Life After You File For Bankruptcy
February 7, 2009 by admin
Filing for bankruptcy can be an enormous relief if you’ve been struggling with debt and worrying about money, and rightfully so: bankruptcy can be the first step you take toward financial health and stability. But in order to make the most of the fresh financial start the U.S. government offers to bankruptcy petitioners, you need to understand that a bankruptcy filing is only the beginning of your new life.
Like physical fitness, financial fitness takes a while to develop – but is completely worth the time and effort you invest. Here are a couple of key behaviors that will help your post-bankruptcy life be as successful as possible.
Budgeting
To make sure you don’t end up in debt again, you need to make sure you spend less money than you make. The best way to avoid overspending is to create a budget – and stick to it.
The first step of budgeting is figuring out where your money goes. To do this, write down every single purchase you make for a month (including bus fare, rent, sodas – everything!). At the end of the month, find the total. If that number is more than your monthly salary, you need to make some adjustments.
Divide your expenses into categories (entertainment, food, rent, etc.) and determine where you could cut back. Sometimes it’s as easy as switching to generic food brands at the grocery store or brewing coffee at home rather than buying it each morning. You may have to be creative and you may have to sacrifice, but you can do it. And you need to.
Once you’ve set yourself a budget, follow it. Remember, this isn’t a punishment, it’s a way to make sure you save money wherever you can so you have cash left over for the things that really matter to you!
Saving
Maybe you were pushed to file bankruptcy because of a financial crisis like a divorce or serious injury. Often, people are flattened by unexpected life events because they don’t have any money saved for emergencies. Creating a safety net is important for your peace of mind and for the surprise needs that will undoubtedly crop up in your life.
Some people are intimidated by saving because they don’t know how to do it or think they don’t have enough money to make saving worthwhile. But that’s a huge mistake. Remember, you’re in this for the long haul. Even if you can only save $20 a month, that adds up over the years. And when you include the compound interest from a savings account, it’s even more.
If you were starting an exercise regimen, you wouldn’t expect it to show results overnight, and saving is the same way. Be patient and be consistent, and you’ll see the benefits.
Rebuild Your Credit
Some people balk at the idea of opening lines of credit after bankruptcy, because credit cards were how they got into debt in the first place. But to establish a strong credit history these days, you need to use credit responsibly.
Right after filing bankruptcy, your credit won’t be very good. The bankruptcy itself will stay on your credit report for 10 years, but its impact on your overall credit rating will decrease with time and positive credit use on your part. But if you don’t use any credit at all, your credit history will contain nothing but the bankruptcy, so even if you’ve been living well and responsibly on cash, lenders will have no proof and won’t be able to offer you attractive rates.
One of the best and surest ways to build healthy credit is to borrow money and pay it back on time. You can do this by opening a credit card (when you’re ready), using it regularly and paying the balance in full each month. You may also be able to take out a loan with help from a cosigner.
The point is to use credit to your advantage and not let credit control you.
Avoid Crisis Behavior
Maybe you maxed out your credit cards or visited payday lenders to make ends meet before your bankruptcy filing. To make sure your finances don’t get out of control again, you must avoid crisis behavior after your filing.
Use What You’ve Learned!
Bankruptcy isn’t an easy process, but it’s necessary for many Americans. Take advantage of the debtor education requirement – put the tips you learn to use to make your finances as strong and healthy as possible. And remember that you’re not alone. Millions of Americans have filed bankruptcy and will file bankruptcy.