After bankruptcy, you will need to rebuild your financial life. This will involve repairing your credit rating so that it becomes easier for you to get new loans. You will also need to take steps to ensure that you do not end up in financial trouble again in the future. When you file for bankruptcy, as part of the bankruptcy process, you will be required to attend two financial counselling sessions. In these sessions, you will learn money management and budgeting tips that will help you avoid future financial difficulty. You will also learn what you can do in order to improve your credit rating and repair your credit report. Some people believe that bankruptcy ruins your credit and your financial life forever. This is not true. You can rebuild your financial situation and repair your credit after bankruptcy.
Make a Budget and Stick to It
During your financial counselling sessions, you will learn how to make a budget. Creating a budget and sticking to your budget is important to avoid financial trouble in the future. One of the keys to budgeting is to keep track of your money. Write down every expense you have, from monthly bills to costs associated with food, clothing, transportation, etc. You need to ensure that your budget balances, meaning that you have more money coming in than you have coming out. By keeping track of your spending, you can avoid situations where you do not have enough money at the end of the month to pay all of your bills. Keep an eye on your bank account as well. Overdrafts and NSF (non-sufficient funds) charges not only cost you money, but they are also a sign of financial difficulty. Always keep track of how much you have in your bank account and how much is coming out and scheduled to come out. This will avoid costly charges.
Remember the Importance of Savings
Emergencies happen. Cars break down and require repairs, sudden unexpected home repairs happen as well. Job losses, illnesses and other unfortunate situations occur. If you do not have any savings, you cannot adequately deal with these unexpected circumstances. As a part of your budget, include a category for savings. Even if you cannot save very much at first, anything is better than nothing. Once you have savings, put them into a separate savings account that you will use as an emergency fund. This way, you’ll have some money available when you need it. Remember though, that this money should be used for unexpected expenses such as repair bills, medical bills or to help you cope with a job loss or other loss of income. With proper budgeting, you can avoid having to turn to this fund to pay your regular bills and expenses.
Rebuilding your Credit Rating
If you wish to be able to get loans and use credit, you’ll need to rebuild your credit rating after bankruptcy. While bankruptcy is noted on your credit report for six years after you have been discharged (if it is your first bankruptcy) this doesn’t mean that you’ll need to wait six years to begin rebuilding your credit. You can start as soon as you’re discharged. One way to rebuild your credit rating is to show that you can use credit responsibly and pay your bills on time. However, you could find it difficult to get a new loan or a credit card after bankruptcy. One way to resolve this situation is to get a secured credit card. This is a card where you put down a deposit that is held for as long as you have the card. This deposit is used as your credit limit. This means that if you put down a $500 deposit, there will be a limit of $500 on your credit card. You can then use this card like any other credit card. Using the card and paying the bills on time will help show lenders that you can be responsible with credit and, therefore, it will help rebuild your credit rating. It’s important to note that this is different from a prepaid credit card, where you buy a card for a certain value and then use that card until the money on it is used up. This type of card does not help build your credit history or improve your credit rating. Many people feel like there is no way to repair, rebuild and improve your financial life after bankruptcy. This is simply not true. The bankruptcy process is not designed to ruin your financial life. It is designed to put you in a situation where you can get a fresh start. By following good financial practices after bankruptcy, you can rebuild your credit rating and start a new, successful financial life.