Why You Need Credit Counseling After Bankruptcy
By now, you probably have heard that the new bankruptcy laws enacted in 2005 require all petitioners to undergo credit counseling for a bankruptcy to be successful. While you're certainly not opposed to undergoing credit counseling, you may wonder why such an emphasis is placed on this requirement.
After all, doesn't it stand to reason that filing for bankruptcy has taught you all the financial lessons you need to know? And what if a medical emergency, rather than misbehavior with a credit card, is what caused you to file for a Chapter 7 or Chapter 13 bankruptcy ?
When it comes down to it, why do you need to undergo credit counseling after bankruptcy?
It Gives You Necessary Life Tools
Undergoing credit counseling provides you with the necessary life tools you need to successfully manage your finances after bankruptcy. Regardless of why you declared a Chapter 7 or Chapter 13 bankruptcy, learning how to wield credit cards and build up a viable financial nest egg can help you avoid the same scenarios that landed you in bankruptcy court. These life tools will help you take advantage of the fresh start you'll receive once your debts are discharged.
It Teaches You To Manage Credit
After bankruptcy, many individuals insist on avoiding any and all lines of credit, with the mistaken belief that they won't ever get into trouble again. However, building up your credit rating involves using credit cards and loans, as it shows credit agencies that you've become financially responsible. Avoiding lines of credit doesn't build up your credit score - in fact, it can make it stagnate, resulting in a score that doesn't improve, even years after declaring bankruptcy.
It Transforms Your Money Behaviors
While bankruptcy is usually caused by a catastrophic event (in fact, recent figures show that up to 70% of personal bankruptcies are caused by medical debt ), there's no denying that there are certain money behaviors that have laid the brickwork in the path to bankruptcy. Credit counseling transforms your bad money behaviors (for example, teaching you to save up a nest egg), resulting in a future that is more secure from more financial mishaps.
The bottom line is that while credit counseling is a legal requirement of filing a Chapter 7 or Chapter 13 bankruptcy, the main benefit for taking these classes is to learn better financial behaviors. That way, when your debts are wiped clean, you'll be able to better enjoy your new financial future!