So here you are, legally bankrupt, no credit, your credit score is in the toilet, you are dead in the water - you are sunk. Not so fast.
Before you sink to the depths of despair, listen to me, there is hope. Combine hope with a little time and effort and you can revive your credit score and get credit to make purchases again.
First get a free credit report from all three bureaus. See; www.ftc.gov/freereports for more information. Also see; http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics for additional information.
Read my blogs on credit repair.
Then get to work on cleaning up the reports by notifying the bureaus of incorrect information. You may be amazed how much this helps.
Let’s talk about: MEDICAL BILLS, CREDIT CARDS and FUTURE PURCHASES.
MEDICAL BILLS – It is a fact that most Bankruptcies occur because people have incurred insurmountable medical bills. For accumulating medical bills in the future try to make payment arrangements with your medical provider that is within your budget. (More on budgets later.) How do you determine that figure? Compare your income with expenses and make a determination of how much you can pay. An ongoing payment on a medical expense could be as little as $5.00 per month. Even if the medical provider rejects the amount that is within your budget, send them the payment anyway. In order for this approach to be helpful (and this is the important part) you must pay that amount or greater every month.
Will this approach be helpful in every situation? Sorry to say probably not. So why bother? Here is why; Taking this approach may be helpful to you in several ways: It may help prevent wages being garnisheed. It could help get debt collectors off your back. It is less likely the provider will sue you for payment. If the amount is truly within your budget, you are more likely to be able to pay other bills. There are some types of income that is not collectible making the provider more willing to accept something instead of nothing.
CREDIT CARDS: Negative thought; ‘I have no credit, so no one will give me credit’. Why is this statement negative thinking? Because it is not necessarily true.
First go to the copies you obtained from the credit bureaus. Check for credit cards that were not listed on the Bankruptcy filing. Credit cards that had a zero balance or payments up to date may still be active accounts in good standing. If you find a credit card that fits in this category – 1) Make sure it has a zero balance. 2) Use it! Caution is warranted here. Make extremely small purchases and pay the balance off every month. One suggestion; use the credit card on a single need/must have item that is purchased with cash/debit card every month anyway. One more caution- make sure to stay within your monthly budgeted amount for this item. An example would be gas budgeted to get to and from work every day.
Nothing usable on the credit reports? Not a problem. Apply for a pre-paid credit card. Pay off the balance every month and within a relatively short period of time there will be an opportunity to obtain a more traditional credit card.
If the bankruptcy was the result of irresponsible spending, we are dealing with an added problem. Never, I say NEVER charge anything on your credit card that cannot be paid off when the bill comes or you will be doomed to end up in bankruptcy again.
FUTURE PURCHASES: Keep in mind that a credit report is generated based on recent activity. So if you pay off a derogatory debt wait a couple months before applying to make a major purchase like a home or car.
By all means do not create a situation to increase the activity on the credit report like applying for a store credit card just before making a major purchase. It will only hurt your chances of being approved for the loan.
If you have questions about a specific situation, by all means ask. I will do whatever I can to get an answer for you.
I am looking forward to hear your story and what you learned going through the bankruptcy experience. Who knows your sharing could help someone and that is what it is all about!
