Life After Bankruptcy

You Financial Future

Your debt has been eliminated and you are now on the path to a rebuild credit for a solid financial future. However, the financial recovery process after bankruptcy requires effort and lots of planning. There are several things to consider when developing your financial plan after bankruptcy.  First, evaluate what part of your financial past could be improved to avoid getting into overwhelming debt again.  Credit is a major part of our economy and is meant to be a tool of assistance for those who manage their spending properly.   Take a look at your spending habits to identify how you ended up in bankruptcy and develop a plan to manage your money differently in the future.

After you have eliminated or reorganized your debt through bankruptcy, it will be more difficult to obtain loans and lines of credit than before you filed for bankruptcy. This provides you with the opportunity to learn to “live on cash” and rebuild credit. You might find that you have to make adjustments to your lifestyle and spending habits. You may not be able to have that expensive dinner out on the town or stay in the nicest hotel, but a home-cooked steak dinner outside on your patio in the springtime can be enjoyable for the whole family.  The point is, you can take back control of your financial life.

Find/Maintain a job

In order to reclaim your financial future, you will need a sufficient income. Having a stable income will allow you to stick to your budget and keep track of your bills each month.  Your monthly expenses must be paid on time, each month. If your income is not enough to cover your basic living expenses (home, utilities, gas, food etc), you may need to consider changing to a higher paying job or obtaining a second job.  However, avoid too many changes in jobs as this often reflects poorly in your employment history. A stable employment history also shows creditors that you are reliable.

Pay your bills

This is your biggest opportunity to turn your financial life around and rebuild your credit history. You may not be able to obtain a line of credit right away but, you do have the income necessary to pay for you basic expenses.  Paying bills late or not at all is the worst action you can take after bankruptcy. You may need to consider adjustments in your expenses. For example, if you cannot afford your home or apartment payment, sell your home or move to a cheaper apartment.  It is imperative you show creditors you can pay your bills on time each month. Creditors look for stability in making payments before offering lines of credit to individuals. Keep track of your bill due dates to ensure you pay on time and improve your payment history and credit standing.

Track your spending

One of the biggest mistakes people make in managing their money is failure to track each dollar that they spend. It is easy in today’s economy with check cards, debit and ATM cards to mismanage your money. If you don’t already have one, open a checking and savings account at your nearest bank.  It is important that you keep a positive balance in your accounts to reflect positively in your credit history. One to make sure you keep a positive balance is to request a check register in order to keep track of your credits and debits to your account.  Online tools, like, make it easy for people to track their spending by categories (e.g. medical, auto, utilities etc) and set budgets for those categories. Keeping a consistent, positive balance in your accounts will show creditors you have reliable cash flow.

Rebuild your credit

After your bankruptcy discharge, the responsibility to rebuilding your credit is in your hands. Once you have established stable income and reliability in paying your bills, consider applying for a low-limit credit card. The interest rates on cards you may qualify for will be higher than desired, so avoid applying for a card with a high spending limit. The goal is to obtain a card that you can afford to pay the monthly amounts. It is wise to avoid purchasing any big or costly items.  The best way to rebuild credit is to maintain a small balance, making regular payments over a period of time. People often think the best way to improve your credit history is to keep a card open with no balance. In fact, keeping a manageable balance that is paid on time over a period of several years shows reliability and improves your credit standing.