Many people hesitate to file for bankruptcy out of fear that this move will hurt their credit. The truth is that many times bankruptcy can actually help your credit in the long run, by offering a fresh financial start and a new chance at establishing credit without massive amounts of debt hanging over your head. A common misconception is that after you have filed for bankruptcy credit is impossible to get and this is actually not true. As soon as your bankruptcy case is closed and your debts are discharged there are creditors who are willing to give you a chance to reestablish credit fairly quickly. Bankruptcy will show on your credit report for several years but this does not automatically disqualify you for new credit options. Some creditors are eager to offer credit after your bankruptcy because of the restrictions on how often you can file for this protection, believing that you are more likely to pay on the debt to keep your credit clean after the fresh start.
Once you have filed for bankruptcy and received the debt discharge it is extremely important that you are very careful about accumulating any debt. Just because you are eligible for credit after a bankruptcy this does not mean you should accept every credit offer that you get. If you need to file bankruptcy then the first step in rebuilding good credit is getting your finances in order. Create a budget that is realistic given your monthly expenses and income. Make sure to set aside part of this amount to be used for emergency savings, with the ideal goal of building up an emergency fund that has between 3-6 months worth of living expenses.
Examine any credit offers that you receive after bankruptcy very closely. Look at all of the fine print involved. Some offers may include hundreds of dollars that are charged against any credit card issued. You may qualify for a $400 limit but receive a credit card that only has $50-$100 left after the account fees and other charges are deducted. This means you start out with the card owing $300-$350, often at interest that is more than 20% and without any grace periods. A secured card may be a better option. Most lenders will offer a secured credit card that allows you to place the amount in a savings account for the desired card limit. This account is used to secure the credit card if you do not make the required payments, and this type of card can help you improve your credit score over time.
After bankruptcy always use credit wisely. If you must pay with a credit card then pay off the full balance each month instead of only making the minimum payment. This will help you avoid debt problems with credit card use in the future and keep your credit clean after your bankruptcy. Strict financial management and careful credit use will give you the tools you need to get your credit back in order within a few years after bankruptcy. Make sure not to squander the fresh start that bankruptcy provides though, otherwise you could end up in the same position in a few years and have bad credit once again.