I want to take the stigma out of the "B" word. No, not the one that rhymes with witch. It's BANKRUPTCY. Sometimes life's circumstances make it challenging to keep up with bills, and once it starts accumulating, it's difficult to get out of it without some help. And I want you to know, bankruptcy is just that...another tool in your toolbox to get you out of financial dire straits. Now, if you have experienced a bankruptcy recently, this collaborative/contributed post will definitely help you to create a brighter future through a comprehensive and consistent plan.
So, what are the key steps to bouncing back from bankruptcy? Here's what you need to know.
Changing Bad Habits
Even if bankruptcy wasn't your fault, the experience can teach you a lot about preventing future damage. Avoiding the bad financial habits that contributed to the insolvency is vital. This could be something as simple as taking out medical insurance to make sure accidents or high ticket emergency visits are covered because high cost medical bills lead to a high number of bankruptcies. You may also want to consider NOT using store cards and financial products that put you at risk of further problems. And I know I don't even need to say it, it's time to quit gambling and smoking.
Repair Your Credit Score
Bankruptcy has a serious impact on your credit history. And it's one of the many reasons that you may struggle to get agreeable terms on various credit plans. Although a bankruptcy stays on your credit reports for up to 10 years, you may start to see a higher credit score as early as ONE YEAR after bankruptcy, if you're re-building the right way. Start with a FREE annual credit report to show you exactly where you stand. It'll also provide tips on how to improve the situation. Next, you can establish your credit again by getting prepaid or secured credit cards and if possible, have someone co-sign on a car loan.
Find Support For Big Agreements
Many people assume that bankruptcy will preclude them from big investments like buying a home. It doesn't have to be that way, though. FHA loans can help candidates secure a mortgage even when traditional routes are closed. Having a mortgage will increase your credit score tremendously, and the stability of having your own home may be the foundation of a happier lifestyle for a lot of people. In addition to buying a home, like I mentioned above, you can buy cars with alternative methods like using a guarantor.
Keeping your finances in good health is tough, but the formula is simple. Increased income is one of the quickest routes to a better future. It's important to check that you are being paid fairly for your skills and experience. Likewise, you should try to find ways of maximizing your immediate and long-term earning potential. If boosting this aspect doesn't achieve the desired results, side hustles may be available.
A lot of people fall into insolvency because they don't know about alternative paths. In Canada, a consumer proposal, for example, can provide significant debt relief. Meanwhile, there are a lot of financial entitlements that many people fail to claim despite being eligible. You cannot turn the hands of time back to prevent your bankruptcy, but you can educate yourself to avoid the threat of it happening again. You owe it to yourself to take control and build towards the future.
The road to recovery after bankruptcy isn't easy, but the tips above should make the journey far smoother. You've got this!