Bankruptcy is not the end of life as you may think. You can take advantage of the situation and come back stronger.
Life after bankruptcy won’t be easy. Your credit score will be too low, and no lenders will want to loan you. But the good news is that the old debts are off your back, and you can start afresh.
While it won’t be simple, proper planning and dedication will bring you back up to your feet. So let’s look at 7 tips for recovery after bankruptcy.
1. Keep An Eye On Your Credit Score
Your credit report is an important financial asset. It determines your credit score and the likelihood of getting a loan at good interest rates. So, keeping an eye on the credit report’s details is vital.
Keep an eye on your credit score by checking with your credit bureau and ensure that all eligible debt in your credit report has been accurately recorded and noted.
Check for any errors and ensure that all the discharged loans have been recorded as such. Failure to correct the mistakes will continue hurting your credit score. So if you find any discrepancies, take it up with your credit bureau to have them removed as soon as possible.
2. Steer Clear Of High-Interest Products
You will find various companies promising you better financial aid after bankruptcy. However, if they are not credit unions or close family offering a second chance, avoid them at all costs.
Title loan companies, pawn shops or payday lenders usually offer high-interest products that will put you in more financial trouble.
You should also be aware of companies promising to repair your credit: it is a scam!
It is important to look out for warning signs of credit repair scams. They include promises or new identities and removal or negative credit reports.
3. Keep Your Paperwork
Filing for bankruptcy is tiresome and entails a lot of paperwork. After a discharge, you may be tempted to dispose of the documents, forget about the ordeal, and start afresh.
Well, your bankruptcy documentation is very important. For instance, a collection agency may require the documents on discharge loans as proof. You’ll also require documents when applying for credit accounts like a mortgage.
4. Stay Focused
A steady job and consistent residence create a sense of trust with creditors and show you are reliable.
Most lenders and financial institutions consider your income, employment history, and residential address when considering you for a loan. A steady source of employment and consistent residential address gives the impression that you can be relied on to repay or honor your financial obligation to repay creditors.
Gaps in your employment resume and multiple residential addresses may give them the impression that you are unreliable.
5. Start Rebuilding Your Credit
Now that you are debt free, you can start rebuilding your credit score. Rebuilding your credit score means paying your bills on time and keeping your credit ratio at a minimum. Having various credit accounts will also improve your score.
Don’t Delay Payments
Always be on top of all your bills, especially those not on your bankruptcy report.
Bills for utilities, cell phones, and medical should always be paid on time and not left for too long as they may end up going into collections.
If you find it hard to track what you owe, try using budgeting apps or setting up automatic payments through your bank.
Keep Your Balances Low
Credit experts always encourage credit users to keep their balances at under 30% of their overall available credit. The higher the percentage of balances, the less trust a lender may have when considering giving you credit.
Remember, you’re just coming back from bankruptcy, so building your credit score back up is a vital part of the process.
6. Follow A Budget
While you’re trying to build back up and toward your financial goals, avoid impulsive buying and overspending.
Living beyond your financial means and not keeping track of what and how much you’re spending is one of the most common contributors to bankruptcy.
Instead of taking a loan to buy something, consider saving up to be able to purchase it. It might take longer, but that is the safest route.
For companies and businesses, consider investing in purchasing software.
Purchasing software gives your teams better spending visibility.
For example, you could notice the equipment in a certain department breaks down more frequently than in others. In such cases, you’ll task the line’s engineer to solve the problem. They will then narrow it down to the problem and include the parts needed in the purchase order.
Start An Emergency Fund
History has a way of repeating itself. If you don’t change your habits and take steps to have a better relationship with finances, you may find yourself back to claiming bankruptcy.
One of the easier ways to help maintain your newfound financial freedom is to start an emergency fund to cater to any unexpected financial emergencies.
This may take a year or longer to save, but eventually, it will keep you from possibly incurring debt. So instead of having to borrow or take loans during the next emergency, you can use take from your emergency fund.
7. Prepare For Challenges But Stay On Track
While the worst may be behind you, you’re still trying, probably trying to catch your breath. You’ll be facing a new life with newer challenges. It won’t be easy; you may need to change your lifestyle and cut back on your expenses, but it will pay off in the long run.
Staying focused on your newfound financial habits will become second nature, and sooner or later, you will be more adept at keeping your finances in check and possibly growing them to where they need to be.
If you find it hard, you can approach various certified organizations to help guide and steer you in the right direction and keep you on the right path.