Bankruptcy is a difficult and complicated legal process, which is why most people don’t even consider it an option. They don’t want other people to know that they are in a difficult and struggling financial situation. And that’s precisely why they stay stuck in their financial clutter. It is true that filing for bankruptcy may damage your credit. Bankruptcy stays on your credit report from 7 to 10 years, depending on whether you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. However, experts believe that the fear of bankruptcy is mostly unrealistic and exaggerated. Dorothy Lawrence, the CEO of the Dorothy Butler Law Firm, believes that the impacts of bankruptcy decrease over time and that there are many ways in which you can improve your credit after filing for bankruptcy.
Dorothy believes that the best way to improve your credit after declaring bankruptcy is to obtain a secured credit card. Most people will not be able to obtain an unsecured credit card. However, Dorothy says you can eventually convert your secured card into an unsecured one if you use it wisely. Another option that Dorothy suggest is taking a secured loan through your bank. She strictly discourages her clients from using the funds. Her advice is to just take out the loan and make the monthly payments on time each month. If you do it correctly, it can give your credit a huge boost!
Surviving bankruptcy often comes down to adopting healthy credit habits. Dorothy believes healthy credit habits can help people that have been through bankruptcy and improve their credit. One of the things she suggests to her clients is to use only one credit card for purchases. She strictly discourages taking out multiple lines of credit. A much better habit, she says, is to make purchases from your debit card and spend only the funds you actually have in your bank account. Remember that once you file for a chapter 7 bankruptcy, you cannot file for another one for 8 years. That’s why Dorothy teaches healthy spending and credit habit to debtors. There are two safe and wise options, says Dorothy:
- Having one small secured card that you cannot make large purchases on.
- Using only your bank account and the funds you have currently available.
Dorothy says that people often commit the mistake of buying cars with payments they cannot afford. She regularly comes across individuals who try to make car payments of $900+/month. Sometimes they spend as much as 40% of their monthly budget on their car payment. It is very important to make wise spending decisions. If you cannot afford a brand new fancy car, she says, purchase something that makes sense within your budget.
Recovering from bankruptcy and improving your credit afterward may be a bit hard, but never impossible. Experts like Dorothy are always there to help. Dorothy and her firm offer many programs that help monitor the budget of their clients and educate them on wise financial decisions. She recommends joining these programs to all her clients and followers. Clients and followers regularly reach out to her with financial questions that she eagerly answers. During bankruptcy, her firm offers two credit counseling courses to debtors. One of these courses specifically focuses on how to rebuild after bankruptcy. These courses are invaluable because they help debtors not get into another situation where they have an unmanageable amount of credit card and loan debt.