So you have filed for bankruptcy. What’s the next step? At first
blush, you are full of ideas on how you are getting a fresh start.
You have freed yourself from almost all of your debts and you are,
for all intents and purposes (financially, at least), a new person.
But note that by filing for bankruptcy, you had to pay a dear price.
In exchange for a discharge of your debts and stopping your creditors
from pursuing any collection actions against you, your credit rating
took the brunt of the blow. Considering how your credit rating was
probably not all that great to begin with, this recent hit is going
to be an easy one to recover from.
Let’s start with
the bad news:
• The bankruptcy
will stay on your credit report for up to 10 years.
• To lenders, you
would seem a bad risk because you have legally written off at least
some of your past debts.
• As a
consequence, you may not be able to get a loan or a credit card for
some time after the bankruptcy.
• And if you do
get lucky and get approved for credit, the interest rates and fees
attached will be rather punishing.
The silver lining?
Think positive. It is good that you are restricted from getting new
credit. Credits were what you got bankrupt in the first place. They
will have no difficulty getting you in that place...again. Now, for
the rebounding tips to help you climb back up from the pits of
bankruptcy:
Lead a Frugal
Lifestyle: Common sense dictates that you lead a simpler lifestyle
properly slimmed-down, no frills attached. In other words, be frugal.
If you filed under Chapter 13, it means that you have signed up for a
repayment plan to pay off some of your debts. The purpose of Chapter
13 is to allow debt reorganization so that you can continue holding
on to your properties and other assets in exchange for obliging
yourself to pay your debts for a certain number of years. The bottom
line, therefore, is that you are still in debt, albeit, you may only
pay a portion of the total debt to your creditors.
The usual period
given by bankruptcy courts with which you can pay off your debts is
within three to five years. During this time, the court allows you
only a set amount to live on while the court-appointed trustee
divides the rest among your creditors each month. What does this mean
to you?
As we earlier said,
it means a no-frills lifestyle. No luxuries whatsoever, except those
exempted under the law. And sometimes, just sometimes, it may also
mean changing your basic expenses, such as how much you pay for
shelter and groceries every month. You may even have to move to a
cheaper apartment or a more low-end neighborhood just so you can get
by with the amount the court allows you. Suffice to say that getting
new credit will be a difficult feat, if not downright impossible. So
you can forget about getting a new credit card or a car loan. Or at
least, getting it the easy way. Besides, you can’t take on a new
debt without the court’s permission anyway, and getting that means
adding an awful lot of complexity in your life.
So how do you go
about with barely anything to tide you over through the hard times
ahead? It’s simple really – make a budget. Better yet, keep a
close watch on your expenses for three months and make a budget based
on any observations you have made on your spending habits.
Track your expenses
for three months to get an idea of how much you’re spending and
where that money is going. Then create a realistic budget that fits
within your monthly income, he says. 'The first step to saving is to
set boundaries on your spending. And after making a budget, stick to
it. That’s the most important part.
You can do it, and I
am always here to help. debtfreedetroit@gmail.com
or 313-343-9930