After  declaring bankruptcies, there are a number of consequences that we should know. As an example, our credit score may drop tremendously. There’s no way around this. Bankruptcy ruins our financial credibility and it’s devastating for our credit scores. With Chapter 13 bankruptcy, we will still need to work hard to pay off debts. With Chapter 7 bankruptcy, we will start from scratch and all of our assets have been confiscated to satisfy creditors. In both situations, we should already have drastic changes in lifestyle. In fact, we will need to become an entirely new person; if we had unhealthy financial habits as part of our lifestyle. The first thing we should do is to build up our overall savings account.

This is our primary financial foundation and a large savings account will allow us to deal with any unexpected financial trouble. In this case, our savings accounts should be enough to cover six income-less months. This could happen when we have been laid off or have medical issues. Without savings account as financial buffer, our situation can be quite difficult. We should consider living without credit cards as long as we can. Instead of relying on cards, we should focus on building our savings account. If credit cards are needed to validate business accounts and help us to earn money, then we should choose the secured type.

Secured credit cards have lower interest rates, because they are secured with a deposit. In this case, the limit of the credit card matches the deposit. We won’t be allowed to use more money higher than the overall amount. Secured credit cards should be used only as backup. We need to rely on our regular income and savings account. Another essential thing that we should do is to clean up our credit records. Lenders should be encouraged to have a new view on our situation. If we don’t focus on increasing credit scores, our financial situation could remain challenging. We are eligible of free copies of credit reports from all major credit bureaus.

When we obtain the report, we should check the information carefully. Any inaccuracy should be properly examined and irrelevant negative comments should be removed. After we have a fresh start through both bankruptcy chapters, we should avoid applying for unsecured credits for about 18 months. In this case, we need to sizable savings account and decent credit score before applying for any unsecured loan. If we have credit card, we should keep the balance under 30 percent of the limit. As an example, if we have a $500 limit on our credit car, we shouldn’t charge more than $150 each month. Moderate usage of credit card can help to improve our credit score and we need to pay it off each month. Responsible usages of credit cards are a good indication that we are more capable in managing our finances. Overall, we should focus on our savings account, even if we need to use public transportation and rent a house for a few years; because we want to avoid mortgage and car loans.