As many Colorado residents may be aware, bankruptcy can bring wonderful benefits to individuals who find themselves deep in debt. Notwithstanding these benefits, however, many are often fearful of filing for bankruptcy because they worry about what will happen after the case is complete.
These individuals may be relieved to hear that bankruptcy is not a death sentence on a person's credit. First, the debt discharge is often necessary because individuals have accumulated loads of unsecured debt that they can no longer manage. Bankruptcy allows the person to discharge this debt and begin anew. After they discharge credit card debt in the bankruptcy proceeding, individuals can set about rebuilding their credit.
The process of rebuilding credit often starts with getting a person's financial affairs in order, which is a function of the bankruptcy proceeding itself when a person is allowed a fresh start. By creating a budget and tracking a person's income and expenses, the individual can move on from the bankruptcy with an eye toward staying out of debt.
From there, the person can reapply for credit cards. While some companies might not offer cards initially, individuals can often find cards that fit their personal situation. Individuals can then go about building a payment history, which, in turn, can lead to better cards with better interest rates.
Accordingly, individuals can achieve the benefits of bankruptcy by wiping out their unsecured debt through a discharge. While bankruptcy may impact the person's credit rating, the individual can undergo a process of rebuilding that credit through responsible debt management and spending practices.
Source: USA Today, "Personal finance: re-establish credit after bankruptcy," Robert Powell, July 3, 2014