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Everyone Should Learn a Little about Law

After Bankruptcy: How You Can Regain Your Financial Independence

2 December 2016

Kaylee Wells

After filing for bankruptcy, it's time to begin the uphill battle to long-term financial security. Recovering from massive debts and poor financial circumstances may seem impossible to you, but with planning and careful decision-making, you will eventually gain the financial freedom you seek. 

1. Stay in contact your lawyer.

Even after the case is complete, your lawyer is still a wealth of information. Your lawyer can provide you with any legal documents you might need to show your landlord or employer regarding your bankruptcy. Also, if creditors are still harassing you for payment from discharged loans, your attorney can and should step in to stop them. You lawyer can also work to add things to your case might have forgotten, like a 5-year-old store credit card you forgot about. 

2. Improve your credit score.

One of the biggest downsides of filing bankruptcy is that your credit takes a terrible hit. It can be very difficult or your to get a home loan, car payment, or credit card. However, you should actively take steps to rebuild your financial credibility with lenders. Here's what you can do:

• get a pre-paid credit card. This way, you can only spend money that you pre-load onto the card.
• get a limited use credit card. For example, some stores and gas stations have their own credit cards. You might use it only at the grocery store or to buy gas.
• pay all your bills on time, especially your rent, utilities, and cell-phone bills.
• stay completely on track with court-ordered repayment schedules. These will help to build your trustworthiness.
• contact lenders who are reluctant to work with you and explain your personal situation. After proving your employment and explaining the circumstances of your bankruptcy, some can be more lenient. 

Remember to choose only one or two credit options and leave everything else. Don't hop around from card to card shopping for better rates -- if you pay your small balance on time, rates won't matter. What matters the most to your credit score is longevity -- how long you've stuck with and consistently paid one credit card or line of credit each month. 

3. Set and stick to your budget like glue. 

Many people recovering from bankruptcy do best using only cash to pay for their immediate needs. Paying in cash helps to prevent over-drafting your accounts, and it eliminates the compulsion to pay for things on credit. Using a cash budget can be a good way to train yourself to stay within the strict parameters of a budget. You can also utilize budgeting software, like those offered by Mint.com (free), Quicken (software), or YNAB (subscription). These can track your spending and help you make financial goals for your own life. Be sure to completely account for every transaction, including those "dollar here, dollar there" types, as those can quickly add up. 

4. Avoid buying a car on credit if you can.

Unlike a house or property, car loans are for a depreciating asset. It means you end up paying more than you should for something that will one day be worth nothing. Having a vehicle is necessary for many to get to work and visit family, but if at all possible, give yourself a few years before you look into a car loan. Buy something cheap and used if you can. Car loan rates vary based on financial history, so giving yourself time will help you recover your credit and reduce your lending risk. If you get a car loan too soon, you'll be raked over the coals when it comes to interest rates. 

For more information on getting back on your feet after bankruptcy, contact your attorney and visit a site like http://timgeorgelaw.com.

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