There are many myths surrounding bankruptcy, but few have the sticking power as the belief that a person’s finances will never recover again. Many individuals view the bankruptcy process as a form of submission wherein you give up control of your financial future in exchange for quelling the cacophony of debt collectors, tormenting notices and phone calls. However, this is not the case. Declaring bankruptcy can afford you a great degree of control in reshaping your economic future, as long as you take the proper steps and are responsible in the future handling of your finances.
Bankruptcy should be viewed as offering a clean slate - a second chance and a fresh start - allowing an individual to reestablish a positive economic picture in order to regain economic credibility and move on with life in a more confident and certain manner. In order to make these changes and to meet these goals, one must have a basic understanding as to what works best to repair an individual’s finances. To explain useful tactics, Robert Canning with a Los Angeles, California based bankruptcy law firm, brings his more than 28 years of legal experience to help you get your life on track after bankruptcy.
Useful tactic #1: Take Out ONE Credit Card
According to Canning, “One of the most common statements I hear again and again from clients [after filing for bankruptcy] is that they will never, ever take out another credit card again.” Canning says that many clients receive credit card offers only a few months after filing for bankruptcy, but because credit card debt got them into a mess before, they actively avoid making the same mistake by discriminating against all credit cards. Canning believes this is a big mistake. “I tell clients they should take that credit card-that ONE credit card, and use it, but make sure to pay it off each and every month with no exceptions.” By taking out ONE credit card again and being responsible with the spending and the payments each month, Canning says that this positive approach to your economic wellbeing can go a long way to help rebuild your credit and prove that you have become financially responsible. However, Canning stresses that you should only take out ONE credit card and pay the entire amount due on time every month. Otherwise, you risk repeating the same mistakes and worsening your financial situation.
Useful tactic #2: Take Out a SMALL Loan
One of the less obvious tricks to improving your financial reputation is taking out small loans. Canning recommends going to, for example, a credit union, bank, or other such institution and starting off with loans of only a few hundred dollars. It will not necessarily be easy; a person with poor credit will have to be persistent and probably even pay a high interest rate. [Note: If it is a small loan at first, the total interest should not be that high.] Once the loan is secured, it needs to be paid back as required each month. Then, after paying back a few smaller loans in a timely manner, you may be able to gradually move up to larger loans (with lower interest rates) as long as you are positive that you will be in a position to pay them back on time each and every month. This kind of borrowing will prove to the banks that you are responsible and trustworthy, which will then make them more likely to offer larger loans in the future.
Useful tactic #3: Pay Car Payments ON TIME
According to Canning, one of the payments that should be prioritized is the car payment, as it is one of the payments that creditors are bound to pay attention to, and it is a reliable indicator as to how you handle your overall finances.
When combined, all three of these tactics will go a long way towards improving your financial stability. Canning says, “By doing these things [for several years], you could then go to a bank or mortgage lender and when they ask you about your financial situation, you can admit to the bankruptcy but also say ‘yes sir, I did file bankruptcy, but look what I’ve done since.’”
The most important lesson to take away is that by filing bankruptcy you are not powerless, but rather, able to prove to yourself and to others that you have learned, improved your life, and are now on the right track economically.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.