5 Ways to Rebuild after Bankruptcy

The fresh start bankruptcy offers can be life changing. At Borowitz & Clark, we’ve helped tens of thousands of Californians start over. But discharging debt is just the first step. Making the most of that financial clean slate takes planning. Here are 5 steps you can take to build a stronger financial foundation.

1. Create a budget and stick to it. The very first step toward financial success is making sure you know exactly how much money you have coming in, how much you’re spending, and where it’s going. Before you get started, it’s usually a good idea to track all of your expenditures for a month. Most people aren’t aware of how much they’re spending, and small costs can add up and break the budget.Try not to think of a budget as limiting. It’s really a way of ensuring that your money goes to the things you value most. You are the master of your budget and you get to choose what you prioritize. If that includes an $8 coffee every morning, that’s nobody’s business but yours. Just make sure you’ve factored it into the budget and that your total monthly expenses are less than your income. Update your budget any time your income changes or your expenses increase, and always look for opportunities to save more.

2. Start saving, even if it’s small. Just 34% of Americans responding to a recent survey said they could cover an unexpected $400 expense without using a credit card or borrowing money. Relying on credit in a crisis can restart the debt spiral. A charge of just $750 paid off through minimum monthly payments could take more than 15 years to repay and end up costing more than $2,800. In other words, having saved $750 could save you more than $2,000.Build savings into your budget and separate that money as soon as you get paid–you may even want to consider setting up an automatic transfer to your savings account or splitting your direct deposit. Obviously, more savings is better, but there’s no amount of savings that’s too small to bother with. Even if you can only spare $10/week, that would add up to cover that $400 expense in about 8 months.

3. Use credit responsibly. Many people who have filed for bankruptcy fear credit, often with good reason. If you’re not careful, it’s easy to slide into debt again. However, avoiding credit entirely can work against you. Your credit score affects more than just access to credit. Without a positive credit history, you could have trouble renting an apartment or be required to pay a higher deposit. You may also pay more for auto insurance and be limited in your options for cell phone plans.You may also need to use credit for a big ticket purchase like a home or a new car. Your ability to get those loans and how much interest you pay will typically depend on your credit history. After bankruptcy, it’s best for most people to gradually open different types of credit accounts and manage them strategically. For example, open one or more credit card accounts, but keep the balance at 10% of the credit limit or less, and make sure every payment is on time. You don’t need to carry a balance to build your credit history.

4. Change the way you think about money. By the time most people file bankruptcy, finances have become a source of significant stress. One of the benefits of bankruptcy is that it puts you back in control, but it can be hard to shift your thinking. Your budget is one step toward changing the way you think about your finances, since you’re making conscious decisions about how to spend your money.It’s important to consciously maintain that sense of control. Every expenditure is a choice, based on your goals and priorities.

5. Tackle problems quickly. Fear is the enemy of financial stability. It’s common for people used to struggling with money to avoid the specifics. You probably know by now that ignoring phone calls and recycling bills unopened doesn’t solve any problems. Now, it’s time to internalize the power of keeping your eyes wide open and being proactive.If you get a large medical bill, for example, don’t set it aside because you can’t pay the whole bill, and don’t randomly send in a partial payment. Look at your budget and figure out what you can afford to pay on a monthly basis, then log in or pick up the phone and see if you can work out a payment arrangement that fits your budget. Don’t get pressured into agreeing to a payment you won’t be able to make.

At Borowitz & Clark, we’ve seen how bankruptcy can be life-changing. After a bankruptcy discharge, you can let go of the stress and juggling and plan for your financial future. But you have to make the conscious choice to take control of your finances moving forward and build the life you want.

To learn more about bankruptcy and whether it may be the right solution for you, schedule a free consultation right now. Just call 877-439-9717 or fill out our contact form.