Bankruptcy can become a long-awaited relief from unmanageable debts you’ve collected over years. If you have realized that bankruptcy is your only option and decided to file for it, you should be prepared for a post-bankruptcy period that many meet with a depressive state of mind.
Let this guide become your assistant in recovering from bankruptcy so you will be able to get back on track quickly and easily. There are some rules you will have to follow and learn how to restrict yourself from bad financial habits that have led you to the bankruptcy.
You should be prepared that right after the bankruptcy your bank accounts will be frozen and you will not be able to get even a credit card which will make you depressed. But this time will pass and you will be thankful for bankruptcy that it made you start your life with a blank sheet.
Remember, bankruptcy can happen to anyone and even the most famous celebrities went through bankruptcy many times.
Always keep in mind that you first and foremost task is to resume your financial reliability in the eyes of lenders. In order to restore your financial status, you should start working on your credit score as soon as possible. So, let’s take a closer look on how to bounce back from the personal bankruptcy.
Step 1. Analyze your mistakes
You have to take your lesson and understand your mistakes and mindset fallacies that have led you to financial catastrophe. Analyze and describe everything that should never happen again, starting from the delay with monthly loan’s payments to buying unnecessary goods and living beyond your means.
Make a list of your previous financial mistakes and promise to yourself you will never repeat them whatever the circumstances. What is good about a bankruptcy is that it teaches you to never neglect your financial obligations and manage your money in a most efficient way.
Step 2. Set your monthly budget
Make a list of all necessary monthly purchases, bills, and other obligatory outgoings and add a couple of bucks to unforeseen expenses. Compare it to your expected income (salary, if you have a job).
Now you should stick to the budget by all means and only get loans for really necessary stuff like a cell phone. Also, if it’ll turn out you have a lack of budget even for monthly necessities, living expenses, and utility bills; then it’s reasonable to get a credit card when your scores are improved a little bit. Don’t start again the loop by getting a personal loan with a ridiculously high interest rate.
Step 3. Start restoring your credit scores
Depending on whether you do have some spare money in your budget, you may not only start restoring your credit score by getting new small loans but also pay for special service that monitors your score and keep you informed if any changes appear. This service is often offered by banks, but of you also monitor your records through websites like FreeCreditReport.com or CreditKarma.com.
Why it’s important to track you record? Because often inappropriate or inaccurate information goes from lenders to your credit history, so in a case you notice it you may fix it. If the mistake goes unnoticed your credit score that needs revival will be damaged even more.
Also, don’t forget that after your bankruptcy the records will stay for 10 years (for Chapter 7) and 7 years (for Chapter 13).
Step 4. Make financial discipline your new habit
Financial stability is all about discipline, so make timely payments and budget following your new habits. Start with a rule to pay your bills timely so you will not get penalties that will damage your budget.
Develop your cell phone plan and stick to it: by paying that simplest cell phone credit you will start restoring your scores drop by drop. Remember, if you will fail to pay your cell phone plan your lender will add another negative point to your credit record. It will definitely not help you to recover from bankruptcy in the fastest way.
Step 5. Get an unsecured credit card
After you have got a secured credit card and used it for a while, it’s time to get an unsecured card as your credit score is supposedly improved. Surely, for your first unsecured credit card after the bankruptcy you will be offered quite high interest rate, but it is up to you now to pay everything on time and not to use borrowed money without a real need. The most important thing is not to get trapped by that loans loop where you will need to borrow money to pay interests for the existing loan.
Step 6. Become used to paying cash
Yes, as long as you will not have a credit card during a waiting period (about two years or so) you will have to pay cash for everything, so you will have to get used to it. The bright side of it you will not make needless purchases beyond your actual earned means. Besides, not using a credit card will keep you free from paying interests for using it.
Step 7. Wait some time before buying a new car
Even if your credit score is already improved enough for getting a car loan – wait some time before buying an auto and make some savings instead. Don’t forget that along with paying the interest rate for your car loan you will have other related outgoings like gas, parking, Insurance, and repair services.
Besides, if you will get a car loan where the collateral is the auto itself, you will have to pay higher premiums for car Insurance as this will be a guarantee for the bank the collateral will not lose the value (the bank will not lose the money) in a case of a car’s damage. Therefore, before buying a car, make sure your budget will sustain such expenses.
Step 8. Get involved in volunteering social activities
This will help you to not to feel isolated from the society. Active social life prevents post-bankruptcy depression and brings you more new useful contacts. Besides, you will get a chance to find new, higher paid job because people who know you will recommend you as a reliable and responsible person (while employers who don’t know you will see you as a potential “trouble” due to your bankruptcy).
Step 9. Start saving money
Even if you have only 20 dollars left at the end of the month – save them and add regularly whatever small amounts. Swear to yourself you will not touch this money under no circumstances. You will be thankful to you for that when there will be a situation where you will urgently need money but your scores are not high enough to get unsecured loan. Start taking care of your financial future step-by-step and you will get back on track way sooner than you think.
Step 10. Never follow a temptation to “fix” your credit score artificially
Yes, there are plenty of companies on the Web offering individuals to “fix” their credit scores with the fake loans and records. Even if you need a loan urgently, don’t fall for that illegal service, because one day it will be revealed and you will dig in your “financial grave” even deeper.
Instead, work on your trustworthiness month by month, read inspirational stories from real people who recovered from bankruptcy and now are thriving.
And finally, let go of the guilt. It’s not that important that you’ve made mistakes, the most important is to learn from them.