Bouncing Back from Debt

At some point in most people’s lives they will fall behind on bills for a month or two and then pick themselves back up. Other people are not so lucky. They scrape by as best as they can, but still fall further behind. Their debts may seem like a revolving door where they think they are finally making forward progress, only to find out that they are further behind or back where they started from. It is something that is hard to get out of, once you sink below a certain point in that bottomless pit. However, with a little planning and a lot of effort, you can eventually rise above the debt. Are you ready to discover what it takes and how to go about bouncing back from debt?

Start Small

Regardless of what set you back, be it an illness that you could not easily work through, a divorce that cost more than you had, or simply losing your job and being unable to find a new one quickly, you can begin recovering from it. The difficult part is deciding which steps to take and how to take them.

There is some truth to the idea that in seven years your credit will reset. However, this is based on seven years from when you go delinquent. If you fall behind over a period of a few years, you need to take into consideration the last bill date that you went behind on.

If you have a desire to rebuild your credit you should ask yourself how much time you have. If you are 5+ years delinquent, do you have the money or time to rebuild? Perhaps you should continue to wait and let the seven year window expire and then start over from scratch. If you are nowhere near the five year mark and you want to get ahead again, you should start recovering yourself now, but first, you will need to decide which route you want to go with it. You really only have three options. You can pay it off, settle it, or file bankruptcy on it.

What Next?

After you have satisfied your debt collectors most people are able to start rebuilding their life in about 2 years, but it depends on the option that you have chosen. If you file bankruptcy, it can usually satisfy the debt collection agencies in about three to five years. This means in roughly five to seven years, you will be able to clear your name and rebuild. If you choose to file a chapter 7 bankruptcy, you can rebuild in as little as two and a half years. The same can be said of a simultaneous debt settlement.

There are several types of bankruptcy to choose from, but in general the best way to clear your good name is going to be to simply pay off the money that you owe. That will be the only way to have your credit say that it is paid in full. The downside is, if you are broke, the inability to pay it off is why you are in this situation. To go with the simultaneous debt settlements, you will need about half of the payoff amount.

If you do choose to pay off and continue paying as much per month as possible, cut up the cards you have. After that, include friends and family and have them help you not spend as much on needless items. As a final thing, teach yourself to budget better so you can save up to put more toward your bills.

Now to Rebuild

Regardless of which method you choose to go with, the first step toward rebuilding your finances is going to be budgeting and saving what you can. This will ensure that in the future, you will be able to have some padding against unexpected expenses.

You will need to start paying your bills, all of them on time after suffering a setback. It is the fastest way to get your name back high up on the credit scale. You will also want to keep a close watch on your credit score to see if you are making headway.

When bouncing back from debt, one of the main things to keep in mind, is to not let yourself end up in a bad situation again if at all possible. If you had five cards maxed out from stuff you didn’t really need and couldn’t afford, why rebuild by having five more? This is where knowing your own weaknesses can come in handy. If you get a card, use it for emergencies. Save the “wanted items” for when you have a little extra money in the bank and are able to buy them outright.