How to recover from Bankruptcy
Bankruptcy is going to leave a bad taste in your mouth for years to come, it’s a fact. If you have read the news lately, then you know that bankruptcy courts are working overtime to process the scaling numbers of bankruptcy petitions being filed. The economy has gone completely wrong and we’re all finding ourselves wondering what we need to do to hold on to what little we have. This adds to the financial burdens a lot of Americans were already in because of consumer debt. Taking the option of filing for bankruptcy comes with a series of consequences like being denied credit, not being able to rent an apartment, or qualify for an auto loan; at least not at a resonable rate.
The fact of the matter is that it is now a done deal, you’ve filed for bankruptcy and you’ve been discharged and although that was somewhat of a relief initially, you are now facing a bleak future with your new credit. There are some things you can do for yourself to help you get through this and recover from bankruptcy in a progressive manner.
Change your attitude and practice discipline - What you did before obviously did not work too well, maybe you always thought that it was ok to buy things you needed on credit. Maybe you thought it was a good idea to finance your home with a subprime loan and pay interest only and maybe you only made the minimum payment on your credit cards. Since none of those things proved to be wise decisions, it’s time to change your habits, change your way of rationalizing when it comes to making purchases from now on. There’s a difference between needing and wanting something, but we often make ourselves think that what we want is what we need. Your new financial life will be built on what you lay down now so stop thinking the way you did before. Also, unless you were a victim of identity theft, you should not be blaming any of this on anyone else. You had everything to do with the decision making process in your finances so start with that and change it completely.
It’s time to reestablish credit - It’s not that you can’t get credit anymore, it’s more like you don’t qualify for a good rate anymore. Because creditors who will consider your application are in fact taking a chance on you, is that they invented programs where you can qualify for a credit card again, you just have to pay more on your interest rate. Much more. it’s not unheard of that some creditors will charge anywhere from 19% to 29% for these types of programs. So do some digging but always shop around and try your best to get the best deal and not just anyone that will accept you. Once you do get your new credit card, use it only for necessities and emergencies. Do not take cash advances unless it’s a true emergency and always pay on time, this will begin to reflect on your credit report as positive entries and that’s what you need.
Check your credit history often - This is something that a lot of people overlook, they think that because their credit is ruined they should not bother to check it anymore. You may find that your credit will have more mistakes now that it is in shambles. Sometimes after bankruptcy some of your debts will remain recorded in default on your credit report, when they should be labeled “included in bankruptcy”, if this is the case then you need to take the necessary steps to fix this, because in this case no one will ever lend you a penny. Also collections accounts may appear especially if your debts were sold to collections agencies and then your debts were dismissed. No creditor will ever bother to make sure that your credit is updated correctly and since they won’t be getting paid the last thing they’re going to do for you is a favor. So make sure you use the credit bureaus dispute systems to get these entries corrected. Next, you need to sign up for credit monitoring from one of the three credit bureaus for a fee or sign up for your annualcreditreport.com, for free, which you can only do once a year, but you need to get something.
Be on the alert for shoddy deals - You’re going to become a target for predatory lenders, this is a well known fact because your bankruptcy file is public record and anyone can access these records for a fee. They access these records so that they can offer you credit, auto deals, and even home financing. Often they will emphasize that your credit does not matter and they can finance anyone. You MUST be very cautious with these deals. They are geared to making lots of money from desperate people. This is not a good way to start recovering from bankruptcy. Read these terms carefully and ask all the questions you can and if it does not feel right to you then don’t do it. Keep looking and you’ll eventually find a creditor with a better deal, it’s a bit tougher and the choices are limited but you have to realize that you could be getting yourself into more trouble financially than actually helping your cause. Remember that always, these companies would not come after you if they didn’t have something very valuable to gain. They are never acting in your best interest.
Consult with professionals and get support - You don’t have to have a lot of capital to go to a financial planner, they’re there to assist everyone. Now that you’re clear of your debts or repaying them under better terms, you should be on a tight budget and making sure your extra cash is going some place where you can’t touch it. You won’t always have the knowledge to know how to invest your money and you may not always know what kind of budget you should adopt to start making significant improvements, that’s why financial counselors are there. You won’t be able to recover from bankruptcy if you don’t adjust your budget considerably. Going back to the point about discipline, it’s all about change and it’s all about looking back at where you were before and where you are now and most importantly what you can do to ensure your future brightens up. Consult a professional and ask them to work out a good reasonable budget for you and then stick to it, do not negotiate with yourself and do not compromise.
Think about your future and your family’s future - This also means setting goals, you may have had plans to retire at a certain age and maybe even buy a boat when you retired etc. You can still accomplish these things if you continue to work on your attitude about money. Bankruptcy is not the end, it is the beginning of something new. If you continually focus on the future you’ll naturally begin to take action towards accomplishing those things, but it must be a constant effort and your behavior with your money needs to show it. If you do not see yourself advancing in the right direction you can always stop and study your plans again and make the necessary changes. Always stay in touch with your financial counselor and bring up any questions or concerns. You should not be investing aggressively, you should be investing consistently and in intelligent vehicles that will help you rebuild your future.
I hope this has been helpful, please review as much as needed and I’d love to hear your thoughts on this post.
One Response to “How to recover from Bankruptcy”
By cory johnson on Jun 10, 2008 | Reply
I have just come through the perfect storm; loss of business, divorce, bankruptcy, health issues and I actually look forward to starting over.
I chronicle the whole experience on my blog
http://www.phoenixrising-online.com/blog