Filing for a New York bankruptcy has a long-term impact on your life. In some regards, this impact is for the better. Bankruptcy prevents future calls from debt collectors and lenders. After bankruptcy, you are able to start with a clean slate financially, and you don’t have the stress of overdue payments. However, other ramifications may negatively influence your future.
Bankruptcy will impact your credit score and ability to secure a loan or mortgage in the future. A bankruptcy filing remains on your credit history for 10 years. During this time, lenders are hesitant to provide you a line of credit or a loan, as there is a risk you will default again. As well, your credit score is very likely to fall below a bank’s risk tolerance.
These negative repercussions don’t mean you should sit back and wait out the 10 years following a Chapter 7 or Chapter 13 personal bankruptcy. Rather, you should follow these four tips from a New York bankruptcy lawyer for rebuilding credit after a New York bankruptcy.
#1: Focus on Healthy Financial Habits
One of the best ways you can begin rebuilding credit is by implementing healthy financial habits. You should set a budget, track your spending, limit your major purchases, and ultimately live within your means. These daily habits will help you manage credit card payments and other payment obligations.
In turn, organization and money management prevent missed payments and future delinquencies that could further harm your credit score. As you move past bankruptcy, making timely payments is one of the most important things you can do to establish a better credit score and improve your credit history.
#2: Face Your Credit Score
Avoidance is a horrible tactic when it comes to your finances. Even if you haven’t filed for bankruptcy, by avoiding debt, missed payments, or a low credit score – you are setting yourself up for failure. For many people, avoidance is what led to extensive debt in the first place.
Instead, you should face your credit score and credit history. Acknowledge the impact bankruptcy proceedings had on your financial history, and use it as a starting point for growth. As you start to implement the other tips after a New York bankruptcy, you’ll see improvement in your credit score. Eventually, you’ll build a financial record that elicits pride, not disappointment.
#3: Apply for a Small Line of Credit
There are credit card companies that accept high-risk borrowers. While these lenders typically exist outside traditional banks and credit card companies, the Internet makes it easier to find alternatives. Several startups and companies accredited online are willing to take a chance on someone who filed for bankruptcy but demonstrates timely payments and good financial habits post-bankruptcy. A subsidiary of PayPal is even willing to offer small loans to high-risk lenders, including individuals that filed for bankruptcy.
Why is taking on small amounts of debt important to rebuilding your credit? Successfully paying a small credit card bill each month or making timely payments on a $1,000 loan shows your new financial responsibility. This could reassure traditional lenders down the road. As well, a history of repayment will up your credit score, making the impact of bankruptcy less noticeable and easier to explain.
#4: Stick to Your Budget
After a New York bankruptcy, you are offered a clean slate financially. Your debts are discharged or reorganized for repayment with the help of a New York bankruptcy lawyer, and those debts that go unpaid are erased. This is the ideal time to avoid future debt, and that starts with following a strict budget.
As part of our first tip on rebuilding credit after a New York bankruptcy, we said that healthy financial habits are important. It isn’t enough to merely put those habits down on paper, but you also need to live them. This means not only creating a budget, but you also stick to it. Don’t overspend, don’t live beyond your means, and when you hit a weekly or monthly allowance, stop spending.
Find a New York Bankruptcy Lawyer
While these steps can help you repair a credit score and improve your financial outlook after bankruptcy, there are proactive steps you can take before a New York bankruptcy. One of these steps is hiring a New York bankruptcy lawyer. If you need a bankruptcy lawyer in New York, contact Simon Haysom, LLC at (845) 294-3596.
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