Harris-Courage & Grady, PLLC
You Can Survive Without Credit
Many clients who come to us drowning in debt are using their credit cards to pay their living expenses, and their entire paycheck paying down their credit cards.
In order to file bankruptcy, you need to stop using your credit cards.
Credit card use right before filing bankruptcy is considered fraud—the court will assume you were borrowing the money without intending to pay it back.
You need to make a change in how you use your money. Your paycheck needs to go to pay your living expenses. Things you should be paying for with cash include your rent or mortgage, electricity, water, transportation, and food. If you are filing bankruptcy, paying off your credit cards is no longer important because your debts will be discharged (erased). Your attorney can help you with your budget and help you decide what bills you need to continue to pay.
If you have not yet spoken to an attorney, continue to make at least your minimum payments on your credit cards, but do not add any new charges. Don’t get yourself deeper into debt.
A budget is vital to allow you to live within your income. You need to know where every dollar is going so you don’t overspend. When you’re living without credit, once the money is gone, it’s gone. A budget will make sure you can always take care of your most important expenses.
The second key to surviving without credit is an emergency savings fund. Many of our clients got into financial trouble because they had an emergency and no savings. Borrowing what they needed to survive got them into the vicious debt cycle. Start building your emergency savings—even small amounts will add up over time. It will be so comforting to know that you can take care of yourself in an emergency without getting yourself back into debt.
Remember that your abstinence from credit doesn’t have to last forever—just until your case is filed. After you receive your bankruptcy discharge, you have a wonderful opportunity to rebuild your credit. You will have access to credit cards and loans again, and this time around you can use them without getting into serious debt.
Our office offers a program to help you qualify for a regular interest car or home loan only two years after you file. Can you pay off all your debts and improve your credit score in only two years? If not, give us a call and find out how we can help you.