Get Out Of The Debt Trap

Nobody plans to file for bankruptcy. The harmful effects of bankruptcy on your life and for 7-10 years on your credit report is not something that anybody would prefer or plan to have, if they get better alternative. The toughest part of filing for personal bankruptcy is that once you are through bankruptcy, all the people around you, including your friends will shun you. Bankruptcy also has a psychological detrimental effect, as you feel you have failed yourself and your family.

To get over it, the first step is to overcome its psychological effects. Remember you are not bad and while going over the events that led you to this financial calamity, you have learned a few things that will let you prevent from making the same mistakes later on as you go on building your life.

After declaring bankruptcy, remember that life goes on. You will still have to buy the basic necessities of life, you will still need a roof over your head, you will still need a car, etc. But one thing that you will encounter without fail is that getting credit like mortgage or a car loan will be very tough. To be approved for a loan after bankruptcy, you should be in a position to fulfill the lender’s minimum criteria for your credit score, and bankruptcy causes heavy damage to your credit score. Lower your credit score, lesser are your chances of getting a loan, or in the best situation, you will get a loan at exorbitantly high interest rate.

So unless there is an emergency for which you need the loan immediately and are ready to pay the steep interest rate, the first thing to do is take-required steps to increase your credit score. Though the bankruptcy will still stain your credit report, there is little point in showing your credit score less than it actually is.

Once you have got your loan and/or new credit cards, pay more than the minimum payment and ensure that payment is recorded in your account before the due date. E.g. if the minimum payment is $50 that is due by 1st of the month, ensure you pay at least $60 and it gets credited to your account before 1st. Most banks provide free online checking and free online bill payment that will ensure you pay your bills on time. It is all carried out electronically, so saving you a stamp and the headaches of late payment due to the postal mail reaching late, as well the delay on the part of the lender to credit the payment to your account.

Ensure you have learned from the need to file for bankruptcy. Know where you erred and make sure you don’t repeat those mistakes again to prevent going to the bankruptcy.