When you have filed bankruptcy one of the first things that you should do is try to begin rebuilding your credit score. This means saving, not overspending, living within your means, and holding onto money.
You may think that you shouldn’t take out loans or credit cards if it is not necessary, but in actuality you should take out credit and demonstrate your ability to hold the loan, line of credit, using it on occasion and paying it back in full.
This responsible behavior is easier said than done for a person who has failed for a long time to handle credit properly has to suddenly change spending habits and handle money cautiously in order to rebuild credit. It’s important to follow a path of fiscal maturity if one is going to rebuild credit and establish a successful financial profile.
This means that those who have filed bankruptcy begin saving, do not overspend, live within your means, pay creditors on time, delay large purchases, stay away from shopping sprees, frivolous vacations or other irresponsible spending habits. A key proponent of this is not taking out loans or credit cards unless use is sporadic and only used to demonstrate the ability to make timely payments.
Winter Park bankruptcy attorneys Eric Lanigan and Roddy Lanigan have handled bankruptcies and foreclosures since 1976 and 2007 respectively. Part of the value in working with the Lanigans is the knowledge and the experience that they have. The Lanigans will share information and guide those who file bankruptcy with tips on how to rebuild credit.
Responsible Use of a Personal Loan: Step One
One of the ways to rebuild credit and demonstrate responsibility is to take out a personal loan after bankruptcy. It’s an easy loan to obtain and one that many who file bankruptcy will be solicited for by mail. It is an unsecured loan usually a small line of credit offered by a financial services company. Personal loans after bankruptcy, the very thing that that ruined credit for some people filing for bankruptcy is the thing that can actually help them get credit back over time.
The question about personal loans after bankruptcy is whether an individual taking out an unsecured loan can leave it there without touching it. Holding it as an amount in reserve, or using it in reasonable increments and more importantly, repaying it on time to demonstrate fiscal responsibility.
Personal unsecured loans are going to be one of the costliest type of loans or lines of credit available as it will have the highest interest rate because if the loan is defaulted and you don’t repay it there is nothing held as collateral to secure it. There’s a huge risk in this for the lender thus, the higher interest rates.
Financial companies are also the only likely source for the personal loan because they’re one of the only institutions able to offer this type of loan risk to the newly bankrupt. While the interest rate may seem ridiculously high, used carefully, the personal loan can sit as an unused line of credit that can demonstrate the ability to responsibly use a line of credit.
The personal loan from a finance company is likely the only institution willing to make a commitment to borrowing out money at extremely high rates but they’re legal. This kind of loan truly is the last things in the world that bankruptcy filers need to ever use. However, if the loan sits as an unused but constant line of credit over time and is then repaid in full with all payments made on time, it can help to re-establish credit.
A Car Loan: Step Two
A car loan will be one of the first lines of credit offered to the bankrupt usually by mail. The car loans will have a high interest rate, but next to a personal loan, a car loan is one of the only types of loans that a person who filed bankruptcy will be able to take out. Repaying this loan on time over the life of the loan helps greatly in rebuilding the credit of an individual who has filed bankruptcy.
Chapter 13 Bankruptcy vs. Chapter 7
The other type of personal bankruptcy is a Chapter 13 bankruptcy which allows you to repay the debt that has been accumulated. A Chapter 13 bankruptcy will provide you with a three-to-five-year repayment plan that is more manageable because there is a lowered interest rate and sometimes the amounts are reduced. A Chapter 13 bankruptcy is less damaging to an individual’s credit report and is most like a debt counseling program.
With a lowered interest rate, it’s possible to payback loans within three to five years, but the debtor cannot miss a payment and has to stick exactly to the Chapter 13 repayment program.
Interesting is the fact that often a Chapter 7 filer may be eligible for personal loans after bankruptcy more quickly than the filers of Chapter 13. In debt counseling and in Chapter 13, a debtor cannot open another loan account or the program is ended. Most importantly, if a payment is missed the Chapter 13 converts to Chapter 7 bankruptcy.
Choosing a Bankruptcy Attorney With Experience
While there is complete credit counseling either on the phone, in-person, or online before and after filing bankruptcy, there will be a lot of questions that arise. This is why it’s important to work with attorneys who have a financial background and years of economic experience and knowledge to provide a reasonable footprint for bankruptcy filers to follow.
Eric Lanigan and Roddy Lanigan handle every bankruptcy personally completing all paperwork, attending all meetings and bankruptcy hearings. There are no paralegals or legal assistants involved. All questions you have are answered by Eric or Roddy Lanigan. The Lanigans have experience from years of filing bankruptcies and will provide information, viable options after bankruptcy that will help to rebuild a healthy credit score over time.
The Lanigans will tell you that credit reports will lead with bankruptcy information, but small, unsecured loans that are faithfully paid back responsibly, on time each month will begin to restore the financial health and profile of anyone who has filed bankruptcy.
Another interesting fact the Lanigans share is that a Chapter 7 filer may be eligible for personal loans after bankruptcy more quickly than a filer of a Chapter 13 bankruptcy. To find out more about filing bankruptcy and how it will affect your financial future, set an appointment with Eric or Roddy Lanigan to come into the Winter Park office and begin planning your fiscal future. Everyone’s financial situation is different. Work with the Lanigans to determine what your plan of action and options will be.
