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As anyone contemplating bankruptcy can tell you, it is nearly impossible to live
a normal life today without credit. The bankruptcy laws were enacted largely to
give Americans without credit a fresh start. These laws provide the debt
stricken with an alternative to staggering year after year with an ever
increasing debt burden and an ever declining credit rating.
Many filers are surprised to find that their credit scores actually improve
simply because their debts have been eliminated in the bankruptcy. While the
fact of the filing can remain on a credit report for ten years, the credit
score, the important part, starts improving immediately.
Within the first couple months of filing you will start to receive credit card
offers from companies that used to decline your requests for credit. Within two
years of filing, government mortgage lenders are required to offer you the same
rates of interest as anyone else so long as you’ve paid your debts in a timely
manner after bankruptcy. Because you can only file Chapter Seven every six
years, many lenders will regard you as better credit risks, the day after you
file for bankruptcy.
The idea is to file once and get it right so that you never have to file again.
Here are some tips on reestablishing your credit rating so that you can make
bankruptcy a true financial turning point:
- Apply for gas credit cards and store cards at businesses where you would
normally just pay in cash.
- Apply for a secured card where you deposit cash and charge against it. Pay
advances back over two months so that they will be reflected as positive marks
on your credit report.
- Find a friend or relative to cosign for you on a loan and pay it on time.
- Look for mortgage brokers and car dealers that hold themselves out as
“bankruptcy friendly”. Try and buy a used car so you do not get hit with the
depreciation that occurs during the first two years of a new car purchase.
- Stay away from payday loans that are at high interest rates and are a “bad
credit” trap.
- Write a letter to each credit reporting agency explaining the circumstances
that lead to you filing. You are entitled to put a statement into your credit
report explaining why you had to file bankruptcy. If circumstances beyond your
control were the cause, this should help.
- Open a savings or checking account. Lenders may look at this to determine if
you can responsibly handle money.
- Live within your means. Remember not to unnecessarily increase your debt to
income ratio by taking on credit to purchase luxury items that you DO NOT NEED.
Your payments on consumer debt should equal no more than 20% of your disposable
income after costs for housing and a vehicle.
- Pay your rent and utility bills in a timely manner for a year.
- Pay your reaffirmed, pre-bankruptcy obligations on time.
- Apply for a secured credit card where you deposit cash and borrow against
it. Do not purchase consumables (food, gas and other things you will use up
within a few days) with a credit card. You want to be able to pay off the
purchase before the item is used up.
At Pacific Bankruptcy, P.C., our goal is not only to help our clients get a
fresh start, but to help them make the most of the opportunity. The idea is to
file once, get it right and make the most of the opportunity so that you never
have to again. To learn more, please call one of our attorneys toll free
(503) 352-3690 or just fill out a
free evaluation form and one will call you.
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