Filing for bankruptcy is a difficult step that some people take to get out of debt. If you are thinking of taking this step, make sure that you understand what life is going to be like after the filing.
It is imperative to take steps to shore up your finances during the bankruptcy. You also have to learn the discipline that helps you follow the steps that you need to take once you file. All of this can work together to help you have the best financial life possible from here on out.
Check your credit report
Your credit report is going to take a hit due to the bankruptcy. Since many, or all, of your debts are going to be relieved in the bankruptcy, make sure that those accounts are accurately reported. When the bankruptcy is discharged, the accounts should reflect that. Continue to check your credit report throughout the rest of your life. This is a good opportunity to see how debts are impacting you, as well as ensuring that you aren’t the victim of identity theft. If you see accounts that aren’t yours, report them and find out what is going on.
Set your budget and stick to it
Your budget is your financial lifeline. Set this up based on your income. You can’t have credit accounts during your bankruptcy unless you have the court’s approval. Throughout the case, you have to be able to pay your normal bills and the ones related to your case only on your household income. By setting your budget now and getting used to living in this manner, you can achieve financial freedom.
Rebuild your credit
While you can’t rebuild credit until after the discharge, you can get to work soon after. You will likely have to start with a secured credit card. Slowly, you can start adding other forms of credit. Just remember that these might come with higher interest rates due to your current credit status. Only charge what you can pay off when the bill comes due. You should try not to carry balances since this might lead to another financial crisis.
Save money in an emergency fund
Your emergency fund is another key to future success. You need to start saving now, no matter how small the deposits into your savings. Ultimately, you need to work toward an emergency fund that covers your expenses for at least three to six months.
If you are overwhelmed by debts, you need to take a hard look at your financial state. If you know that you just can’t get past these, bankruptcy might be your best option. Look into the two types of consumer bankruptcy to determine which is the most appropriate for your needs.
