Bouncing Back From Bankruptcy

Bouncing back from bankruptcy is often not an easy task. When you are declared bankrupt by a court, it takes its tool on almost every aspect of your life – be it financial, personal or professional. Bankruptcy is undoubtedly a trying time, where you have to deal with an array of difficult things, such as liquidation of assets and properties, the process of facing the court proceedings, and the shame associated with the financial downfall. Despite all these facts, bankruptcy still stands as a powerful last option to those consumers to get rid of their debt problems and to give their financial life a fresh start. If you follow the right approach and demonstrate a great level of financial discipline, you can definitely make life after bankruptcy easy and smooth going for you. Though the process takes time, but if you are consistent in your efforts, you can significantly improve your credit worthiness by implementing effective money management strategies. If you are determined to invest your financial creativity and hard work, there is no reason why you should not bounce back from bankruptcy. Following is a brief rundown on how to go about it.

Start Living A Cash Only Life

When it comes to bouncing back from bankruptcy, the first thing you have to do is to stick with cash. If you do not have a credit card, you may feel the temptation to get one, but you are strongly recommended to wait for a couple of months before you go for it. Before you start building your credit, you must first learn how to use your money responsibly. And, the best way to learn it is by living a cash only life. It will get you better control over your money. The first task for you is to bring your finances on a smooth track, where you should not have any problem in meeting your basic expenses and still saving a decent amount of money for financial emergencies. Budgeting is undoubtedly the keyword here. You will have to create a well-planned budget and then stick to that plan. Budgeting works on a very simple concept – reducing your expenses and/or increasing your income. This is not the right time to make luxury purchases. This is the time to save more and spend less. Once you have a good amount of savings, you can start working on your strategies to use credit so that you can increase your FICO score.

Do Not Default On Any Of Your Bill Payments

If you are serious about bouncing back from bankruptcy, the next thing you have to do is to make sure that you pay all your monthly bills in a timely manner, such as telephone bills, gas bills, electricity bills, and others. Likewise, if you are required to make payments toward certain debt as per the new repayment plan under bankruptcy, you should try to make extra payments toward the same so that you can pay them off faster. Late and missed payments can further damage your credit. That is the reason why expert emphasize on first getting control over your financial life before you start rebuilding your credit worthiness.

Regain Your Financial Footing

The first step in bouncing back from bankruptcy is to regain your financial footing. First you should try to pay off all your debts that you still owe as quickly as possible. When you through with the same, your focus should be on savings as much money extra as you can. You can achieve great results by living a frugal life, cutting down your regular and irregular monthly expenses to a very low amount. You can further boost your savings by working overtime or by getting a second job. You can look into the “budgeting” section in the “debt consolidation” category of this blog for plenty of information on how you can effectively save money.

Monitor The Updates On Your Credit Report

When it comes to bouncing back from bankruptcy, make sure that things are being updated correctly on your credit report. For example, if you are making regular timely payments toward your debts and bills, it should reflect on your credit report and you should notice a slight improvement in your credit score. If you find that there are some errors out there and that some of the entries are not completely correct, you must immediately file a dispute with the credit bureau and get those errors rectified.

Get A Secured Credit Card

Once you successfully regain your financial footing, you can now go ahead and start working on your strategies to improve your credit worthiness. For this, you will need to borrow credit, but you must show a great sense of responsibility when it comes to handling the same. The best way to start your journey in this direction is by applying for a secured credit card. You will have to use your savings here. In order to obtain a secured credit card, you will have to pay a certain amount of money as a security deposit. The amount you deposit becomes the maximum limit on your credit card, which means you will not be able to spend more than what you have deposited. Make sure you pay off the monthly balances in full every month. Avoid the temptation to make just the minimum payments, as this way, you will actually be acquiring debts very fast, and very soon, you will again find yourself amidst a financial crisis.

Overall, when it is about bouncing back from bankruptcy, it is basically a two-step process – first you need to regain a firm financial footing and then you can start rebuilding your credit. The success in both these steps depends very much on disciplined you are in handling your debts and finances.

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