So you have run into difficult financial straits and had to file for bankruptcy. That meant completing paperwork, filing documents with a court and/or municipal agency, and having a black mark on your record for a decade. You may have even had your home foreclosed on by the bank and/or some of your assets seized by creditors. This entire process can leave you feeling stressed, dejected, and helpless.
But now, you’re finally done with all that. Since the worst is over, you can start focusing your energies on the light at the end of the tunnel. You didn’t plunge into fiscal ruin overnight, and it will take some time to get back on solid financial footing. That said, recovering from bankruptcy is very possible if you have the discipline and determination to stay the course. Here are ten suggestions on how to bounce back from bankruptcy.
1. Put it behind you. There are a lot of emotions that come with filing bankruptcy: anger, depression, guilt, and self-doubt. While these are natural responses, the sooner you get over them, the sooner you can start putting your life back together. Over a million people file for bankruptcy every year, so you shouldn’t feel like you are a loser. Start looking forward instead of backward.
2. Keep a positive attitude. Punishing yourself for filing bankruptcy is counterproductive and irrelevant. Bankruptcy isn’t really like a death, but more of a rebirth. The laws were structured to give Americans a second chance financially, so focus on the opportunity to start fresh. Instead of dwelling on past mistakes, learn from them and move on.
3. Evaluate your situation. Take a good hard look at what got you into bankruptcy in the first place. Too much discretionary spending? A lack of discipline in paying your bills? Not enough money in the bank when you lost your job? Resolve to make the necessary changes to avoid getting into financial trouble again. (This is where credit counseling services can help.)
4. Set goals. What is it that you want in the future? A better credit score? A new car or house in a few years? To become debt-free? Once you identify precisely what your goals are, you can take practical steps to achieve them. Conversely, you can recognize what actions or behaviors will retard your efforts to reach that goal – like going to Las Vegas every year or making large credit card purchases.
5. Save money. Yes, you’ve heard this one before. But if you’ve filed for bankruptcy, you likely have costs that you no longer have to worry about (like credit card payments or country club dues). So take the money that you used to allocate toward those payments and put it in the bank. That way, it’s earning interest, giving you a cushion in case the unexpected occurs, and it prevents you from spending it frivolously.
6. Cut your overhead. This can be tough, but it’s important to figure out the difference between what you want and what you need. If you look carefully, there are probably quite a few fixed costs (like gym memberships, landscaping services, and satellite radio) that you can eliminate altogether, and others you can reduce by changing your behavior (like learning to cook, buying off-brand gasoline and other products, or shopping at secondhand stores).
7. Monitor your credit record. One key to getting out of bankruptcy is measuring your progress, and a way to do that is to familiarize yourself with your credit report. Reviewing your report periodically can help you track your debt repayments and credit score. You can get a free credit report once a year from each of the three credit bureaus. Plus, it is not uncommon for erroneous or outdated information to appear on your report. Getting these entries removed will improve your credit almost instantly.
8. Build credit. There are several ways to make you look better in the eyes of the credit bureaus. Obviously, the best way is to pay all of your bills on time and avoid getting into debt. But you can also get a secured credit card, which not only helps you stay on top of your credit card debt, but also reports monthly to the credit bureaus. So if you pay off your balance in full each month, the bureaus will adjust your creditworthiness accordingly.
9. Avoid scams. There are so many people and companies that are just waiting to take advantage of your situation. Firms like rent-to-own outfits and payday lenders will offer to give you something quick and easy, but then they’ll charge you high interest rates and cascading penalty fees that could push you back into debt. Avoid high interest rates, and remember that if something sounds too good to be true, it probably is.
10. Seek support. This doesn’t refer to financial support like borrowing money from friends or family. There are regional and online support communities for people like you who are battling to get out of bankruptcy. These groups can not only give you moral support, but can also supply you with tips and strategies to help you achieve your financial goals. The old adage “strength in numbers” is especially true among people who are trying to put bankruptcy in their rearview mirror.
One resource that can help you recover from bankruptcy is credit counseling. Some of these services go so far as to take your regular paycheck and make all of your required disbursements before transferring the funds to your account. Though this may seem harsh, it can be an effective way to remove the temptation of frittering your money away before your financial obligations are met.
Bankruptcy may seem overwhelming, but countless Americans emerge from bankruptcy every year – and you can, too.
Chris Martin writes for several blogs and websites. He loves to help people save money by preparing easy meals, finding credit card deals, and managing debt. And for people who are seeking houses for sale by owner, he can even assist them in buying a home without using a realtor.