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Life After BankruptcyLife After Bankruptcy

After you receive a discharge order from the Court, you no longer have those debts and you now have a clean slate. Now it's time to plan your financial future. The major areas of focus to put you on a path to financial stability include, generating income, decreasing your spending, accumulating savings, and rebuilding your credit. You should also analyze the cause of your initial financial hardship that led you to file bankruptcy and avoid falling into the same traps. Of course, some of those causes may have been beyond your control. But, you can start today to plan for that "rainy day" that may occur again in the future.

Generating Income

You must have income in order to rebuild your financial life. Initially, it's usually best to secure steady and secure income, rather than income dependent on contingencies, such as commissions. A steady consistent income will give you the foundation to determine your necessary expenses and begin to repair your credit. Of course, don't give up a good commission job if you already have a successful one that is giving you consistent income. You may also consider changing jobs or taking a second job, if possible. Keep in mind, however, that many employers and credit companies will look at your employment history when applying for a job or credit. A stable employment history will increase your chances of other employment and/or credit.

Decreasing Spending and Saving

If your expenses currently exceed your income, you should quickly determine which expenses are absolutely necessary and eliminate as many other expenses as possible. No matter how much income you have, if your expenses exceed your income, it won't be long until you're in financial hardship again. Unfortunately, this may require a bit of a lifestyle change. As difficult as that may be, it's necessary. You need to modify your spending habits and spend money only on those things that are absolutely necessary. For example, take your lunch to work instead of buying it from a restaurant every day. Avoid "eating out" as much as possible. Add up what you spend on eating out and you'll be surprised how expensive eating out can be compared to cooking or preparing your own meals. When you make these simple changes, you'll be amazed to find that you're saving several hundred dollars per month! Remember the old saying, "Watch the pennies and the dollars will take care of themselves." Before long, you may find that you now have positive cash flow and can begin saving money.

As soon as possible, if you haven't already, open a checking and savings account, and don't forget to pay yourself! Make yourself a "necessary" expense and deposit a percentage of your income into a savings account each month. You'll be surprised how quickly your savings will accumulate.

Rebuilding Your Credit

It may be hard to believe, but you can rebuild your credit score, even with a bankruptcy on your credit record. There are two primary ways in which to rebuild credit. First, always pay your bills on time. Late payments or no payments will continue to ruin your credit. Even one late payment on a car can be reflected on your credit history and it could take years to be removed. Second, establish new credit. However, you must be very careful with new credit. Don't buy anything on credit that you can't afford to pay. You can apply for credit with credit card companies or any lending institution. Get at least one low interest credit card. Keep in mind that since your credit already has blemishes, you may have to pay a higher interest to the credit card companies that are willing to give you a credit card. Find the company that will give you the best interest rate. Although you must use the card to establish credit, avoid making any large purchases with the card. Instead, use it only for small purchases you won't have difficulty paying off. It actually helps to maintain a small balance on the card for short periods of time. The most important thing is that you make your payments on time! Maintaining a small balance and making timely payments shows reliability and will eventually increase your credit score. You can use this same approach with two or even three credit cards when you have the finances to do so. Again, always make your payments on time and do not buy anything with your credit cards that you can't afford to pay off immediately. Avoid any high interest credit situation, such as payday loans, lines of credit or automobile title loans. This type of credit may be viewed negatively by other creditors and the high interest charged could, once again, put you in a bad financial situation.