Filing for bankruptcy can feel overwhelming, but learning how to recover from bankruptcies can help you regain financial stability and rebuild your future. If you’re in this stage and wonder how you can recover, here are some steps that can come in handy.
How to Recover from Bankruptcies: Key Steps to Take
Understanding how to recover from bankruptcies involves careful budgeting, saving, and rebuilding your credit.
1. Start planning
It’s never too early to start planning after filing for bankruptcy. If you do not have any experience with this, contact an NY Certified Financial Planner to help you get started. You should create a long-term plan to get back on your feet. Don’t think it’s going to be a quick process. So, sit back and let everything happen naturally.
2. Budget
Having to file for bankruptcy means your spending habits are poor. A new start means changing how you view money and living on a budget. The plan you created earlier can be expanded to cover your monthly expenses. For a start, you may need to forgo expenses on wants and focus on needs. When you have demonstrated financial maturity, then you can consider buying a few wants.
Naturally, you should spend only 50% of your salary on needs such as transportation and food. 30% of the sum should go toward other expenses that aren’t as important as food and transportation. The last 20% should be saved.
3. Saving
We’ve talked about how you need to budget and save 20% of your earnings every month. This may not be easy for some people. If you lack financial discipline, you can always automate the saving process to force yourself to save. Some people opt to have 20% of their salary sent directly to a high-yield savings account. That way, they can make some money from the savings in the long run.
4. Credit report
Filing for bankruptcy is bad for your credit report. It could affect your chances of getting a loan for about ten years. You should monitor your credit report immediately after filing for bankruptcy. While this may seem like a hassle, it is necessary to inform them about your discharged debts. Be sure to check at least every sixty days to ensure that it stays positive for your good.
5. Stay employed
After filing for bankruptcy, you’ll need a stable job to keep the ball rolling. This would be the wrong time to job-hop. So try as much as possible to keep the job. Staying in one job for a long period is also great for your credit score. Creditors will view you as a more trustworthy person who’s ready to pick up the pieces of their life. You can get a higher credit score to give you access to loans.
6. Pay all bills promptly
Bankruptcy doesn’t absolve you from paying what you owe. You only get more time to pay them. If you’re able to pay the bills on time, you’ll not only finish payments faster than planned, but you’ll get a higher credit score. Pay other bills, such as your rent or utilities even if they do not affect your credit ratings. They prevent you from taking out high-interest loans and falling back into debt.
Conclusion: Rebuilding Your Financial Future After Bankruptcy
Recovering from bankruptcy is a challenging but achievable journey. With the right mindset and a strategic plan, you can rebuild your financial stability and regain control over your life. By budgeting wisely, saving consistently, and monitoring your credit report, you can develop healthier financial habits that will prevent future setbacks. Staying employed, paying bills on time, and seeking professional financial advice can further accelerate your recovery process. Remember, bankruptcy is not the end—it’s an opportunity for a fresh start. Stay committed to your goals, remain patient, and take proactive steps to secure a brighter financial future.
