Getting Back on the Horse and Rebuilding

In previous posts I have talked about how to avoid bankruptcy(BK) and foreclosure (FC), however, life happens and some times there are no other options than BK or FC. If you find yourself in this situation, you are probably wondering how to re-build, re-establish, and get back on your feet.

The first step is to reflect on the past, and determine what was the cause of your financial problems and learn from your mistakes. While it may have been an unforeseen event such as job loss or family/personal emergency, was there any thing you could have done different to avoid BK or FC? I'm not talking about preventing the event itself, but did you have adequate savings that you could have used to pay your bills while you were trying to find a new job? Learn from the past, otherwise, you are doomed to repeat history.

The next step is to PLAN your financial future. There is no better time to develop a personal financial plan then when you have reached rock bottom. Create a budget for yourself and determine how much you can save on a monthly basis. Savings is the key, you must find a way to save at least a little every month. As with all plans, make sure you set dates to evaluate your plan and chart your progress. You will find that you need to make changes to your plan frequently in the beginning, I would suggest you do this every month or every other month for the first year and every 3-6 months after the first year.

Once you have a financial plan, now you need to work on re-building your credit...pull out the Advil and let's have some fun. First a quick piece of advice, if you are filing BK exclude at least 1 item from bankruptcy, this will help you re-build your credit quicker. If you have eliminated all of your debt through BK or all of your debt is currently is delinquent you will need to obtain new credit lines, in order to re-establish your credit.

There are a few ways you can do this, the first is by applying for new credit (credit cards, auto loans, pre-paid credit cards). When applying for new credit make sure the new credit will report to the credit bureaus, otherwise, it will not help you. Once you have new credit lines, make sure you keep your balances low on credit cards and that you make your payments on time. Another option, which will improve your credit quicker, is to become a co-signor or joint owner on a family or friend's credit card. Obviously, you want to be sure this person has perfect payment history and a low balance. This option will improve your credit quicker because it will report on your credit that you have had this account since the credit line was opened, providing you with a great credit history.

Next you will want to obtain a copy of your credit report, I would wait 2-3 months from the discharge of the BK or the completion of the FC. Many times, you will find that there are a lot of errors on your credit report. Items that were included in the BK are still reporting as open and/or your mortgage showing as active loan even though the FC is completed. You will need to dispute all of these items with the three credit bureaus. I would suggest you consult with a professional that is knowledgeable in credit repair (they will typically charge about $450) or contact us and we can provide guidance for free. It can take up to a year to clear your credit, but it is worth every penny and minute.

All of these steps are necessary to re-establish yourself and your credit, if you choose to only focus on 2 or 3 of these areas you will the road to recovery a challenging obstacle and you most likely will not be successful. If you have and questions or need a little help please feel free to contact us and we will be happy to assist you.


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Lafayette, CO
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