For most people, a bankruptcy filing follows months or years of financial struggle. In fact, one recent study revealed that 30% of households in bankruptcy seriously struggled with debt for five years or more before filing, and another 36% for two years or more but less than five. Some may barely remember what it felt like to pay bills comfortably and have a bit of money left over. Bankruptcy can change all that and create an opportunity to build a better, more stable financial future.
Unfortunately, that extended period of juggling debts and falling short can ingrain bad habits – even change the way you think about money. That’s why it’s important to have a clear plan for rebuilding after bankruptcy. While everyone’s planning and priorities will be a bit different, here are some tips that can help set most bankruptcy filers on a better path after discharge.
5 Tips for Rebuilding after Bankruptcy
- Take the Debtor Education Course Seriously
It’s easy to think of the financial management course required for bankruptcy discharge as just a hoop to jump through. After all, you’re required to submit a certificate of completion to get your bankruptcy discharge, just as you were required to complete credit counseling before filing. But the purpose of the course is to help you build better financial habits so you can get the full benefit of filing bankruptcy. Some of what you hear or read in the course may be old news, but nearly anyone can pick up some useful information or a new strategy or two. Don’t just think about the course as a box to check off. Look at it as a tool to help you achieve your goals, and really think about how what you learn may apply to you and your future.
- Create a Budget
You’ll definitely hear this in your debtor education course, but it’s important enough to repeat here. Though it sounds obvious and simplistic to point out that spending more than you bring in each month is not sustainable, many people never do the math and figure out what they can change. And, budgeting isn’t just for those who are having trouble breaking even. Creating a budget is just as important for those who newly have money left over after paying their bills and covering necessities. That money can be the key to financial security, but can just as easily disappear if you don’t watch it closely and consciously decide what to do with it.
Creating a budget can also help clarify goals and priorities, as you determine whether you’re spending your money on the things that matter most to you. You may even discover unexpected opportunities to save money or shift funds to something more important.
- Rebuild Credit Carefully
There are many good reasons to re-establish credit after bankruptcy such as:
- access to and better interest rates on loans for big ticket items, including homes and cars
- helping get approval for apartment rentals
- creating a backup option for true emergencies
- lowering the cost of even non-credit items, such as automobile insurance
However, opening new credit accounts can also be risky for those who don’t have a solid history of strategic credit management. That’s especially true if the budget is still tight and the temptation to use credit for items you can’t yet afford is strong. Therefore, it is important to have a clear plan as to how you will make credit accounts, and to stick to it religiously. It is generally a good idea to keep credit limit low in the beginning, and establish a pattern of repayment before taking on larger obligations.
- Set Financial Goals
Managing your money and sticking to your plan is both easier and easier to track when you can measure clear progress toward a goal. There’s no right or wrong goal – this is about achieving what’s important to you and your family. That may mean saving for a down payment on a house, building retirement accounts, or just having the freedom to take an annual family vacation without taking on debt. Whatever your goal is, make the plan concrete. Decide how much you want to save or invest over what period of time, and then calculate what that means on a monthly or per paycheck basis.
- Be Honest with Yourself
Often, financial problems spiral out of control in part because people are fearful of looking at those problems head-on. That’s understandable, but it’s also counterproductive. You’ve already learned that turning a blind eye to debt problems doesn’t work, and that taking informed action can change everything. You’ll also have learned new tools for financial management, through your financial management course and your own efforts after bankruptcy. At the first sign of trouble, aggressively take control and get your finances back on track, even if that means making big changes.
Bankruptcy can provide life-altering relief to people weighed down by debt, but it is not a magical fix. Rather, it’s like hitting the reset button. What comes next is up to you.
Talk to a Las Vegas Bankruptcy Attorney
The tips above will help you build a brighter, more stable financial future after bankruptcy. But, that recovery starts with educating yourself about the bankruptcy process and determining whether Chapter 7 bankruptcy or Chapter 13 bankruptcy may be the solution you’re looking for.
Fortunately, it costs nothing to learn more about your options and the benefits bankruptcy may offer. You can schedule a free consultation with one of the experienced bankruptcy lawyers at Haines & Krieger right now. Just call 702-903-1459 or filling out the contact form in the right-hand sidebar.