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Life After Bankruptcy: Guided Steps to Rebuilding Your Credit, Finances and Emotions

While filing for bankruptcy no longer carries the negative stigma it once did, it is still a stressful process. Many people find that concerns about making ends meet, fears for future needs, and turbulent emotions as you begin to grasp how life after bankruptcy works overshadow the welcome relief from constant debt collector phone calls and late notices.

The good news is that you have already taken the most difficult step by declaring bankruptcy; your next steps will be necessary, but not as overwhelming as initiating the bankruptcy process. The following steps will help you as you move forward from bankruptcy.

Stabilize Your Current Finances 

Securing finances and gathering information are essential because bankruptcy laws vary from state to state and misinformation, intentional or otherwise, is quite common. The information your brother-in-law, neighbor, or co-worker gave you may lead you down the wrong path. If you are in doubt about anything moving forward, contact your bankruptcy attorney for advice. It is always best to check with someone who understands your situation when seeking guidance. Your bankruptcy attorney’s advice will help you with the essential step of stabilizing your finances. Here are some steps to take when beginning to start over after bankruptcy.

• Take control of your current expenditures- This involves gathering the information about what debts which require you to make payments still. Often this includes utilities and mortgages or second mortgages if you elected to keep your home. Create a budget that is realistic so that you can live with to avoid the temptation of overspending. By knowing what you owe, to whom, and when payments are due you will have a clear picture of the next step towards stabilization.

Begin a Savings Account

You may believe that you have nothing to save, but even small deposits add up. It is important to start saving as much as is practical because of the limited access to credit that you will have for the foreseeable future. Even a small amount of money will help in the long run. If you find putting away money too difficult, arrange for an automatic withdraw of a sum that is within your comfort zone. After you have accumulated two months wages worth of savings for unforeseen expenses, continue your saving plan with an eye towards retirement or a special future purchase.

Rebuild Your Credit

This step seems daunting, but with careful planning, you can improve your credit rating faster than you believed possible.

• Obtain a credit card- This advice may sound counterproductive. However, the fastest way to rebuild your credit score is by showing responsibility with credit. After discharge of your bankruptcy, you should begin to receive credit card offers. Take your time to look at these carefully, especially look for hidden fees and variable interest rates. Next, choose ONE card with the lowest interest rate and the fewest fees.

• Use it carefully and pay it off every month- This step is all about showing lenders that you are responsible and a good credit risk. Avoid creating large bills that you cannot pay off on a monthly basis; falling into the trap of debt will not enhance your credit rating. Only charge what you can afford then pay off the card each month.

Focus on the Present and Moving Forward

Even though filing for bankruptcy is more common and less stigmatized than ever before, that does not mean that it is any less emotionally draining than it ever was. Recovering emotionally from filing for bankruptcy is more complicated than rebuilding credit and stabilizing your current financial situation. While there is no set formula, here are some points to remember going forward.

• Leave the past behind you- Nothing constructive happens by constantly reflecting on what is past. Whether you made poor choices, were a victim of circumstance, or a bit of both take the experience as a life lesson, forgive yourself, and concentrate on the present.

• Be guarded when sharing information- If you are someone who feels a sense of embarrassment over your financial situation, although there is no need for shame, limit what details you share and with whom you share these details. Contrary to popular belief, the details of your life do not need to be part of a display for the public.

Bankruptcy is not a sentence to a miserable life. Remember to take control of your current finances and take control of your financial future, build a reserve account for emergencies, begin to reestablish your credit, and allow yourself the opportunity to move away from the past. Your future decisions are in your hands.