If you have recently filed for bankruptcy, perhaps you can find some comfort in the fact that you are not alone. According to the American Bankruptcy Institute, the number of July bankruptcy filings came to 87,684 – down 10 percent compared to the same time last year, but up slightly from the previous month.
But just because bankruptcy is increasingly common doesn't make it any less stressful. People who file for bankruptcy often feel ashamed, overwhelmed,and hopeless. Here are eight tips on how to recover:
Address what caused the bankruptcy. Perhaps you need to set a new budget or look for new types of employment, so you don't find yourself in the same financial straits five years from now.
Identify your goals. Recovering from bankruptcy can mean anything from re-establishing a healthy credit score to paying off all of your debts. To help focus your progress, pick a handful of top goals to work toward.
Check your credit score. Inaccurate information often plagues credit reports, which can affect everything from job applications to mortgage rates. Simply removing incorrect information often significantly improves your score.
Gradually re-establish credit. Taking out two credit cards and paying them off fully each month can help rebuild a credit score that's been dragged through the mud. After one year, that score will start to improve, and after seven to 10 years, it could look as good as new.
Find a new credit card issuer. While lenders often hesitate to give credit cards, car loans and other forms of credit to people with a history of troubled loans, it's usually possible to find a willing lender. The terms might not be ideal, but new accounts will help rebuild credit history.
Over the last two years, card companies have tightened their standards in the wake of rising default rates and have raised interest rates even on reliable customers. Card comparison sites can help maximize the chances of getting the best deal possible. Secured cards, which function more like debit cards, are often the best option for those trying to rebuild their credit.
Avoid unfair deals. Predatory lenders often target vulnerable groups, including recent bankruptcy filers. That's why recent filers should be wary of organizations and companies offering payday loans and rent-to-own deals that carry high interest rates. Consumers are often so eager for credit approval that they jump on contracts with high interest rates, but it's usually better to wait.
Seek support. People recovering from bankruptcy can feel like social pariahs; finding yourself in this situation can be embarrassing and even shameful. But online communities of people going through the same thing can help provide the much-needed emotional support.
Think positively. Most people's credit improves after filing for bankruptcy because debts are cleared to give them a fresh start. While the bankruptcy filing will stay on your credit report for 10 years, many creditors are willing to take a chance on lending to those who have been in bankruptcy.
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Sometimes working with a professional credit counselor or bankruptcy attorney can help make the recovery process easier; bankruptcy attorneys often offer free initial consultations and then arrange for future payments. It's not always expensive. Some professionals provide services at reduced rates or even for free. But if anyone promises to improve your credit score quickly or makes another offer that sounds too good to be true, there's a good chance it's a scam. Be sure to research any company or individual counselor online before working with them to ensure your path away from bankruptcy is as bump-free as possible.