Bankruptcy is one of the most significant events in life, comparable with marriage or divorce in its impact. However, unlike those two events bankruptcy is almost always a sign of bad times.
To make sure that the bad times are a thing of the past and you do not repeat the same mistakes that led to the bankruptcy in the first place, we have collected this handy guide to what to do after bankruptcy. Even a divorce may be a favorable event if it is done amicably, but a bankruptcy inherently means that you have fumbled financially; therefore it is a good time to make a new start using the following tips.
Assess your Credit Report and Finances
The first step to better financial management after declaring bankruptcy is to educate yourself about not just finance, but also about your own finances. You should read your credit card reports, as well as bank reports, to find out where you spend your money and what your sources of income are. Once you know more about your spending habits, you can take steps to change them for the better.
Learn to Live within your Means
Maybe you have done that always, but a bankruptcy should be taken as another chance to start living within your means. Make sure that you change your spending habits so that you cut back on all unnecessary expenses. When you are in this phase, it is a good time to learn about the differences between liabilities and assets. Any product or service, such as cable or mobile phone is a liability in the long run, whereas the vehicle that allows you to go to work is an asset. You should acquire assets, and try to reduce liabilities.
Pay Your Bills on Time
By paying your bills on time, you not only develop financial discipline, but also improve your credit score. If you find that your bills are too high or too many for your means, you should cut back on some of the services to reduce them. For example, if you have monthly subscription to entertainment or other services, you can unsubscribe till the time your finances are better.
Repair your Credit Worthiness
By declaring bankruptcy, you have definitely taken a huge blow to your credit worthiness. However, it is perfectly possible to repair your credit worthiness by using your credit card wisely. Paying bills on time is also a part of the process of improving your credit score. For a while, you will find that you can only get loans, such as car loans, at a higher interest rate. However, once you have paid them in full and on time, your credit score will improve and you should be able to access loans at a lower interest rate.
When you are recovering from bankruptcy, you are likely also recovering from a number of bad financial habits. Therefore, bankruptcy should be taken as an opportunity to change those habits, as well as to improve your credit score. Once you r credit score has improved, and you have successfully paid off all your debt, you can definitely call yourself a bankruptcy survivor.