What should you do after bankruptcy? If you have completed the bankruptcy process or if you have almost completed the required payments in your Chapter 13 debt repayment plan, you may think you are finished.
You may feel like the dieter who has reached their ideal weight and mistakenly thinks their work is done, only to return to their old habits and old weight. Understanding your past decisions and financial actions which caused or contributed to your financial crisis can ensure that you are not in the same place seven or ten years from now filing for another bankruptcy.
So what steps should you take immediately following bankruptcy?
1. Create an Emergency Fund – Most people do not file for bankruptcy because they have maxed out their credit cards on unnecessary purchases. Divorce, job loss, high medical bills, or an unexpected death are the leading causes of bankruptcy. Unfortunately, if you do not have an emergency fund you are one crisis away from a financial disaster.
How much should you save? It depends on your expenses. Many experts suggest 6 months of savings but if you have a secure job, you do not own a home and you have limited expenses, three months of savings may be enough.
2. Create a Budget – Successful people generally have a plan. It does not have to be written, but your expenses and income should not be a mystery each month. If you are married create a budget together. Identify the amount of money each of you can freely spend without consulting with each other.
3. Get a copy of your credit report – If you have completed your bankruptcy, the last thing you want is inaccuracies on your credit report to interfere with your efforts to improve your credit score. A free copy of your credit report can be requested each year at several different websites.
4. Do not co-sign a loan – Everyone wants to help their friends and family members, especially in these difficult economic times, but co-signing a loan will make you liable for the principle payment and interest of the loan if the other person defaults.
5. Save for your Retirement – It is never too early to think about saving for retirement. Many workers aim to save 10-15% of their gross income each month. If you have the amount automatically deducted from your paycheck it is unlikely (after awhile) that you will notice it is gone.
6. Get a credit card – You may not be ready for this step yet, but at some point it is important to begin to re-establish your credit and prove that you are able to meet your financial obligations. Experts suggest starting with a secured credit card which has a low interest rate and no annual fee. Only charge a limited amount each month and be sure to pay the full balance.
7. Get a secure loan- After you have established your budget and have met your financial obligations for approximately a year, you may want to get a secured loan and continue to rebuild your credit. Secured loans may offer a lower interest rate than a credit card because the lender can repossess the property and get a percentage of their money back. Lenders may also be more willing to loan you money if it is secured.
8. Find a higher paying job or take a second job – If you have completed the bankruptcy process but you are unable to meet your financial obligations, it is time to take drastic steps. Taking a second job may be your only option. If you have changed your spending habits and reduced your unsecured debt obligations, there is a good chance that you will not have to work a second job for too long.
9. Tell others about your bankruptcy – Telling your friends and family and honestly confronting your financial situation has several benefits. It will keep you accountable and help you to make the needed changes. Millions of people file for bankruptcy each year. There is no shame in bankruptcy.
10. Do not worry about the future and have patience – Like a new exercise program, eating regimen or new job, change is difficult, and it does not happen overnight. Stay focused and disciplined and you can be on the track to a better life.
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