borrowing money. Analyze your previous financial habits, and see what landed you in the bankruptcy hole to begin with. Once you find the problem, it’s easier to find the solution.
2. Start Small: Start borrowing small amounts from friends. Whether it is $5 or $.50 cents–make a habit of paying your friends back. This will subconsciously help to re-establish the concept of credit and reinforce the benefit of a prompt payment system. Once you begin getting re-accustomed to paying credit, begin applying for credit cards with small limits (under $1,000). Beware that you will sift through many rejection letters, but refer to step one and understand why, and make changes to better your financial health.
3. Find Help: There are credit card issuers and lenders that work with bankruptcy victims. You are not alone. While many banks are wary of giving auto, bank and mortgage loans to people who have filled bankruptcy, some will do it through the recommendation of another lender or a middle man. Think about it, you are much less of a financial risk then you were before you filed for bankruptcy, because you don’t have the debt weighing you down. There are lenders that specialize in this type of lending and will be happy to help you.