If the media has taught us anything, it’s that bankruptcy is the end of the line – the absolute rock bottom of personal finance. You file for bankruptcy, and you can kiss any credit opportunities in your future goodbye, right?
This could not be farther from the truth.
I’m not saying that filing for bankruptcy is a great thing. Of course, it should be avoided if possible. But, in some cases, this is not an option. So, what do you do if you find yourself in this situation?
The first thing is not to panic – it is not the end of your financial life but merely a setback. You CAN come back from it, but it will take time.
A bankruptcy can stay on your credit report for 7 to 10 years, so you’ll have time to work on getting yourself back into financial shape.
Here are some quick tips on how to make the most of your new situation and take the opportunity to practice some good habits that will help bring you to a place where you (hopefully) never have to file for bankruptcy again.
- Make a budget. Keeping track of what you need to spend on your day-to-day life will give you a solid idea of what your income vs. spending trends look like, which can provide you with perspective on where you may be overspending.
- Use cash to pay for your purchases in-store. Keeping a set amount of money on you when you go to the store is a great way to curb unnecessary spending. Before going to the store, make a list of what you need, and estimate how much these items will cost. That way, you will almost surely keep to your grocery budget.
- Pay your bills on time. Granted, many utility companies don’t report on credit – but it is still in your best interests to pay your bills on time. After something like bankruptcy, making a late payment shows lenders and banks that you’re not exactly the most reliable with money.
- Secured credit cards. The beauty of a secured card is that it allows you to build (or rebuild) credit even if you’ve got an extremely low credit score. The catch? Your card starts at $0 available credit. You are responsible for adding money onto it, like a savings account. When you’ve done so, this amount becomes your credit limit.
Having to resort to bankruptcy is a challenge that no one should have to endure. If you are facing this decision or want to pick up the pieces afterward, a financial advisor can help. If this is you, give us a call at 513-563-PLAN (7526) or click here to book a 15-minute chat with us to figure out how we can help you dig your way out of that hole – no matter how deep it seems.
Regards,
Nikki Earley, CFP®
