Filing for bankruptcy is tough. You have to admit to yourself and others that you are not capable of paying back your debts and that you need help. Even though the majority of bankruptcies in the US aren’t a direct result of people’s actions, but rather of various external factors (like unexpected medical bills), people still find it difficult to accept that they need help.
However, once you’ve filed for bankruptcy and the whole process is done, what do you do? Your credit score is ruined, many of your assets are probably liquidated and you find yourself in less than enviable position. We talked to the bankruptcy specialists at The Law Offices of Mark L. Miller who told us what some of the most important steps in recovering from bankruptcy are.
If you’d lost your job during (or before) the bankruptcy, it is vital that you find a job as soon as possible. This is important for numerous reasons. Bankruptcy is a reprieve from debt collectors, but you will continue accruing new debt if you don’t have a source of income.
Your landlord, too, will most likely ask for proof of employment before they will lease a home to you. The job you find doesn’t have to be perfect, it just needs to be good enough for you to get by. As you improve your credit score, you will get better options and better job offers, but you do have to start somewhere.
In order to get your credit score back on track, there needs to be a paper trail of you having and spending money in a responsible manner. This means that you need to have a bank account and use it for most, if not all, of your payments.
This especially applies to big ticket items, such as paying your bills, rent, or even grocery shopping. As you continue to display proper fiscal responsibility, your bank will start offering you better conditions, and as a result, your credit score will improve gradually. In fact, most experts will recommend that you use your cards for every purchase.
Chances are that your bank will not let you have a credit card right from the get-go. After all, credit card debt is usually unsecured, meaning it will get written off in case of a bankruptcy. This might limit you in the ways you can spend your money initially, but there is a workaround for that as well.
Some banks offer special credit cards for building credit score. They are geared towards people who are just recovering from a bankruptcy and need a credit card. The main difference between a regular card and this one is that the debt on this credit card is secured, meaning it won’t be eligible for deletion in case of a new bankruptcy.
This brings us to the most important change you will need to make – a change in your habits and behavior. For a while, your finances will likely be less than healthy and you will need to learn to budget properly.
To that end, you need to make sure you prioritize your obligations – that is rent, bills, and any payments you need to make to your bank. Once those are accounted for, the rest of the money is yours to manage as best as you can.
If you have extra money at the end of the month, make sure to deposit it in a bank account – it will bring your credit score up faster. Getting over a bankruptcy is typically not easy, but plenty of people have done it, with just a bit of good advice and some determination, and so can you.