Getting Back Your Credit After Bankruptcy, Some Tips Part II

09 Mar Getting Back Your Credit After Bankruptcy, Some Tips Part II

After Bankruptcy, you will probably fall into one of three very generic categories: 1) You will never want credit again. You will never want to see a credit card again. You despise all forms of credit. 2) You may need credit in the future, and therefore, have a reason to rebuild your credit profile. 3) You will definitely need credit again in the future.

Although these categories may seem simple, they do serve a very useful purpose. For the people who never want to see credit cards or use credit again and who fall into category 1, this article serves no purpose, so please stop reading now. I just hope that you will never need credit again, because if you do, and you are lucky enough for someone to lend you money, it will probably come at a huge premium.

However, if you fall into category 2 or 3, please keep reading.

If you may need credit in the future or will definitely need credit in the future, this is the time to take inventory of the baggage that you carried over from your bankruptcy. Some of you may have no debts after bankruptcy, goody for you. But, now you will have to hit the ground running because you are behind.

Some of you may have carried some debts through the bankruptcy with you, like mortgages, car loans, furniture loans, etc. These loans now take priority for two reasons. First, you must, not may or should, pay these loans on time each and every month. Second, many bankruptcy courts and states require that you reaffirm debts to carry them through a Chapter 7.

I hate reaffimation agreements with a passion. If you signed one, you are obligated to satisfy this debt. My advice is make it a priority and pay the darn thing off as fast as possible.

After bankruptcy, you must prioritize your debts and cut the fat out of your household budget. I know there are many gurus out there that have their own systems on how to accomplish this task. But, I also know that I am able to stick to something that I commit to a whole lot easier than to someone else’s cookie cutter plan for all occasions.

If you have a home, I would always put the mortgage payments first. If you are serious about rebuilding your credit, the fastest and easiest way is by paying that mortgage timely. This is true for several reasons. First, for most individuals, their home is their largest investment and by far their biggest debt. Post bankruptcy, this will be the most important item on your credit report. Second, if you can put the monthly mortgage payment on auto-pilot, you will be able to plan for it and budget for the remainder of your bills.

Likewise, your car payment, if you have one, will go a long way to the re-establishment of your credit score. If at all possible, I would set up these payments on auto-debit as well. By drafting these payments directly out of your checking account, you are not only disciplining yourself to make the payments timely, you are also creating a record of electronic payments in case something goes wrong in the future.

Now that you have your home and car on auto-pilot, you will also need to direct some of your income to a rainy day fund that you will not touch under any circumstances, except for a rainy day of course. Likewise, you will need to have a way to pay your monthly bills and reduce existing obligations like your mortgage and car payments. In other words, its time to get serious about saving money now for the future.

Part III will discuss what I like to call: Creating snowballs and watching them roll down hills.

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Carmen Dellutri is a proud member of the Florida Bar, and he is a Board Certified Consumer Bankruptcy Attorney, Certified by the American Board of Certification. He practices in the areas of Consumer Bankruptcy and Plaintiff's Personal Injury. He is the principal attorney at The Dellutri Law Group, P.A. The firm supports many charitable and civic causes by donating time and much needed capital to our community. Mr. Dellutri and the other attorneys in the firm routinely speak to students of all ages about various legal and societal issues.
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