Thursday, October 26, 2017

Get Clean, Then Get Credit Worthy

Get Clean, Then Get Credit Worthy
 by Constance Ray

Getting clean is hard, but fighting your way back to financial stability may be even harder.

Nevertheless, it is possible for recovering addicts to get their lives back, and that includes financial peace of mind and the ability to find a job and buy a house. You do, however, have to accept that this is not going to happen in a day.

The basics

There are steps that any recovering addict should take if she has pinged her credit:

      Reduce outgoing expenses. If you are living cost-free or at low cost in rehab or a halfway house, stay there as long as possible while you develop a financial recovery plan.

      Ask people in your support group  to tell you how they recovered financially.

      Accept help from your family.

      Get advice from a non-profit credit counseling agency. Little known fact: credit unions offer free financial counseling.

      Check your credit report and fix inaccuracies, keeping in mind that seventy percent of credit reports have mistakes. Use and to obtain free or low-cost reports.

      Also demand that the credit reporters delete any information that cannot be verified, like debts to businesses that no longer exist or companies that changed names because they merged.

      Don’t apply for high fee credit cards. This is predatory lending and will likely hurt your credit some more.

      Don’t fall for TV or internet scams that promise to repair or consolidate your credit. These companies never do what they claim. They only do things you could do on your own without paying a fortune.

Should you declare bankruptcy?

You will receive a lot of advice on whether or not to declare bankruptcy, much of it bad. Some people will tell you that going bankrupt is in violation of the Alcoholics Anonymous mandate to make amends. However, you can always repay debt that represents a serious moral obligation, even if you have declared bankruptcy.

Furthermore, the judge who declares you bankrupt is going to have better ethics about who to repay and on what schedule than the collection agency that is hounding you with phone calls.

To determine whether bankruptcy is your best option, figure out how long it will take you to find a job, secure safe housing, pay off your debts and re-establish your credit. If the answer if more than seven years, declaring bankruptcy makes sense, because the bankruptcy will only show up on your credit report for seven years from the time of declaration.

If you are determined to avoid chapter eleven, negotiate with creditors for lower payments over more time. Tell them the alternative is bankruptcy. Ask them to accept direct deposit of payments out of your bank account.

Protecting assets and rebuilding a solid financial profile

Consider putting some or all of your financial resources in the hands of a trusted family member, like a parent or spouse. This may save you from losing your house, car, or savings.

Pay down on your overdue mortgage payments, if you have them, first so you don’t lose your house. Pay down and pay off the highest interest credit cards second.

Aim for credit card debt that is only seven percent of your available line of credit or less. That is the shortest path to a better credit report. Use any large, available sums of cash to pay down on credit immediately.

Get one secured credit card if you have no credit or if you have lost all your credit cards or declared bankruptcy. The secured credit card requires you to put a sum of money on your card upfront. Then you cannot borrow in excess of that sum. This may seem like a waste of time and money, but it is not. It is a part of recovering an acceptable credit score.

For addicts who lost control of their finances, finding the way back to stability requires, above all things, patience. It may take years, but you will make it happen a lot faster if you have a good plan and if you stick to that plan.

Constance Ray started with the goal of creating a safe place for people to share how addiction has affected them, whether they are combating it themselves or watching someone they care about work to overcome it.

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