There are a few things that all people who have just received a bankruptcy discharge share in common. There is no money in the savings account, no credit cards and a credit score among the lowest 25 percent of all Americans. That may sound bleak, but the fact is, there is good news to consider as well. There is little or no unsecured debt, a debt-to-income ratio that will soon help you qualify for a car and home loan and enough experience to chart a positive financial course in the future. What’s crucial in the weeks and the months following your bankruptcy is to take control of your budget and to take the proper steps to create a healthier financial outlook. Qualified bankruptcy lawyers can offer some excellent advice on what to do – and what not to do. In the meantime, here are some tips to consider:
Your bankruptcy may have taught you how an unexpected event can turn your financial life upside-down. Many people who declare bankruptcy do so because of unexpected medical bills or a lost job. Having a pool of money in reserve is crucial. You don’t want a car repair or leaking roof to leave you without options immediately after bankruptcy. While finding a way to save money will be a struggle, put one month’s salary in savings as soon as you can. The best way to do this is to take advantage of a credit union account and have a small amount of money deducted automatically from your paycheck.
Get Credit Cards
This may almost sound counter-intuitive, particularly if high credit card balances were among the reasons you turn to bankruptcy protection. However, credit scores and credit reports are increasingly relied upon by lenders, employers and landlords. The first step in rebuilding your credit standing is by showing the national credit reporting agencies that you can properly manage revolving credit. The best way to do that is by getting a pair of new cards and faithfully paying them off every month. You may have already noticed the credit offers coming in the mail since your bankruptcy discharge. It will be unusual if you get an offer for an unsecured card. Don’t worry. You can put up money for a secured credit card. Make sure you completely pay off any charges every month. Over time, this is the surest way to increase your credit score.
Make a Budget
This is one of the most important things you can do after a bankruptcy. It’s absolutely crucial to understand how you are spending your money. Take a month or two to write down every expense you make, creating categories like gasoline, groceries and utilities. Look carefully at your monthly expenses and then cut out anything that can be removed. A home phone isn’t necessary if you have a cell phone and you can bring lunch to work instead of going out to lunch, for example. Make sure that your first priority is paying yourself. When you reach the equivalent of one month’s salary in your emergency savings fund, continue to add more. One great resource is your bankruptcy lawyer who gets feedback from clients on what works and what doesn’t work after a bankruptcy.
Check Your Credit Report
Your credit report is so important you should be familiar with what is there. Check your report at least once a year. If you are unclear about what is on your report and how important it is, check with your local bankruptcy lawyer. It isn’t unusual to have mistakes on your credit report that reduced your credit score. There is a fairly straight-forward process to request the credit agencies to correct an error on your report.
Don’t Be In a Rush
It’s not unusual for someone who filed for bankruptcy to have a credit score approaching 700 again within a year of receiving a discharge in bankruptcy court. That’s only possible if you pay all your bills on time, cut out unnecessary expenses from your budget and keep a close eye on your credit report. Ask your bankruptcy lawyer for the best suggestions from bankruptcy clients who are now thriving.
Important Disclaimer: The information discussed above and throughout this website should not be relied upon to make any decisions without first speaking to a bankruptcy attorney. There are many intricate rules of law governing bankruptcy with many exceptions to the general rules that could change the advice given by an attorney based on the differing facts in each person’s special set of circumstances. THEREFORE, it is important to discuss any information contained in this website with one of our attorneys before taking any action or refraining from taking any action.