The Comeback Trail

Bankruptcy blog sites are often replete with posts about recoveries from bankruptcy; for example, Abraham Lincoln, Cyndi Lauper, and Larry King all filed bankruptcy and they turned out alright. Their stories, and others like them, are both true and inspiring, and they show us that bankruptcy is a fresh start in the game as opposed to the end of the road.

However, these stories often come across like those television weight-loss commercials in which paid actors give testimonials such as “I lost fifty pounds on the XYZ plan; it was easy and you can do it too.” However, not everyone will lose fifty pounds on the XYZ plan, and it will almost certainly not be easy.

Bankruptcy recovery is much the same. It will not happen quickly and it requires effort, but in almost all cases, it does happen.

Everyday Actions

One of the most persistent myths about credit score is that paying bills on time makes a score go up. Unfortunately, that’s only true in some cases. Some monthly payments, mostly auto loans payments, student loan payments, and mortgage payments, are reported to the credit bureaus and on-time payments on these accounts will usually make one’s score go up. But most other bills, like car insurance, rent, and utilities, are not reported to the credit bureaus and on-time payments will have no effect on a FICO score. That being said, unpaid accounts are nearly always sold to debt-buyers. Such transactions do show up on credit reports, and “referred to collections” is one of the worst comments on a credit report.

To hasten the credit restoration process, many former debtors obtain credit cards. That’s much easier to do then one might expect, because since former debtors cannot file bankruptcy again for several years and they are actually better credit card risks than some non-filers, many people are inundated with credit card solicitations almost as soon as the ink dries on their discharge orders. There are a few things to remember:

• – A secured card is sometimes a good option, because it has such a low credit limit. Try to find a card issuer that does not include a comment on FICO scores that the account is secured, because the positive impact is not as significant in these cases.
• – There is some debate as to whether it is better to pay off the balance in full each month or leave a small unpaid balance that allows the moneylender to earn interest. A trial-and-error approach may be best, so do both and see what happens.

Bear in mind that almost everything is negotiable when it comes to credit cards.

That same principle applies when asking for secured loans on a house or car. Be upfront with the moneylenders and tell them about your situation. In most cases, if the moneylenders see six months of on-time payments, they will lend more money, albeit at a higher interest rate. In fact, many secured moneylenders like working with low-risk former bankruptcy filers, because they can legally charge more money for the loans.

Your Fresh Start Is Waiting

At the Bentz Holguin Law Firm, LLC, our lawyers know what it takes to obtain both short- and long-term debt relief. Call us today for a confidential consultation with an experienced bankruptcy lawyer in Chicago.

Resources:

https://www.wisepiggy.com/credit_tutorial/improve_credit/will-paying-bills-on-time-help-my-credit.html

http://www.investopedia.com/ask/answers/110614/how-often-can-i-file-bankruptcy.asp