Repair Your Credit To Avoid Declines
Nowadays, you cannot escape from your credit mistakes. They will eventually come back to haunt you. It is not like in the past when there were no credit records of anyone who ever applied for a loan.
Today, we have 3 companies: TransUnion, Equifax, and Experian who are in charge of establishing credit history for anyone who was ever approved for a loan. This bureau will decide whether you are to be downgraded because of missed payments or credit problems.
Financing companies use this bureau to check whether a loan applicant has a bad credit history and therefore, is a high credit risk. The lower your score, the harder it will be for you to avail of further loans. However, if by chance you are approved for a loan, you will be subject to higher interest rates because of your credit rating.
Assuming you have a low rating, this does not mean you cannot work on improving it. What you need to do is fix your credit problems, clear off any delinquencies, and possibly pay off all your loans. Of course, that is easier said than done. However, if you want to be able to apply for a credit card, housing, or auto loan in the future, it has to be done. Otherwise, you will be declined.
Acknowledging that repairing your credit will take time is the first step. Then you need to prioritize your expenses.
Why not downgrade your lifestyle to fit your budget? If you are constantly eating out, try home-cooked meals for a change. If you have a large monthly mortgage on your home, why not sell your home and settle in a smaller place with lower monthly payments?
The last option you should consider is bankruptcy. This move will stay in your credit history file between 10 to 15 years, regardless if you have recovered from your financial crisis or not.
You should also think twice about getting a debt counselor. This would mean an additional expense, which you cannot afford. Your priority is lowering your expenses and paying off your bills.
The simplest way is to live within your means. Augment your income by taking on part-time jobs. Look for a higher paying job, and from now on, always pay in cash.
Having credit problems is a huge headache and can be very stressful. When it is all over, and all the bills are paid and updated, try to be more prudent in availing of credit facilities.
Protect Yourself Even In Bankruptcy
Bankruptcy usually does people the favor of taking the stress off their shoulders and giving them a sense of starting anew. After this initial period of relief has subsided and your finances are back on track, you will probably want to get a loan for something down the road. Many people are told before they declare bankruptcy that they will never be able to buy a big ticket item as they’ll never be able to take out a loan. Although usually the case, you can still get a loan after bankruptcy.
Some lending agencies do most of their business with those individuals who have previously filed for bankruptcy or otherwise have poor credit. In most cases, an individual will not be able to take out a loan until the bankruptcy period has ended or their case has been dismissed in court. These types of loans are dependant on whether you filed for Chapter 7 or Chapter 13 bankruptcy.
For example if your case is classified as Chapter 7 bankruptcy, you only have to wait for two years until you can take out another loan. If you happened to file for Chapter 13, you will have to wait until you have paid the creditors what they are owed and the judge dismisses the case. It is because of the many nuances between these classifications that you should always hire a bankruptcy lawyer to represent you. It may seem expensive to hire a lawyer when you’re about to file for bankruptcy, but if you want to keep anything that you own, hiring a lawyer is essential.
When filing for bankruptcy, even though you should have a lawyer, it is important to know the differences yourself. By filing for Chapter 7 bankruptcy, you will be forced to sell your assets and give the money to your creditors. When apply for Chapter 7 protection, it would be helpful to compile a list of your sale-able assets and your debts. Take this to your lawyer so that he can determine if any of these assets are protected from liquidation based on which state you live in. Anything that you can’t place on the exempt list will have to be turned over to the state for them to sell to the highest bidder.
Chapter 13 protection allows an individual to work out a payment plan with the creditors without having to pay interest. When you file for this type of bankruptcy, you must present a plan as to how you’ll get out of debt, and you’ll have to give a big percentage of your check to the state to settle your debts. Secured debt that you have to pay off such as property cannot be more than $922,975 while unsecured debt such as credit card debt can’t equal more than $307,675.
In order to file for bankruptcy, you must enroll yourself in credit counseling in order to learn fiscal responsibility. After taking this class, you and your attorney will have to meet with those who you owe money where you will present your plan to pay off your debt. Your creditors have thirty days to challenge your plan of action and 90 days discuss the next course of action for you with the court.
The biggest different between Chapters 7 and 13 is that with Chapter 13, the court will allow you to keep your home and car as well as certain other possessions. As suggested earlier, it is always best to retain a lawyer when beginning the process of filing for bankruptcy. Only with their help will you be able to properly protect yourself and your family in these troubling times.
This article is written specifically with United States audience in mind. However, you are advised to seek a local lawyer near you to ensure the accuracy of the details shared here. If you are in Phoenix, get the advise of a Phoenix Bankruptcy Lawyer.
