Bounce back after bankruptcy
Updated On: Nov 14 2012 06:20:00 AM EST
More than a million women will file for bankruptcy this year. That's more women than will graduate from college, be diagnosed with cancer or file for divorce. The numbers are staggering.
Gabby Douglas took home the gold, but while the numbers are adding up for her, this Olympian's mother is facing bankruptcy and she is not alone. Cyndi Lauper, Kim Basinger, and Dorothy Hamill all had successful careers and a bankruptcy to clear the financial slates.
New reports show women who are declaring bankruptcy have higher education levels, attended college, are employed and own their own homes. They played by all the rules, but are in an economic free-fall.
That's what happened to Rose Kolla and now she hopes she's headed in the right direction.
"I finally found a financial institution willing to put a little faith in me," said Kolla. "I've been with them for a year. I've made every payment on time."
The single mother is re-establishing credit after bankruptcy. A divorce several years ago put her in a financial tailspin.
"Now I've become a sole provider raising two children. A mortgage, two mortgages, car payments, and Catholic school on one income--that's basically impossible," she said.
But how do you rebuild when your credit is destroyed?
"Bankruptcy used to be the big scarlet "b" on your forehead. It's not quite as traumatic anymore," said Ann Hook Belknap, Belknap and Mayer bankruptcy attorney.
Kim Wisser is a consumer educator with the non-profit Money Management, International. She tells people to start small when looking to rebuild.
"Retail stores and gas cards are more likely to give you a credit card than the larger cards, like a Visa, or Mastercard," Wisser said.
Another option is to apply for a secured credit card. You give the bank or credit union a small amount of money and they give you a credit card with a matching limit. Use it monthly and pay the balance in full each month. Never let the balance exceed ten percent of the limit.
Once you're back on the way to establishing credit, make it your top priority to maintain it. It's important to have a zero balance at the beginning of the month when credit scores are re-calculated.
"It takes time to establish it, and you can ruin it, in a month," Wise cautions.
Women can help themselves if they keep their fixed expenses like rent, car payments and student loans to half of their incomes. Most of all, you'll need a little patience. Most lenders look at a two year credit history before saying yes to big financing, like a house or a car.
"You get over it. You get over that little hump and it broadens the horizon," Kolla said.
For many women, the law is working against them. In 2005, laws changed so if ex-husbands declared bankruptcy, they had to focus on paying child support instead of their debt. But about seven years ago it became harder to file for bankruptcy and men were forced to pay their bills instead of their child support. Women's groups, including the UWCA and the Legal Defense Fund are fighting bankruptcy legislation.