3 Ways To Get Back On Financial Track After Bankruptcy

2014-08-29   minute read

Before going through a bankruptcy, one of the questions I’m often asked is: “What happens afterward?” Most people are wondering how their credit will be impacted and what they can do to help improve their rating again. A bankruptcy notation will stay on your credit reports for six years, but there are still many things you can do in that time to help rebuild confidence with creditors.

People sitting in a coffee house with two cups of coffee, a calculator, pens, paper, tablet, and a laptop on the table

​​Start Budgeting

First, you need to develop good budgeting habits. Speak with your significant other and your other family members about budgeting – make sure you’re all in it together. Gather everyone together to talk about your monthly expenses and your future goals. Once you have compromised on the budget, stick to it. This doesn’t mean never getting to shop or go out again. It just means spend what you have; do not rely on credit cards to make ends meet. It’s important to involve your children in this discussion, as they need to understand you may not be able to buy everything all at once. Now is a good time to teach them about budgets and how to stick to them.

Bet on Debit

It’s okay if you don’t like carrying cash – apart from security, it can be very tempting to spend what you have in your wallet without thinking. But using credit cards can cloud your awareness of how much you’re spending and what you’re spending it on. A good compromise is to try to use debit cards instead of credit cards. A debit card means it is your money – what you actually have on hand. Once the item is paid for, you no longer have to think or worry about it.

Control Your Credit

If you do want a credit card – because let’s face it, the world runs on plastic – keep a limit that is easily manageable and low. A reasonable strategy is to think of things this way: if you need to ‘max out’ your credit card, make sure you can pay it off in full within three months – no more. Another option is to obtain a secured credit card, where you provide an initial deposit that essentially functions as ‘insurance’ against not being able to pay off your card. For example, you could put down $500, which would also function as your limit. If for some reason you default on your secured credit card payment, the creditor will still have that initial deposit to pay off your balance.

Follow these simple steps and you will be on your way to a better credit score and debt-free living. If you have any questions about whether bankruptcy is right for you, contact your local MNP Ltd. office to set up a free initial consultation. ​​

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