A successful bankruptcy filing can benefit an individual in numerous ways. The automatic stay will stop pending lawsuits, repossession efforts and other collection activity. The eventual discharge of your unsecured debts will prevent future collection efforts on those debts.
The trade-off for those benefits is that filing for bankruptcy will drag down your credit score by dozens if not a couple of hundred points. While it does take some patience, you can rebuild your credit after bankruptcy so that it is even better than it was before you filed.
Obtain new credit as soon as possible
One of the ways that bankruptcy can financially limit people is by closing all of their credit cards and other unsecured credit lines. Lenders are often eager to offer credit cards to someone after a bankruptcy discharge because individuals can’t refile for bankruptcy again for several years.
Although the cards you receive offers for initially will likely have subpar terms, the sooner you have a history of making on-time payments, the more quickly your credit score will improve.
Make use of the opportunities bankruptcy affords you
The courts require that you undergo credit counseling and debtor education as part of your bankruptcy filing. You can use the information provided in those courses to create a new, better financial plan for your household.
You have a chance to take control of your budget because all of the money that once went to credit card or debt payments can now go toward covering living expenses or saving for retirement.
Actively monitor your credit score
Your credit score will fluctuate from month to month based on factors ranging from how much of your available credit you use to how old your lines of credit are. Signing up for a free credit monitoring program is a great way to spot inaccuracies on your credit report and address them right away, keeping your score as high as possible.
Many credit monitoring apps will also give you suggestions on how to boost your score, such as adding new accounts at strategic points. When you frequently review your credit score and credit report, will be in a better position to protect yourself from errors in financial mistakes that could lead to financial hardship in the future.
Filing for bankruptcy isn’t just about getting rid of your debt. It can also be about paving the way for a brighter financial future.