People often shy away from the thought of bankruptcy, even when they realize that they have gotten so far behind in payments that they are buried in debt. Some in Texas and elsewhere may feel filing for bankruptcy will put them even farther behind, or that they are taking the easy way out, and so they’d rather keep carrying debt and hope for a break in the future.
What many of us do not realize, however, is that bankruptcy is a legal mechanism for people to get debt relief and have ways of managing finances so that they can once again be solvent and move forward. For residents of Montgomery County, knowing that they have options is sometimes all it takes to for them to get back on their feet again.
Is my credit ruined after bankruptcy?
Many people would rather not file for bankruptcy because they believe that they will ruin their credit forever. Although their credit rating will take a hit for a while after the bankruptcy procedure is over, it is important to realize that outstanding or delinquent balances have been showing up anyway on their credit report. Bankruptcy will often discharge these balances.
Some steps toward repairing your credit can start right away, such as:
- Checking your credit report to check for errors, or to send a dispute to creditors who are still reporting negative account information. Check for red flags that might be inaccurate, and look at any improvement as a motivation to keep moving forward.
- Pay monthly balances on time, keep credit balances low, and reduce credit card use.
- Get new credit by applying for a secured credit card or a loan that requires a security deposit or has higher interest rates. Avoid department store or gas cards, which have lower qualifications. Pay off the balances on time, which will gradually improve your credit score.
- As it can be challenging to qualify for a loan or rental agreement, asking a trusted friend or family member who is financially stable to be co-signer will jumpstart the process toward building a new credit profile.
- Becoming an authorized user on another person’s credit card will allow you to have your own credit card. Although the account is in another’s name, your credit score will improve as you make timely payments on your balances every month.
Which type of bankruptcy is right for my situation?
The two types of personal bankruptcy available to individuals are Chapter 7, which is a liquidation proceeding that eliminates most debt, and Chapter 13, which may discharge some debt but will reorganize most of a debtor’s obligations rather than liquidate them. Although the proceeding takes place in federal court, under Texas laws there is property that is exempt from liquidation, as well as a means test to determine which is the appropriate bankruptcy for you.