You did it. Good for you. You have successfully emerged from bankruptcy, but not necessarily unscathed. Although you have been provided with a fresh financial start, you know that you have some work ahead of you. Just months ago, your personal and financial lives were in a tailspin. Things did not look good as you drowned in debt due to less-than-reliable behavior.
But remember that you are not alone as many other Americans have filed for bankruptcy. According to the American Bankruptcy Institute, nearly 462,000 people filed for Chapter 7 bankruptcy and nearly 288,300 people filed for Chapter 13 bankruptcy in 2018. However, that is the past. It is time to look ahead. Do not look back. It is time to create and stick with a new plan.
Stick with a budget, understand spending habits
Upon emerging from bankruptcy, here are some significant steps to take in order to get back on track and avoid any potential financial relapses:
- Create a budget and strictly abide by it. Track every expense for at least six months. By doing this, you see where your money goes and, perhaps, what frivolous things you spend it on.
- Consider making all purchases in cash. This way, you only buy what you need such as groceries, gasoline for the car and home repairs. Temptation to spend via a credit card remains. However, in your financial position, you may not be able to obtain a credit card.
- Apply for a secured credit card. This will help in your attempt to rebuild your credit. Secured credit cards resemble regular credit cards, but they are strictly supported by cash deposits you make to the account. Your credit limit is equivalent to the amount of money deposited in the account.
- It is crucial to build an emergency fund of at least six months’ expenses. This may take some sacrifice and discipline on your part, but you can do it. Try to save a little every month.
- Regularly review your credit report. Finding errors is not uncommon, and these mistakes can affect different facets in your life, including mortgage rates and job applications.
- Watch out for scammers. You may be a target for unscrupulous individuals or companies contacting you via phone, email or text. And make sure not to obtain loans from a payday lender. They charge high interest rates that further dig you into a hole.
You already have looked inward and made some changes. Now, it is time to create new habits. Personal bankruptcy represents the beginning of your road to recovery. With the right gumption, you can reestablish your credit and begin anew.