Life After Bankruptcy

Bankruptcy is a difficult decision to make. Due to life's circumstances, a chronic illness, divorce or loss of a spouse, sometimes it is the best financial decision for a family and their financial future. Based on financial or family changes, moving forward from a bankruptcy will bring about lifestyle and attitude adjustments.

Bankruptcy can, in many cases, wipe the debt slate clean. Moving forward it is important to think differently about debt, credit and savings. Not all people who file for bankruptcy have difficulty saving or living within their means, however, for some this will be a major lifestyle change.

After a bankruptcy, cash becomes the number one currency to negotiate while a positive credit history is re-established. There are several companies out there that are willing to offer high interest credit cards, be wary of such offers.

Oftentimes homeowners do not have recent rental histories available to show stability, therefore, if a home was lost in a bankruptcy, additional cash may be required to secure housing. In rare instances, a co-signer may be used in lieu of a higher deposit.

It is important to establish good spending and savings habits, using the envelope system may be helpful. Establish a monthly budget. Each payday, after cashing your paycheck, separate the money into envelopes. Label each envelope with the bills that are due that week. Include an envelope for savings. It is important to establish a growing saving account for emergencies.

This system is proven to help redefine the concept of money. It enables us to see it is a finite commodity rather than an unlimited pool of money that doesn't have to be paid back. Paying bills on time is an essential step in building a foundation to obtain credit in the future.

Companies know that once you have filed a bankruptcy, you can't file again for 10 years. Be careful when accepting new credit obligations. While it is important to start reporting positive entries on your credit report, be responsible and do not over use credit. Keep all balances below 60%, and, if possible, pay off the balance monthly.

If your bankruptcy included a repayment plan, it is imperative to stay on target to get the debt paid off. Keep good records and stay in touch with the courts. If your home was saved from foreclosure through bankruptcy proceedings it could fall back into jeopardy if payments are not made according to the settlement agreement. This is also true for a vehicle that was in the brink of repossession.

Recovering from bankruptcy is possible. Understand your credit report and monitor it for accuracy, report errors and make payments on time to insure only positive entries are reported from this point forward. As more positive entries are recorded, they will begin to outweigh the bankruptcy. Make a plan for a two-year recovery period to improve your credit rating after a bankruptcy.