While filing for bankruptcy has an immediate negative effect on your credit score, having credit card balances that have reached their maximum isn't helping you out either. When balances are high and payments are late, you are destroying your credit. If credit cards balances are out of control and you are unable to make your payments, filing for bankruptcy is an excellent way to build a new financial foundation for yourself.

Your Debt to Income Ratio Has Just Been Greatly Reduced

Once you have filed a Chapter 7 liquidation bankruptcy, you are in a better financial position than you were when you were buried under a mountain of debt. This is because prior to the bankruptcy, your debt to income ratio was out of proportion. With your credit pushed to the limits, you no longer had any buying power. When your debt is high, lenders aren't going to let you borrow any more money. Once this debt is erased, lenders are more likely to lend you money because you will have the income potential to pay the debt back.

You Can't File Another Bankruptcy for Eight Years

Once you file a bankruptcy, you do not have the ability to file another one for at least eight years. This means that you will not be able to rack up credit card bills and then get out of paying the balances. You are actually a better risk for credit card companies because of your inability to file another bankruptcy than you were when you had high balances to pay off. 

Start Small and Expect to Pay Higher Fees

With a recent bankruptcy on your record, you can expect to pay higher interest rates for new credit cards. You are considered a subprime borrower until you build your credit back up. Interest rates for credit cards can be high (29.99% and higher) when you have poor credit. These lenders are banking on the fact that you are trying to reestablish your credit and you will accept just about any credit card offer. If you get a card with a high interest rate, pay off the balance every month. The lender makes money off of your interest rate, and by paying off the balance every month you will avoid high interest rates.

As you repair your credit after filing a bankruptcy, take your time. Make a monthly budget for yourself and stick to it as best as you can. With a monthly budget in place, you will be able to pay your bills on time and you will slowly begin building a new financial foundation for yourself. Contact a local bankruptcy attorney, such as one from Bauer & French Attorneys at Law, for further assistance.