Filing bankruptcy is a big decision, and there are some financial ramifications after it’s complete. With this in mind, filing bankruptcy may only be the first step most debtors have to take to get their finances back on track. In fact, failing to take the right steps after bankruptcy may result in another financial crisis a few years later. Recently on our bankruptcy forum a user asked, “I just received my Chapter 7 bankruptcy discharge. I want a fresh financial start. What steps should I take now?” What’s great about this question is this debtor is thinking ahead. They know they made some bad financial decisions in the past and do not want to repeat them. The good news is there are some steps you can take right now to secure your financial position.
Steps after filing bankruptcy
Review why you had to file bankruptcy.
Filing bankruptcy because you had a major financial crisis or death in your family is a lot different than charging $10,000 on four credit cards to purchase unnecessary clothing or luxury items. The bottom line is there are dozens of reasons debtors have to file bankruptcy, and some of the reasons may or may not have been beyond their control. The first step after filing bankruptcy is to review what actions or events led to your bankruptcy filing. If it was bad decision on your part, you need to take immediate steps to eliminate those actions in the future. This may require cutting up credit cards, going to a cash-only transaction system, creating a budget, cutting expenses, or getting a second job. If filing bankruptcy was a response to something you did not anticipate such as death, divorce, joblessness, or illness, you still may need to create a budget and save money, but it may be less likely that these events will occur again in the future.
Begin to repair your credit.
Step two after filing bankruptcy is to review your credit reports and take the necessary steps to begin to repair your credit. The good news is this can start immediately following your discharge. For example, you can start paying your bills on time EVERY month. You can take out a small loan and pay it back over a short period of months, and you can monitor your credit report and fix any errors.
Monitor your expenses and cash flow.
The third step after filing bankruptcy is to understand where you are spending your money. Did you know that most people spend hundreds of dollars each month on frivolous items such as daily coffees, soda, gym memberships, eating out, or entertainment? Keep a monthly budget and track every expenditure. Most likely you will find ways to cut costs. Immediately send all of your savings to an emergency fund and make sure you have up to six months of funds.
Consider spending only cash.
Credit card debt for U.S. families is sky-rocketing. Avoid credit cards completely going to a cash-only system. There are a variety of different systems available, but regardless of the system, if you don’t have the cash you won’t make the purchase.
Bottom Line: Filing bankruptcy may have been a good first step, but getting a strong financial position will take time and effort.
Latest posts by Beth (see all)
- Chapter 7 bankruptcy how to avoid filing a second time? - April 24, 2017
- Chapter 7 bankruptcy how do they determine if I can file? - April 19, 2017
- Receiving Supplemental Security Income can I file for bankruptcy? - April 12, 2017