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How to Rebuild Your Credit After Bankruptcy

If you are worried about rebuilding Credit after Bankruptcy, this article will help you with some general advice about how to find your way back to the top.
What filing bankruptcy is all about
Bankruptcy is a process whereby a person in debt can crawl out from under it and start again. The idea is to help out those who are in dire financial straits, and are in debt over their heads. The result is that you do not have to pay back most of your debts, you are debt free and can move on. The drawback is that it leaves a nasty stain on your credit report for the next ten years, making it hard to reestablish yourself and recover.
Do I really have to wait another ten years before I can get a loan again?

No. As a matter of fact it is possible to get credit again. However, it will be a bit more difficult. One possibility is to get a protected or pre-paid Credit Card which can be used by depositing money into it, like a bank debit card. This can help you rebuild your credit again, and establish yourself. After a while it can help you start to get loans and credit again before the ten years is up.

What about my debts?

One good thing about filing is that it gets rid of the creditors once and for all. They won't be bothering you anymore. Once all the paperwork is in and processed, it is illegal for them to keep harassing you. You have the law on your side!

Will everybody know that I filed?

No. Very few will actually know about it. However, since the file is accessible to the public it will be visible on your credit rating, and will be kept on file for ten years.

What are the changes I've been hearing about?

The original laws were passed in 1978, and were revised in 2005. The general idea of the new legislation is to make people who CAN pay some of their debts pay. The laws were being abused by those who could have paid. Here are the major changes that went into effect last year:

  • You have to meet certain requirements in order to be able to file bankruptcy. Your family income will be checked to ensure that it is below the state average. They also want to make sure that your family is able to make the regular payments.
  • You are required to submit your last year's tax return, in addition to all the other paperwork.
  • They also require that you have lived in the state in which you file for at least two years. The reason for this is that some states have more or less lenient laws.
  • Child support and alimony and are the debts that have to be paid first.

Next Step

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Refinancing Your Mortgage Loan After Bankruptcy

Though it may seem impossible, refinancing your home loan after going through Bankruptcy is feasible as long as you can meet certain requirements. Finding the right lender is however, a challenging task.
Refinancing After Bankruptcy is Possible

Refinancing a home mortgage is probably one of the few financial transactions that someone who has gone through bankruptcy can achieve within a small period of time after the bankruptcy has been discharged. Since a mortgage loan is secured by an Asset, the usually extremely low Credit score bared by someone with a bankruptcy in his credit report isn’t that detrimental.

Raising your Credit Score

Moreover, refinancing a home loan is an excellent opportunity to raise your credit score and improve Credit History. The monthly payments you make will be recorded into your credit report and this will contribute to a continuous increment on your credit rank. However, since you won’t be able to apply for a refinance home loan till six months after your bankruptcy has been discharged. You need to work hard during this period in order to build a good credit history so as to make sure you get approved for your refinance home loan.

Getting Ready for Applying

In order to do so, you need to make all your payments on time including your current home loan installments. This is essential since any late payments or missed payments may be an obstacle between you and your refinance home loan. If you haven’t done so yet, open a bank account, either a checking or savings account and get a Credit Card. If you can’t get approved for an Unsecured Credit card, don’t hesitate, apply for a Secured Credit card and start using it and making regular payments. All this will help you build a healthy credit history and will ensure you get approved for a refinance loan.

Search for a Lender and ask for Loan Quotes

The search for a suitable lender is the main task you need to complete. You can refinance with the same lender that is currently handling your home loan, but don’t stick to the first offer you receive. Request loan quotes with every lender you run into and even request online quotes as you’ll be able to get much better deals this way.

Pay attention to Interest Rates and other fees

You need to pay special attention not only to the interest rate and fees charged by the lender that will refinance your home loan, but also to any punitive fees that your current mortgage loan lender may charge for pre-cancellation of your loan. These fees and costs may turn refinance too onerous to even consider the possibility. You may have to pay a slightly higher interest rate since you’ve got a bankruptcy on your credit report, however, don’t let lenders take advantage of this situation. This kind of loan is secured by Collateral so there is no reason to charge high interest rates, no matter how low your credit score is.

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