One of the worst calamities that can hit an individual in these days of developed economies and living in a commercially oriented world is to be forced to consider filing for bankruptcy. This only makes things worse if the individual is to be blamed for the course of events that led to this unpleasant eventuality. Of course, the laws in our country are designed to be remedial in nature. They provide for mechanisms of discharge from liabilities through bankruptcy proceedings to thereby enable a fresh lease on financial life. That being said, how does one really recover from bankruptcy, become financially viable and recover credit-worthiness? Here are some ideas that may help -
- Determine the causes for your landing in bankruptcy, and be totally practical and non-emotional in this exercise. It is quite alright to pin blame in the right place and to avoid repetition of the same actions that led you to financial downfall.
- Determine a budget for your near-term life. Remember, you can only spend less than you earn, and a specified budget will go a long way. Bring control to your life. Recall all essential expenses over the last six to eight months, and prepare a realistic monthly budget. Brutally hack non-essentials or things that can be knocked off if this exceeds earning potential. Ideally, set aside at least twenty per cent of estimated earnings for savings.
- Credit Cards - Opt for secure credit cards that are issued pre-paid. While this is a totally radical way of shopping, it helps build up a decent credit report. No doubt, bankruptcy proceedings stay on credit reports for ten years, but this does not stop you from building a healthier report sooner.
- Clear debts on time - Make timely payment of all your debts including bills for utilities, services, credit cards and anything else that is due. Do not issue checks if in doubt of clearing them on time. Deal diligently and prudently with your bank. Credit reports get generated there.
- Regain credit confidence - Restrict all financial dealings to one or two mechanisms at the most, be they banks or credit cards. Reduce the number of service providers, such as multiple mobile phones and so on. This helps you keep track of payments due, make timely payments, and build up your credit rating and records.
Any individual who has undergone bankruptcy proceedings would be happy to know that certain banks, credit card companies and financial institutions actually prefer lending to them in a limited fashion since they cannot file for bankruptcy for at least another eight years. Also, of course, studies have indicated more prudent financial spending by the majority of such individuals.
Beware of unfair remedies - A rise in bankruptcy filings has brought about unrealistic offerings by some to repair your credit standing and to offer loans at very high rates of interest. Do not succumb to such schemes, but rely on the steps mentioned above.
Normally, it takes between three to four years of sustained good financial behavior to turn credit reports to positive. Before long you will realize your credit ratings have vastly improved and that you really have commenced your fresh lease on a financial life. In all this, do not go it alone, confide in family, friends or associates. It is quite likely some of them have undergone similar situations.