The current economic crisis has resulted in millions of Americans losing their homes and forced many into insolvency. Some are forced to assume the drastic degree of bankruptcy.
It is no shame to declare bankruptcy. It may be a necessary step for some people who are overly leveraged. While going through a bankruptcy is a tragic experience, you can use the experience to get your financial house back in order.
Instead of getting used to it and being negative, you can take steps to rebuild your finances and change the habits and decisions you made that could make you go bankrupt. Here are 5 simple steps to recover from bankruptcy.
Set up a budget.
Consider a budget as a route map that will guide you on your financial journey. A budget should help you to limit your debts by limiting your expenses. Create a budget that is realistic to maintain and that is in line with your financial goals.
Most people structure their financial plans around their spending. Instead, plan your plan around your savings goals. Determine exactly how much money you want to save each month and then structure your future expenses around it.
Set a goal to limit your expenses to no more than 50% of your income.
Pay your outstanding debts.
The general belief is that bankruptcy will lose all your debts, giving you a debt-free future. In the words of Lee Corso, not so fast, my friend! Just because you have been declared bankrupt does not mean that all your existing debts have been canceled.
Bankruptcy courts will cancel many of your unsecured debts, but they can still hold you liable for many of your secured debts and debts to the government, such as student loans, alimony and child benefits.
Build a financial cushion.
If you have sufficient cash reserves, you do not need to be stressed and you do not have to worry about your ability to handle a financial emergency. Unexpected events such as job losses or medical emergencies can occur at any time.
When these unplanned emergencies occur, you can stay afloat thanks to your financial cushion. The larger your financial buffer, the better it will be. Paying cash is usually better than paying with credit for just about anything.
Reset your creditworthiness.
Ultimately you have to rebuild your credit score. You do not want to comment on this, because you could end up in the same situation as before. Only take out as many debts as you can pay immediately. If you were able to save the house in bankruptcy, paying the mortgage on time every month will help you to rebuild your credit rating.
If you have lost the house, we recommend renting for a few years and registering how you paid the rent on time each month. This will help you in your search for qualification for another loan. We do not recommend that you apply for more credit cards to reset your credit.
Credit cards may have been a part of the problem that put you in a financial mess, so as Dave Ramsey says, “if you play with snakes, you get a little.”
Remember that Rome was not built in a day. Your credit was not ruined in one day, so it will not be rebuilt overnight. It takes a while for all things in your credit report to disappear. Creditors can leave negative information about your creditworthiness report up to 10 years after a bankruptcy.
Check your credit report regularly to check if it is correct. Creditors have no motivation to report that you are no longer liable for a debt after it has been discharged. You may need to contact the credit bureaus and let them know that the debt is no longer open and should have been included in your bankruptcy application.
Don’t forget to have a bankruptcy motivated and to remain positive. It may be difficult to do, but it makes the whole process easier. If you have had bankruptcy, you may want to invest some money in consultation with a financial adviser or financial adviser who you know and trust.