Before the recession hit, the housing market was booming and people were using that boom to buy new things.
People overspent and maxed out their credit cards, and then just consolidated it all into a new mortgage.
Where second mortgages used to be something meant only for emergencies, during the boom they were being used to bankroll lifestyles that incomes didn’t allow.
And then the housing market crashed.
Suddenly your house couldn’t pay off your credit card outstanding.
People struggled to meet minimum dues, defaulting often, and debt collection became the new booming industry.
Bankruptcies and the recession followed, and the economy has been bad ever since.
Though there are a number of circumstances that lead into financial ruin – job loss, medical bills, divorce, small business failure, etc.
– the consequences are pretty much the same for everyone – heavy stress, being hounded by collection agents at every corner, and being sued by creditors.
If you are down in such a hole and haven’t yet filed bankruptcy, here’s a bit of bankruptcy info for you – more than 1.
5 million personal bankruptcies were filed in 2010, and the number was actually 9 percent higher than 2009.
So don’t think that cases of bankruptcy are rare.
And if someone has told you that filing bankruptcy will be akin to credit suicide and that you will never recover, here’s another bit of bankruptcy info for you – even Abraham Lincoln, Donald Trump, Mark Twain, Henry Ford, Walt Disney, and Larry King among other immensely successful people filed bankruptcy at some point in their lives.
So, if you are in such a mess that your total unsecured debt, such as medical bills and credit card outstanding, is greater than what you make in a year, or you aren’t being able to meet the minimum dues, or any of your creditors has sued you, bankruptcy might be your only way out.
Once you have got most of your burden discharged, you can start the process of recovering from financial ruin, which begins with being completely honest with yourself about why you ended up here in the first place.
If the reason was circumstances beyond your control – like a medical condition or a layoff – you need to learn how to be prepared to face them.
If it was a spending problem, you need to figure out a way to control it.
Now, if you didn’t learn about rebuilding your credit in bankruptcy info, know that you shouldn’t swear off credit cards – you’ll need them.
To recover your credit score, start by thoroughly reviewing your credit reports and ensuring there are no errors on them.
If there are, dispute them and get them removed or corrected.
Next, get a couple of credit cards and an installment loan.
You need to use credit to increase your score.
Avoid credit cards with exorbitant fees; high interest rate is fine as you are not to carry a balance.
Ensure that the loan and the cards are reported to the credit reporting agencies.
Use the credit cards, but not for more than 50 percent of their respective limits, and pay them off each month in full.
Be on time for your payments on the installment loan as well.
Your credit score should recover enough in a year for you to refinance the loan and the cards to better terms.
Be patient and keep chipping away like this, and you will recover from the financial ruin you were in.
