Life after Bankruptcy
How to Recover from an Unexpected Bankruptcy
There are two common forms of bankruptcy. The first involves a total or partial discharge of debt, using liquid assets and untouched savings to pay-off a portion of what is owed. The other form of bankruptcy does not absolve your debts, but rather places you in a three- to five-year repayment program. In both cases, filing for bankruptcy damages your credit score significantly. Thankfully, not only will this incident eventually drop from your report, but there are ways to boost your score again shortly after the settlement.
Paying your monthly expenses — rent, groceries, transportation, utilities — on time is step one in rebuilding your credit. This should always be a primary concern, especially once you begin looking for additional sources of credit (learn what credit actions to avoid in our previous post!). It’s important to exercise caution in these first few months, spending less than you earn and recognizing your financial limitations. Keeping a detailed journal can help you visualize your larger financial plans. Saving a few thousand dollars is also necessary, as this money could come in handy as a down payment or security deposit.
After things begin to finally fall into place, it’s time to look into getting a secured credit card. Essentially, secured credit cards are an exchange between you and a financial institution. For example, if you deposit $1,000, you will receive a credit card with a corresponding limit. This is an easy way to re-establish credit without risk to the creditor. Another investment to consider making with your savings is the purchase of an RRSP. Since such loans are tax deductible, much of the money spent comes back to you in the end.
By the one- to two-year milestone, you will notice an improvement on your credit score, so now is the time to take the next step. Experts recommend obtaining a line of credit or car loan during this time. Car loans have a great effect on one’s credit score because vehicles are considered highly valuable as personal assets. By this point in your bankruptcy, we advise that you read through the following articles about how car loans work to improve credit and what Trillium Auto Group has to offer. These links are an excellent source of information for people pursuing this option after bankruptcy.