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Los Angeles Bankruptcy Attorneys: Rebuild Credit After Bankruptcy

May 29, 2012

Just the mention of a Los Angeles bankruptcy can strike fear into the hearts of those who may be contemplating it. worldismine.jpg

Los Angeles Bankruptcy Attorney Vincent Howard knows that a lot of people dread even the discussion because they think it somehow means they've failed.

The truth of the matter, however, is that bankruptcy results from a myriad of life events over which you may have zero control. These are things like an unexpected illness or a sudden job loss. The one upside to this down economy is that people no longer view bankruptcy with the same stigma they once did.

All that said, it's true that a bankruptcy is going to impact your credit score. However, what you may not realize is that it's not as difficult as you'd think to raise that score - giving you a clean slate.

This issue was recently addressed in a column by finance guru Liz Weston in the L.A. Times. A letter writer wrote in that her credit scores had once hovered around 800. She had never even had so much as a late payment.

But then, the unexpected happened: A medical emergency forced her to put nearly $25,000 on a credit card. Like most people, she simply didn't have that kind of money laying around to pay it back.

She successfully filed for bankruptcy last year. Now, her score is somewhere around 670 to 680. With two unsecured credit cards and an auto loan, she wondered if she was moving in the right direction.

Weston's answer?

Yes. The mix of having a credit card and installment loan is going to help significantly. The other thing that's going to be critical is making sure all the bills are paid on time.

She noted thatit may take several years for your FICO score to return to its previous level.

What you want to understand when you look toward rebuilding your credit is that you are probably going to have a lifestyle adjustment. First, take a look at what your essentials are: food, shelter, insurance, utilities, child care, etc. You need to try to keep all of those "must-have" expenses to about 50 percent of your income after taxes. Keeping this as a general rule is going to help in the long-term.

Next, get money in your savings account as soon as possible. If you put about $400 extra in savings and another $100 in your checking, that should help stave off overdraft fees or bounced checks.

Finally, don't swear off any and all credit. This may be very tempting, particularly if you feel gouged by these banks and credit companies. However, this is going to be a very important step in rebuilding your finances. The key is to use your card regularly - and lightly. Make sure you can pay off what you use every month.

If you're contemplating a Los Angeles Bankruptcy, call Vincent Howard and the team at Howard Law for help. You can send us an email or call toll-free at 1-800-872-5925.

Additional Resources:
Restoring your credit scores after filing for bankruptcy, By Liz Weston, Money Talk, L.A. Times

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Sixth Circuit Finds Loan Servicer and Assignee Can Be Held Liable Under FDCPA - Bridge v. Ocwen Fed. Bank, May 14, 2012, Los Angeles Bankruptcy Attorney Blog