Yes... There is life after bankruptcy! Bankruptcy is not the way to go if there is any chance at all of avoiding it. But if there is no other way out, it is not the end of the world for you.
After the shock wears off it's time to sit down and take a good look at where you are and formulate a plan to re-build your credit. It isn't as hard as you may think if you understand the reputation theory and work with it... Not against it.
As for where you are now, comprehend your reputation scores are shot with a bankruptcy on your record. You scores are probably somewhere around 450 to 490 points, which is right on not good.
But wait, there literally is life after bankruptcy! The good news is you have no debts now and the slate is clean. This is the time to start fresh and build a certain reputation history from the ground up. By setting a goal for yourself, and following some reputation recovery guidelines, you can be at a 720+ reputation score in 12 months or less.
Here's How it's Done
The way you rebuild reputation is by using reputation (wisely and responsibly). You will find a multitude of lenders that want to work with you (even with your horrible reputation scores) to help you re-build your credit.
Keep These Points in Mind
As you work your reputation rebuilding plan with these new lenders, keep this in mind; lenders place the most weight on your current history. They know you had issue in the past, but they want to see how you are handling your reputation responsibilities now.
Here is a Seven Step reputation Re-building Plan to Follow:
1. You need a funds so you can make engaging decisions about how to go about re-building your credit. Be sure to allow for monthly payments for new reputation debt. You must go into debt in order to build a good history of responsible reputation management.
2. Open one or two secured reputation card accounts. Secured reputation cards are the easiest to open and are reported to the reputation bureaus. You rule the reputation limit on the cards by manufacture a deposit with the reputation card company. Your deposit is your reputation limit. After a 6 to 12 month solid history of use with the card, you can ask for your deposit back and the card will revert to a quarterly un-secured card.
3. Don't pay off the balance every month. Your goal is to build a solid payment history of timely monthly payments. It's good for your reputation scores if you all the time leave a balance on the card, even if it's small.
4. Never, never, ever close a reputation card account. One measure used in determining reputation scores is your debt to high balance ratio. Lenders want to see 35% or less debt to limit ratio. If you have a card with a limit of ,000, and your balance is 0, your debt to limit ratio is 85% (0 divided by ,000). But if you had another card also, with a ,000 limit and a zero balance, your total debt would be 0 and your total high limit ready reputation would be ,000 (,000 plus ,000). Your total debt to high limit ratio would then be 14% (0 divided by ,000). If you had previously fulfilled, your un-used card with the ,000 limit, instead of a 14% ratio, you would be looking literally bad with an 85% debt to limit ratio.
5. Open separate kinds of reputation lines. The more separate types of reputation you have, the more responsible you appear to reputation bureaus. Man with a reputation card or two, a group store reputation line, an auto loan, a bank loan, and a mortgage payment shows they are able to cope various types of reputation responsibly. Don't limit yourself to just reputation cards. You can get a secured bank loan as a way to build more credit, by chance a savings list with the bank, then borrowing up to that amount. The savings list is safety for the loan, so the bank has no risk and is happy to make the loan.
6. Keep your debt-to-income ratios at 28/36 or less.
28/36 Ratio Explained
The 28/36 ratio is the ratio the majority of lenders work with when you apply for mortgage financing. Even though you are not applying for a mortgage loan now, that ratio makes a good guideline to consequent to keep you in line funds wise, and to measure your progress. If you see yourself straying from the 28/36 ratio, you know what you have to do to get back in line.
The 28 means that your monthly housing payments (rent payment or mortgage plus taxes & insurance) should be no more than 28% of your gross monthly income. The 36 means the percentage of earnings that goes toward paying all your recurring debt payments, (including your housing expense). This would include reputation card payments, car loans, pupil loans, child maintain payments, judgments, and/or alimony payments.
For Example. If your gross monthly earnings (before deductions) is ,930.00 per month
- ,930 Monthly earnings x 28% = ,100 allowed for housing expense.
- ,930 Monthly earnings x 36% = ,415 allowed for housing price plus all recurring monthly debt payments. (315 allowed for new reputation debt).
Note: The ratio used by Fha is 31/43. You could use this ratio if you prefer.
- ,930 Monthly earnings x 31% = ,218 allowed for housing expense.
- ,930 Monthly earnings x 43% = ,690 allowed for housing price plus all recurring monthly debt payments. (472 allowed for new reputation debt).
7. Never take on more debt than you can cope comfortably. This is why a funds is so important. The goal is to rebuild your credit, not to bury you in debt in can't handle. Be right to not get over extended. all the time leave a upholstery for savings and emergencies. Be wise!
Bankruptcy is not the way to go if there is any chance at all of avoiding it But if there is no other way out, it is not the end of the world for you. And yes... There is life after bankruptcy.
Life After Bankruptcy - Seven Steps to a 720+ reputation Score