Many people hesitate to file for bankruptcy due to all the negative effects they hear others talk about. Finding out what the financial effects of bankruptcy are may help you better prepare for the aftermath. There are also multiple ways to recover from bankruptcy that may help you rebuild your financial situation faster. Feel free to ask a Tullahoma bankruptcy attorney for guidance if you have any questions.
Financial Effects to Expect After Bankruptcy
The financial effects of bankruptcy revolve around your credit score. After filing for bankruptcy, a credit score can drop significantly, often by 150 or more points. Many people panic when they hear this but not everyone realizes how much their credit score could have worsened if they had not filed for bankruptcy.
In this sense, filing for bankruptcy may actually stop a credit score from becoming significantly worse. At the very least, this opens up the possibility of repairing a credit score compared to letting a credit score become lower and lower. Since bankruptcy discharges most debts, your new credit report will reflect that you owe little to nothing on your current debt.
A common misunderstanding about bankruptcy is that bankruptcy can erase all debt. However, certain debts like alimony, child support, legal fees, and secured debts may not always be discharged. You may still have to pay back some debt after bankruptcy. On the positive side, bankruptcy may not always require you to sell all your property to pay back debt.
Be prepared to work with a lawyer when filing for bankruptcy. Many bankruptcy cases involve lawyers due to the complexity of the process. A lawyer can help you ensure the right steps are taken to protect your best interests.
How to Recover from Bankruptcy
The process of rebuilding credit after bankruptcy may sound tedious but this process is not impossible. One of the most important first steps is to start budgeting. Having a consistent budget plan through phone apps or on paper can help you avoid falling back into debt. Budgeting is all about tracking spending and subtracting this from monthly income to decide what expenses to cut.
Easing back into using credit might be the safer route. However, there are several ways to build credit that may speed up the process and involve less risk. The most important way to do this is to make payments on time for all remaining debts. There are multiple ways to rebuild credit:
Secured credit card
Retail credit card
Credit builder loans
Secured loans
Maintaining a consistent job, keeping credit card balances low, and fixing credit report errors are all other ways you can repair your credit score. Explore all your options to see what works best for your unique financial situation.
Call Tom Bible Law Today
You may not have to settle for the negative effects of bankruptcy for much longer. Start by contacting us at Tom Bible Law today at (423) 424-3116 for a consultation about your options related to bankruptcy. Our experienced team of Tennessee bankruptcy lawyers is ready to guide you on ways to rebuild your credit after bankruptcy. We can be found in the Tennessee cities of Chattanooga and Tullahoma.