Bankruptcy is one of the most emotionally stressful financial situations a person, or family, can face. And in our current times, it is, unfortunately, a situation many Americans find themselves in. In fact, according to uscourts.gov, 2010 saw the highest amount of non-business bankruptcy filings, totaling 1,538,033. Even after the recession was in the rearview mirror, millions of Americans continue to face the realities of bankruptcy. However, what is often overlooked when considering the side effects of bankruptcy, is the emotional relief that can come as a result. For some, bankruptcy can ease the financial burden as they learn to navigate their financial life without the stress of mounting debt. If you have not yet filed for bankruptcy, consider contacting a qualified professional or advocate to walk you through what bankruptcy would mean for you personally. While it is not right for every situation, bankruptcy may be an option to consider.
However, if you have already filed bankruptcy and are looking at ways to rebuild in the aftermath, here are some practical steps to consider:
1. Reflect on how you got into debt in the first place.
This is not meant to assign blame or fault or to cause you to beat yourself up, it is simply an exercise in helping to avoid bankruptcy or financial hardship in the future. Sometimes we fall into hardship at no fault of our own. Illness, loss, and displacement can strike anyone at any time and are truly unfortunate situations. Other times, we help create our situation with unnecessary spending, poor budgeting, and not planning for the inevitable everyday emergencies. Take some time to honestly evaluate your financial past and see if there is anything you may change moving forward that can help you while rebuilding from bankruptcy.
2. Have a Plan
So you are in the clear now. No debt to hang over your head with your whole
future in front of you. So where do you start? Sit down and map out a plan. Plans should include the minimum following steps:
- Create an emergency fund. Can you pick up a side job and start socking away a little bit at a time? Or can you sell some unused items and store the cash for a rainy day? Put this money where it is inconvenient to access it and forget about it. It is not for spending. We all know we will have a true emergency at some point. Let’s plan ahead and be prepared.
- Create a budget every month. Write down not only your recurring expenses but any one-time expenses you can expect for the month as well. This would include Birthdays, gifts, car maintenance, phone replacement, etc. If an expense is
coming in the future but it is not quite here yet, start saving a little bit on a monthly basis to work towards that goal. By the time you need it, you will not have to go into debt to pay for the expense.
3. Find people who support you
Look for people who handle money well- and that doesn’t mean they need to make a ton of money. Good money management, regardless of your salary, can lead to building a great financial future for you and your family. Ask for advice and learn from those who have been where you are and come out on top. You can look for support in social groups, online communities, churches- anywhere that you feel comfortable and encouraged.
4. Remember, rebuilding is a slow process.
The worst is behind you. Paying bills on time and staying away from racking up additional debt will allow you the space to save money and rebuild your credit. As time goes on, the effect of the bankruptcy will lessen on your credit score. Until then, focus on careful money management, having and sticking to a plan, and finding support in different places. Rebuilding from bankruptcy may very well turn out to help you build the future you want and deserve.