You've filed for bankruptcy and received your discharge, but now you're left wondering, "what's next?" After a person receives their bankruptcy discharge, they often feel a sense of relief. However, the thought of rebuilding their life and credit after bankruptcy often feels like an overwhelming task. If you've recently filed for Chapter 7 or Chapter 13 bankruptcy, it's important to understand that there is "Life After Bankruptcy".
Life after bankruptcy can be extremely rewarding for people who strategize and plan for their financial future correctly. How quickly you move forward after bankruptcy depends on the steps you take to safeguard yourself from future financial catastrophes. If you've recently received your bankruptcy discharge or you're near the end of your bankruptcy, here are five steps you can take to help rebuild your credit:
Let Go of Any Guilt and Shame
Before you can start rebuilding your credit, you need to let go of any guilt and shame that you are carrying around that is often associated with bankruptcy. It's not uncommon for people who have filed for bankruptcy to say things like, "I feel like a failure" or "I'm so disappointed that I let things get to this point." The truth is, beating yourself up about your situation won't make it any better. You've made the decision to change your life and you have taken the necessary steps to change your life. Holding onto these feelings about your bankruptcy can even be harmful to you by not allowing you to move forward in a positive way. Instead of beating yourself up, make peace with your situation, and focus on the future.
Create a Budget
One of the most important steps you can take after bankruptcy is to create a budget to help you stay on track with your finances. For many people, the thought of creating a budget is daunting and tedious, but there are many websites that can assist you in creating a budget. Budgets are a great way to view your income and expenses, and they give you a better idea as to where your money is going. Monitoring your expenses can also help you find places where you can cut your spending or at least reduce it. When creating your monthly budget, distinguish between fixed expenses (mortgage payment, car payment, etc.) and discretionary expenses (eating out, entertainment, etc.). This will help you determine where you can reduce some of your spendings.
Pay Your Current Bills on Time
Make it a priority to pay all of your current bills on time. Set up automatic bill payments, set reminders on your phone or computer and remember to pay your rent or mortgage on time. Repaying your existing bills on time is one of the best things you can do when you're trying to rebuild your credit. Creating a budget will also help you prioritize your money to ensure that you're able to pay your existing bills on time.
This may seem obvious, but beginning to save money is a great way to set yourself up for a strong financial future. If you have your own money saved up, you're less likely to rack up new credit card debt. Saving money can also help you discipline yourself when it comes to spending, and if you don't have the money saved up for something, wait until you do before you buy something. Impulse buying is what causes many people to get deeper into debt, and a little bit of restraint can go a long way in helping you secure your financial future.
Obtain a Secured Credit Card
Another key strategy for rebuilding your credit after bankruptcy is to obtain a secured credit card. You can obtain a secured card by depositing money into an account, and the amount that you deposit will become your credit limit. By charging small amounts each month and repaying your debts as you go, you can gradually rebuild your credit.
Thinking about life after bankruptcy can be scary, but it doesn't have to be. Educate yourself on creating a budget, spending money and rebuilding your credit. Save your money and keep track of how you spend it, and if you think it will be helpful, find someone who will hold you accountable for your spending habits. If you actively practice healthy spending habits, life after bankruptcy will be a fresh financial start.