Once you file for bankruptcy, you have some breathing room. Your creditors will stop trying to collect the debts you owe them as the bankruptcy process sorts out what is going to happen with these debts depending on whether you filed for a Chapter 7 or a Chapter 13 bankruptcy. And when your bankruptcy is eventually discharged, you’ll feel even freer when your worst debts are reduced, eliminated, or brought back up to date. But it’s also important to make the most of your life after bankruptcy by doing things a little differently to hopefully ensure it never happens to you again.
After Bankruptcy, Make the Most of Your Fresh Start
Deciding to file for bankruptcy is an agonizing event for most people, even when what causes you to file is something totally out of your control. But the best way to think of bankruptcy is how it gives you a chance to make a fresh start regardless of how you got to this point. Once you file, your life after bankruptcy is a big opportunity to do the important work of getting your financial life back on track and moving in the right direction. Keep the following 7 key tips in mind:
Tip #1: Spend Less Than You Earn. The most important thing you can do after bankruptcy is change your overall financial pattern. Your overriding goal has to be spending less than you earn. If you go right back to spending all or more than you earn every month, you’ll soon find yourself on edge of financial disaster. Granted, there are things that happen beyond your control that can throw a wrench into the works, but if you keep your eye on spending less than you earn, you’ll be able to build up an emergency cushion of savings to get you through rough patches when they come up.
Tip #2: Open a Savings Account. If you can get used to the previous tip, then you need to put the money you save somewhere – and forget about it until and only if you absolutely need it. Having a separate savings account that isn’t easily accessible is a great way to do this. Adding just a little bit to on a weekly or monthly basis will add up quicker than you think, and could be a lifesaver when something unexpected happens.
Tip #3: Use Less Credit. Few people can get by on an all-cash budget, but if you can then more power to you. The only problem with this approach is that once you’ve declared bankruptcy and your credit score is still damaged, one of the few ways you can easily improve it is by getting a new line of credit and using it responsibly. When you pay for everything in cash, nothing is reported to the credit bureaus and it will take your credit score much longer to recover. But if you’re the type of person who has trouble managing credit wisely, then the less you use it, the better.
Tip #4: Be Careful with Credit Repair Services. Many people want to jump-start rebuilding their credit after bankruptcy and turn to one of the many different offers available from credit repair services. Please be careful before doing this! Many credit repair companies are not legitimate. Learn more in our previous article: Do Credit Repair Services Work?
Tip #5: Better Budgeting. It’s hard to improve your financial life after bankruptcy if you don’t get a firm grasp on how you tend to spend and making a real plan for your monthly spending. Yes, you need to create a budget and then stick to it with as much consistency as you can manage. You can do this in either a low-tech or high-tech way as it suits you best. US News and World Report has a great list of 10 Simple and Free Budgeting Tools.
Tip #6: Pay Bills On Time. If you regularly pay recurring bills late, such as your utilities, these are often reported to the credit bureaus and hurt your credit score. Make paying your bills on time every time your goal!
Tip #7: Educate Yourself. Basic financial literacy and household budgeting are mystifying topics to many people because they haven’t been taught in schools in decades. But you can educate yourself. Check out 7 Free Online Courses to Improve Your Financial Literacy or try one of several different Financial Literacy Games for a lighter approach (the ones listed there are designed for kids, but that probably makes them especially fun, too).
Yes, there is life after bankruptcy. As it turns out, the fresh start bankruptcy gives you is the perfect time to adopt the seven tips listed above to improve your financial health. And if you want to quickly rebuild your credit score with a new loan, consider financing a car purchase with a Day One Credit bankruptcy car loan. We work exclusively with bankruptcy customers to help them make the most of their fresh start, whether it’s a Chapter 7, a Chapter 13, or a recently discharged bankruptcy. Feel free to contact us for more information, download our Ultimate Bankruptcy Car Loan Guide, or jump in and fill out our online application today!