One of the key reasons people wait so long to file for bankruptcy in Los Angeles is that they worry their credit will never be the same.
Los Angeles Chapter 7 Bankruptcy Lawyer Vincent Howard of HOWARD LAW knows that while it's true your credit will take a hit in the immediate aftermath, it is not something that is impossible to overcome - if you're smart about how you rebuild your finances.
The best way to put it into perspective though is to understand that while you may face certain challenges, they are more often than not more favorable to the alternatives if you had not filed.
So for example, if you file for bankruptcy, it is true that you will probably have to pay higher interests rates than before. You will also probably be targeted by shady lenders who may feel that your desperation could make you an easy target.
But consider the alternative: You have snowballing bills that you have no hope of paying, and debt collectors incessantly breathing down your neck.
Neither is great, but the former is certainly more manageable.
True, getting back on your feet will take time. A Chapter 7 bankruptcy will clear from your credit report in 10 years. In the meantime, though, there are steps you can take to accelerate your rating.
1. Set up a budget for yourself. Be realistic. Figure out how much you earn each month - after taxes - and establish some priorities. You know you're going to have to pay your rent or mortgage, buy groceries and cover your commute costs. You also will likely need to figure out how much you can save. Ideally, you'll acquire about six-months worth of monthly expenses in savings, just to keep yourself comfortable in case of an emergency. This might mean you won't have much left over for entertainment for a while, but it's critical to ensuring your financial security.
2. Use cash. This is actually a practical and psychological benefit. It's practical because if you've just undergone a bankruptcy, you aren't likely to have a great deal of access to credit cards for a while. It's a psychological benefit, however, because if you use cash to cover your expenses, you're actually less likely to spend when you can see those dollars physically leaving your hands.
3. Make sure you are paying all your bills on time. This includes even the small ones: Your cell phone bills, your electric company, your Internet bill. These are creditors, and any late payment risks the possibility of ending up back on your credit report - something you do not need right now. Plus, paying your bills on time will begin the process of rebuilding positive credit.
4. Keep an eye on your credit report. The whole reason you go through a bankruptcy is to wipe the slate clean. This makes it very important for you to ensure that what is on your credit report accurately reflects your outstanding debts and payments. Errors occur all the time, and you can't afford to have one negatively impact your purchasing power.
5. Get a credit card. We realize some people might think this is akin to insanity after a bankruptcy. But it is actually one of the smartest things you can do. It's hard to build up a better credit history if you don't have a credit card. The key here, of course, is to be smart about it. Recognize that you'll probably be paying a higher interest rate, so be very careful about how much you take out. Be sure that you can pay it off each month. One way to keep it in check is to only use it for one thing, like gasoline or groceries - something for which you have budgeted each month.
The bottom line here is that bankruptcy is not a dark hole into which you enter and never return. On the contrary, it is a process that allows you to come back stronger - and more financially stable.
Los Angeles Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
How to bounce back after bankruptcy, Sept. 13, 2012, By Ray Martin, CBS News
More Blog Entries:
L.A. Consumer RIghts: How to Handle the Debt Collectors, Aug. 20, 2012, Los Angeles Chapter 7 Bankruptcy Lawyer Blog