Once your request for bankruptcy protection is approved, you have the chance to regain control of your finances and enter a new phase of your life. When you file a Chapter 7 bankruptcy, this means that the trustee appointed by the court may order the sale of certain assets to settle part of your debt, then declare the remaining balance dismissed. With a Chapter 13 bankruptcy, the court approves a repayment plan that eventually settles all your debts. In either scenario, the period after the bankruptcy will be a time of change for the way you think about and manage your assets.
Learning From the Past
Bankruptcy may become necessary for a number of reasons. Perhaps you lost a job or had a series of health issues that undermined your financial security. Maybe you allowed your spending to get of control and accumulated an unmanageable amount of unsecured debt. Whatever the circumstances, your financial future requires that you mine the past and learn from what you have gone through.
By understanding how you came to the decision to file for a Chapter 7 or 13 bankruptcy, it will be easier to avoid those same situations in the future. This may involve strategies such as increasing the amount you place in savings each month. It can also involve creating and sticking to a reasonable budget. Keep in mind that it will be difficult to commit to these changes but in the long run you’ll be happy that the effort was made.
Get Some Counseling
In many jurisdictions, financial counseling is mandatory during a Chapter 7 bankruptcy proceeding. That counseling does not have to end once the action is settled and your debts are cleared. In fact, it is to your benefit that you seek additional counseling if you really want to change the way you think about financial matters.
Take classes on budgeting and finance from a local technical school. If money is tight, try auditing a class or two at a local community college. You will also find that some non-profit organizations offer free classes that help with creating and sticking to a household budget. Look around your community and there is a good chance you will find several resources that will provide the help you need.
Establish New Credit
With your old debts either settled or at least now in the hands of the court, the issue of your credit rating must be addressed. If you opted for a Chapter 13 bankruptcy, creditors are not likely to approve applications for new credit. This is because they know that this type of bankruptcy action can be amended to add new creditors. Your best bet is to acquire a secured credit card from a provider who regularly reports information to the three major credit reporting agencies.
This solution is actually helpful on two fronts. One the one hand, you have the chance to use your new credit line to demonstrate that you have learned your lesson and can manage money effectively. In addition, secured accounts require the establishment of a savings account that serves as collateral. Since your credit line is based on the balance of that savings account, it is to your advantage to continue depositing more funds in savings.
If you filed a Chapter 7, potential lenders know you cannot file a second time for several years. You will have a lot of credit card offers come your way. Identify the one that has a reasonable credit limit and an interest rate that is competitive with average rates. Refrain from accepting every offer that comes your way, since too much credit could put you in the same situation in less than two years.
In any event, make sure you pay off the balance on your credit card as soon as you receive the statement. Doing so will ensure you do not incur interest charges. It will also mean that positive information begins to appear on your credit reports.
Obtain Your Financial Freedom
Above all, commit to making the future better than the past. While you want to remember the lessons learned, don’t dwell on past mistakes. Let it go and focus your attention on the future. With the right combination of commitment, information and responsible action you will obtain a level of financial freedom that you thought was gone forever.