“Bankruptcy Benefits” is not an oxymoron! Most people focus on the concept of discharge of debts when thinking about bankruptcy, but there is so much more that should be taken into consideration.
Properly discharged debt prohibits collectors from moving forward with trying to secure owed funds. Apart from breathing a sigh of relief the person who has sought protection now has an opportunity to think ahead and plan anew. This opportunity to plan is the real benefit of a bankruptcy.
Within several months, your credit reports should be updated. The three main credit reporting agencies, Equifax, Experian, and Trans Union, will update your profile. The most noticeable change to that profile will be your debt to income ratio. Your DTI is the percentage of your gross monthly income that is assigned to debt repayment. Front end ratio DTI is that percentage that goes toward housing costs (rent/mortgage [with associated taxes, etc.]). Back end ratio DTI is the income percentage which goes toward recurring debt, i.e. credit cards, loans, etc. if much of your debt has been discharged, and obviously your debt to income ratio becomes a more positive number.
An improved credit score has immense ramifications. Improved credit scores can save you money in terms of lower interest/insurance rates, good deals on loans for homes/cars, etc. How do you build on this new found credit worthiness? Credit counselors/professionals would probably suggest the following, and this list is not all inclusive by any means:
- Look over your finances on a regular basis, preferably more often than less often.
- Make sure you know when your bills are due. Write it down if you have to, but remember bills need to be paid and paid on time! Late payments will undue the dynamics of a discharge in one fell swoop!
- Debts not discharged through bankruptcy require your immediate attention. Set up a viable payment plan which addresses ALL those debts. Decide upon an affordable regular payment figure for each non discharged debt and pay those amounts FAITHFULLY.
- Check your credit reports regularly to make sure payments are being reported properly and that ALL information is correct/accurate/current. Remember those three credit reporting agencies mentioned earlier in this article? You are entitled to one free credit report a year. BE SMART!! Do NOT ask ALL THREE agencies for an updated report AT THE SAME TIME OF YEAR. If you’re smart about it, you could be getting QUARTERLY updates for free!
- To further show your credit worthiness consider getting a small/secured credit card that would be used sparingly but would also show timely payments which will show potential future lenders that you have control of your debt and not vice versa.
- Learn from your past debt experience. Not having money for bills really hurt didn’t it? (It should have.) Do NOT get into that predicament again. Set up a “slush” fund, or, if you will, an emergency account that can be used to forestall a “Do Not Pass Go, Do Not Collect $200” scenario should an unexpected crisis/problem rear its head. Be prepared! You have been given an opportunity to travel down a new and potentially profitable path. YOU have been given control over your debt. Will you keep control?