TIP# 4: Get A Credit Card

Category: Finance.

So you have filed for bankruptcy.

At first blush, you are full of ideas on how you are getting a fresh start. What's the next step? You have freed yourself from almost all of your debts and you are, for all intents and purposes( financially, at least) , a new person. In exchange for a discharge of your debts and stopping your creditors from pursuing any collection actions against you, your credit rating took the brunt of the blow. But note that by filing for bankruptcy, you had to pay a dear price. Considering how your credit rating was probably not all that great to begin with, this recent hit is not going to be an easy one to recover from.

The silver lining? Let's start with the bad news: - The bankruptcy will stay on your credit report for up to 10 years. - To lenders, you would seem a bad risk because you have legally written off at least some of your past debts. - 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. Think positive. Credits were what you got bankrupt in the first place. It is good that you are restricted from getting new credit. They will have no difficulty getting you in that place again. Common sense dictates that you lead a simpler lifestyle properly slimmed- down, no frills attached.

Now, for the rebounding tips to help you climb back up from the pits of bankruptcy: TIP 1: Lead a Frugal Lifestyle. In other words, be frugal. 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. 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 bottom line, is that you, therefore are still in debt, you may only, albeit pay a portion of the total debt to your creditors. 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.

The usual period given by bankruptcy courts with which you can pay off your debts is within three to five years. What does this mean to you? No luxuries whatsoever, except those exempted under the law. As we earlier said, it means a no- frills lifestyle. And sometimes, it may also, just sometimes mean changing your basic expenses, such as how much you pay for shelter and groceries every month. Suffice to say that getting new credit will be a difficult feat, if not downright impossible.

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. So you can forget about getting a new credit card or a car loan. 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. Or at least, getting it the easy way. So how do you go about with barely anything to tide you over through the hard times ahead? 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.

It's simple really make a budget. This is exactly what Greg McBride, senior financial analyst, CFA for Bankrate. com advises. Then create a realistic budget that fits within your monthly income, he says. Track your expenses for three months to get an idea of how much you' re spending and where that money is going. The first step to saving is to set boundaries on your spending. That's the most important part.

And after making a budget, stick to it. TIP# 2: Work on Rebuilding Your Credit. Fortunately for you, filing for bankruptcy does not have quite the same social and financial stigma it once did ten, maybe twenty years ago. Ah yes, the 800- pound gorilla that you would have to take on rebuilding your credit. The purpose of filing is a safety valve, says Roger M. Thank God, the day in which it was like wearing a blazing star on your forehead is over. Whelan, resident scholar of the American Bankruptcy Institute, a nonprofit professional organization.

But rebuilding your credit is the double- edged sword of post- bankruptcy life. However, this does not mean that you would have to steer clear from credit from now on. You have gotten to where you are now because you mismanaged your credit. At first, you may have to, because you are given little choice on the matter. So what are the rules? But sooner or later, you find that you have to get credit to rebuild your financial life. There are no rules.

It does not matter how you do it or how fast. That's the best part about it. The factors can vary widely from the kind of resources you have and the type of bankruptcy you filed for. Whereas, if you filed under Chapter 7, the bankruptcy could stay longer in your credit report say, up to ten years. For instance, if you filed under a Chapter 13 bankruptcy, the bankruptcy will stay in your credit for five to seven years. During that period, it is going to be very, very difficult for you to get credit, let alone work on rebuilding yours from bad to good. Now, if you have a high dollar income, then obviously you are going to have a slightly better edge over the rest.

And yet, if you want, rebuild you must to get back in the financial game. But just slightly. But remember that many apartments don' t report to credit bureaus, so those payments will keep a roof over your head but won' t help you rebuild your credit, business development manager, warns John Ulzheimer for MyFico. com, a division of Fair Isaac Corp. , the company that developed credit scoring. If you managed to hang onto your house, paying your mortgage on time will improve your credit report. Ironically enough, while Chapter 7 filers usually have a hard time getting approved for new credit, they are also usually the ones that have a better chance at rebuilding their credit. That's because you cannot really apply for new credit without getting the court's permission first.

Henry Sommer, an attorney and author of Consumer Bankruptcy: The Complete Guide to Chapter 7 and Chapter 13 Personal Bankruptcy says that while you' re in a Chapter 13( reorganization) , your options are somewhat limited in terms of credit. On the other hand, under a Chapter 7, you are given more freedom in that area since all your debts are discharged. TIP# 3: Adopt a Positive Attitude and Show What You have Learned. The sooner your debts are discharged, the sooner you can get to working on repairing your credit. Experts on bankruptcy insist that attitude and persistence can make a difference on your life after filing for a Chapter 7 or Chapter 1 The consumer who's going to recover faster is the consumer who jumps back in, says Ulzheimer. Hira, a professor at Iowa State University who specializes in consumer economics and family finance. Financial capacity is one thing, says Tahira K.

Mental or attitudinal capacity is the other thing. If you build a savings account, carry no debts and have an emergency fund, you` re saying, I can control, Look my behavior, Hira adds. So being positive can make a whole world of difference. It depends on how good a salesperson you are and how good your behavior has been. Pay your bills on time is the name of the game. And, by behavior, of course, she means your financial behavior or how you carry yourself around expenses and financial obligations. It is also incidentally the easiest way to show to your lenders that you have learned from your past financial mistake and are making every effort never to fall into that trap again.

Can you handle it? In short, youve got to be a model citizen in terms of financial management. Of course, you can! There will be a price attached, which is higher, warns Hira interest. And the only rule to follow is this: Shop for lenders. This gives you all the more reason to be discriminating when choosing lenders. Don' t get hard- balled into paying for high interest rates when you can get virtually the same loan for lower interest.

Don' t just jump at the first credit opportunity thrown your way only to find that the interests are punishing. Compare lenders. TIP# 4: Get a Credit Card. You are the consumer and you still have the advantage of choice. The best way( to establish good credit) is to get a credit card, director of the, says Mark Oleson University of Missouri Office for Financial Success. You generally have two options.

It's ironic because the best way to help yourself is also the best way to damage yourself. You get either a secured card or an unsecured one. Because they lose nothing by this, credit card companies are very open to secured cards. Here's how the two are different: Secured Card. However, personal finance experts are divided on whether or not these cards are helpful to consumers looking to re- establish credit. The limit of this charge card will depend on the amount that you have deposited( it's usually for the same amount) . Basically, a secured card works by depositing money with the bank in exchange for a charge card.

Thus, when you close the account, you get your deposit back. For all the credit bureau knows, you have a credit card and you' ve been using it for some time. The good thing about secured cards, is that some, though of them do not report to the credit bureaus that the card is in fact a secured one. It will show on your credit report as a regular credit line without anything explaining it as a secured card. So a common sense advice would be that if all you get is a secured card, be sure to get the best rates and the least fees. However, that is not always the case.

Before you sign, be sure to read all the fine print. Give it only six months to a year. And finally, use the secured card sparingly. And afterwards, try to negotiate with the company for an unsecured card. Even after you have declared bankruptcy, you may still be able to get a card. Unsecured Card.

It all depends on lender discretion. What's more, there is a, with bankruptcy certain time period where you cannot file for another bankruptcy. Some lenders and banks may even consider you a good risk because you do not have any debts on you. Lenders may take it into good account that you may not be able to file for bankruptcy for a several years. Again, the standing advice is: shop around and always, always read the fine print before signing anything. However, note that there is a very likely chance that you are going to pay for this privilege.