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How to get back on your feet after bankruptcy

On Behalf of | Apr 20, 2021 | Firm News |

After declaring bankruptcy, you may feel like a big weight is off your shoulders. However, it may also seem like an uphill battle to bounce back and restore your credit.

The good news is that there are certain steps you can take to rebuild your credit in a fairly short amount of time. Once your credit score increases and your finances stabilize, you may even be able to start thinking about buying a house.

Steps to rebuild credit and save money

According to U.S. News and World Report, one of the first things to do is analyze how bankruptcy happened in the first place. For some people, it was an unexpected, large expense such as a medical bill. For others, it may have been years of money mismanagement and overspending.

If your bankruptcy was due to spending more than you made, it is time to make a budget and a plan. Along with living under your means, you should also be saving money every month so you have a contingency plan for emergencies.

Along with paying your bills in full every month, you must also pay them on time, as late payments count against your credit. One good strategy for building credit is to apply for a secure credit card. This keeps your spending in check and improves your credit score.

Timeline and strategies for buying a house

If buying a house is a goal of yours, Realtor.com states that most people may begin the application process anywhere from two to four years after the bankruptcy. However, you should ensure that your finances and income are at a place where you feel comfortable being able to pay a mortgage regularly.

Before applying, check your credit reports to ensure there are no errors and that your credit score is adequate to take out a loan. You will also need to explain to the lender what caused you to file bankruptcy in the first place. If it was not an extenuating circumstance, you will need to prove that you have changed your spending habits and are a better manager of your finances.