Bankruptcy is a legal way of getting relief from financial burdens and the last option for people struggling with debt. Are you trying to decide whether to take the plunge and file Chapter 7 or continue looking for another way out of debt? While the idea may be frightening, this situation won’t last forever. Here are some tips for moving forward after your case is complete, so you’ll know what to expect coming out the other side of bankruptcy.
Spending less than you earn is essential for life after bankruptcy. If you go back to managing money the way you did before Chapter 7, you may begin racking up debt again. Life doesn’t always go as planned, but to take advantage of the fresh start bankruptcy can offer, you’ll need to rely on credit less.
Few people can manage expenses on an all-cash budget, and if you want to rebuild your credit, having a credit card is the easiest way to do it. I advise people to get a secured credit card immediately upon discharge. It rebuilds credit just as fast as unsecured cards and it’s available the day they get their discharge.
Getting a low interest, unsecured debt ASAP is critical for when life inevitably sends you an unexpected expense you don’t have cash for (car repair). The secured card builds your credit history right away and using the card for gas/groceries and paying every month in full keeps the utilization ratio at zero (2 main factors in credit score).
Part of Chapter 7 is the requirement to attend classes that can help you learn how to use credit wisely and budget more effectively. There are also budgeting tools available that can help you manage and track your finances to know exactly where you stand. Learn more about fiscal responsibility. Take advantage of resources such as online courses, publications, and state or federal programs that can help you get back on your feet.
Everything from credit cards and secured loans to utility companies charge late fees, increase interest rates or use other methods that increase the amount you owe if you pay after the monthly due date. Make paying your bills on time a priority. This can save you hundreds of dollars a year. Opening a savings account and adding even a small amount every pay period can give you a cushion in emergencies. This can help you avoid the late fees and potentially expensive overdraft fees your bank charges if your balance falls below zero.
Changing the way you handle finances is challenging, but it’s not as stressful as dodging phone calls from collection companies or dealing with creditors. Think of bankruptcy as the transition period between the way life was and the way it can be. Every situation is different. There may be alternatives to Chapter 7 you can explore before making your decision. Isn’t it better to know for sure?
Contact me to schedule a free consultation. I have been helping people in Rancho Cucamonga, Pomona, Upland, and Ontario get debt relief for more than ten years. We can sit down in person, via phone, or video conference and determine if Chapter 7 is the right step for you.
Law Office of Terrence Fantauzzi