Bounce back from bankruptcy

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By Catherine Holland By Catherine Holland

For many people, filing bankruptcy is the final step after a long process of trying to manage debt on their own. Unexpected medicals bills, losing a job, divorce, and large amounts of credit card debt all contribute to the type of financial crises that result in bankruptcy. In today’s rough economy, more and more people are looking for help overcoming the burden of debt. In fact, according to the American Bankruptcy Institute, more than one million Americans filed for bankruptcy protection last year. That’s an increase of more than 30 percent from the previous year.

October 17 marked the fourth anniversary of The Bankruptcy Abuse Prevention and Consumer Protection Act. Before filing for bankruptcy, debtors are required to complete an approved credit counseling session. After filing, debtors must complete an approved financial education course before they can discharge their debts. These requirements were included to ensure consumers make an informed choice about bankruptcy, its alternatives and consequences. Perhaps more importantly, they were designed to provide debtors with the financial skills necessary to build a strong financial foundation and avoid future financial problems.

Filing for bankruptcy can impact your credit report and score for up to 10 years; however, you can still bounce back and re-establish a good credit score. The financial experts at Money Management International (MMI) offer the following advice to help re-build credit after bankruptcy.

Learn from your mistakes. Take a hard look at your past financial situation and figure out what went wrong. If overspending was an issue, learn to live on a budget.

Pay yourself first. Unfortunately, bad things sometimes happen to good people. Learn to expect the unexpected and put money away for the rainy days.

Clean up your credit report. It’s important to take the necessary steps to dispute any incorrect information on your credit report. Visit for one free report from each bureau every year.

Use credit wisely. Credit cards are useful tools, but should only be used as a tool of convenience, not as an extension of your income.

Pay bills on time. Make a calendar and list the due dates and payment amounts for all bills. Don’t neglect creditors such as the phone and utility companies. Many people don’t realize these are creditors too.

Get a secured line of credit. Obtaining new credit after a bankruptcy can be difficult. Consider a secured account or a small loan from your credit union if traditional lines seem out of reach.

Bouncing back after bankruptcy can be tough. When trying to reestablish credit, it pays to be persistent and patient; there are no quick fixes. The good news is that scores are updated and may move several points each month.