So you have filed for Chapter 13. What’s the next step? At first blush, you are full of ideas on how you are getting a fresh start. You have freed yourself from almost all of your debts and you are, financially speaking at least, a new person. But note that by filing for bankruptcy, you are sacrificing some short term freedom. In exchange for a discharge of your debts and stopping your creditors from pursuing any collection actions against you, your credit rating will stagnate for at least a year. Considering how your credit rating was probably not all that great to begin with, but this stagnation has a bright side.
Let’s start with the bad news:
• The bankruptcy will stay on your credit report for up to 10 years.
• Lenders will want at lease a year to have passed before you go on any major loan acquisitions.
• As a consequence, you may not be able to get a loan or a credit card for some time after the bankruptcy.
• And if you do get lucky and get approved for credit, the interest rates and fees attached will be rather punishing.
The silver lining. Your credit score will increase by at least 125 points within one year of completing your bankruptcy and getting a discharge you just have to think positive. It is good that you are restricted from getting new credit. Your debt is what caused your bankruptcy in the first place. They will have no difficulty getting you in that place...again. Now, for the rebounding tips to help you climb back up from the pits of bankruptcy:
Lead a Frugal Lifestyle: Common sense dictates that you lead a simpler lifestyle properly slimmed-down, no frills attached. In other words, be frugal. If you filed under Chapter 13, it means that you have signed up for a repayment plan to pay off some of your debts. The purpose of Chapter 13 is to allow debt reorganization so that you can continue holding on to your properties and other assets in exchange for obliging yourself to pay your debts for a certain number of years. The bottom line, therefore, is that you are still in debt, albeit, you may only pay a portion of the total debt to your creditors.
The the length of a Chapter 13 is three to five years. During this time, the court allows you only a set amount to live on while the court-appointed trustee divides the rest among your creditors each month. What does this mean to you?
As mentioned above, it means a no-frills lifestyle. No luxuries whatsoever, except those exempted under the law. And sometimes, just sometimes, it may also mean changing your basic expenses, such as how much you pay for shelter and groceries every month. You may even have to move to a cheaper apartment or a more low-end neighborhood just so you can get by with the amount the court allows you. Suffice to say that getting new credit will be challenging. So you can forget about getting a new credit card or a car loan. Or at least, getting it the easy way. Besides, you can’t take on a new debt without the court’s permission anyway, and getting that means adding an awful lot of complexity in your life.
So how do you go about with barely anything to tide you over through the hard times ahead? It’s simple really – make a budget. Better yet, keep a close watch on your expenses for three months and make a budget based on any observations you have made on your spending habits. This is exactly what Greg McBride, CFA, senior financial analyst for Bankrate.com advises:
Track your expenses for three months to get an idea of how much you’re spending and where that money is going. Then create a realistic budget that fits within your monthly income, he says. 'The first step to saving is to set boundaries on your spending. And after making a budget, stick to it. That’s the most important part.
Let’s start with the bad news:
• The bankruptcy will stay on your credit report for up to 10 years.
• Lenders will want at lease a year to have passed before you go on any major loan acquisitions.
• As a consequence, you may not be able to get a loan or a credit card for some time after the bankruptcy.
• And if you do get lucky and get approved for credit, the interest rates and fees attached will be rather punishing.
The silver lining. Your credit score will increase by at least 125 points within one year of completing your bankruptcy and getting a discharge you just have to think positive. It is good that you are restricted from getting new credit. Your debt is what caused your bankruptcy in the first place. They will have no difficulty getting you in that place...again. Now, for the rebounding tips to help you climb back up from the pits of bankruptcy:
Lead a Frugal Lifestyle: Common sense dictates that you lead a simpler lifestyle properly slimmed-down, no frills attached. In other words, be frugal. If you filed under Chapter 13, it means that you have signed up for a repayment plan to pay off some of your debts. The purpose of Chapter 13 is to allow debt reorganization so that you can continue holding on to your properties and other assets in exchange for obliging yourself to pay your debts for a certain number of years. The bottom line, therefore, is that you are still in debt, albeit, you may only pay a portion of the total debt to your creditors.
The the length of a Chapter 13 is three to five years. During this time, the court allows you only a set amount to live on while the court-appointed trustee divides the rest among your creditors each month. What does this mean to you?
As mentioned above, it means a no-frills lifestyle. No luxuries whatsoever, except those exempted under the law. And sometimes, just sometimes, it may also mean changing your basic expenses, such as how much you pay for shelter and groceries every month. You may even have to move to a cheaper apartment or a more low-end neighborhood just so you can get by with the amount the court allows you. Suffice to say that getting new credit will be challenging. So you can forget about getting a new credit card or a car loan. Or at least, getting it the easy way. Besides, you can’t take on a new debt without the court’s permission anyway, and getting that means adding an awful lot of complexity in your life.
So how do you go about with barely anything to tide you over through the hard times ahead? It’s simple really – make a budget. Better yet, keep a close watch on your expenses for three months and make a budget based on any observations you have made on your spending habits. This is exactly what Greg McBride, CFA, senior financial analyst for Bankrate.com advises:
Track your expenses for three months to get an idea of how much you’re spending and where that money is going. Then create a realistic budget that fits within your monthly income, he says. 'The first step to saving is to set boundaries on your spending. And after making a budget, stick to it. That’s the most important part.
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