If you had filed for chapter 7 bankruptcy, you may wonder how much damage the ordeal will do to your credit in the coming years. While filing for bankruptcy is usually a last-ditch effort to remove debt, you can salvage your financial reputation for the future. Here are some steps to take after filing for bankruptcy in an attempt to stabilize your future financial outlook.
Taking On the Mindset of Using Cash Over Credit
As soon as you are formally informed via court that your bankruptcy status is accepted, you will be relieved of any debt you owe. While this will be a huge weight off your shoulders, the bankruptcy status will remain on your credit report for up to ten years. In this time you will need to re-establish your credibility by making sure you do not repeat the same spending habits in the future. This will require you pay for everything in cash, as credit card companies will not allow you to get a card until you become less of a financial risk.
Cutting Costs to Ensure Future Bills are Paid
Eliminate any expenses you do not need to survive, such as cable and telephone. Resort to the fact you will need to cook at home and give up eating out. If you rent, you may need to move to a cheaper home. Cutting costs as must as possible will ensure you are able to keep on top of any future bills in an attempt to re-establish your tarnished credit. Be diligent in your efforts to say no to expenses that could add up, leading you down the same path as the past.
Revamping Credit With a Secured Card
The best way to re-establish credit after bankruptcy is by saving a lump sum of cash to use for the privilege of having a secured credit card. Wait several months after declaring bankruptcy while saving this money during this time. When you apply for and are approved to receive a secured credit card, your saved money will be put into a bank account through the credit card company to be used as a line of credit for any purchases you make. This will work much like a debit card.
Ask the credit card company if it will be reporting transactions as unsecured credit before filling out an application to ensure it will work at building credit. If so, using the card will look favorable on your credit report and you will start receiving offers from unsecured cards shortly afterwards.
Paying as You Go to Eliminate Future Troubles
When you are finally awarded an unsecured credit card, you will want to make sure any purchases you make are paid off immediately. Do not purchase an item without having the funds to pay for it within the following month, and pay off the card in full each time you receive a statement. It can be very easy to slip back into debt if you use credit cards regularly. If you have a choice, use cash over a card to ensure you remain in good standing with your creditors.
If you're considering filing for chapter 7 bankruptcy, consider speaking to a local bankruptcy attorney, such as Donald T Tesch, PS, to discuss your concerns and what will happen to your credit after you file.