If you've recently filed for chapter 13 bankruptcy, you know that not all of your debts have gone away. Instead, you've put yourself into a strict debt repayment schedule that will help you settle your debts and get back on your feet once they are gone. However, bankruptcy is an extreme measure, and it leaves you with poor credit and a fresh financial start. How can you start rebuilding your wealth to get back on a healthy financial track?
Everybody and their dog has told you the importance of a budget, but the reality is that only a third of Americans are budgeting, and these people typically have higher incomes and greater financial security to begin with. You might have a lot of excuses for why budgeting is not for you, but it is the first step to getting back on a path of fiscal responsibility. Even if you feel like you have no money to spend or that your bankruptcy terms set your budget for you, getting in the habit of tracking your expenses will also help you prove to financial institutions (like your bank) that you're getting back on track.
2. Stay on top of your existing loans.
Bankruptcy leaves some loans in place. Your student loans and mortgage aren't going anywhere, and if you make it a point to pay these on time (or even early), after your bankruptcy, you'll restore your credit standing more quickly. You might not be able to get a credit card right away or borrow any money for significant purchases without staying on top of these basic repayment schedules, so make them a priority on your budget.
3. Use credit responsibly.
One you are approved for a new credit card, you have to use it responsibly to build credit for the future. Some general guidelines to follow include
- only using your credit card for things you could pay for with your bank account. For example, if you have a 2,000-dollar limit on your card but only 250 dollars in the bank, don't be tempted to use your card to purchase a plane ticket to Europe or even to pay off a high medical bill. Instead, use it for small basic expenses like a tank of gas or groceries and pay the balance from your checking account as soon as possible. This way, you won't get into a debt cycle that will only hurt you later.
- building card payments into your budget. If you are a frequent credit card user, give yourself a monthly credit limit in your budget by figuring out how much you can actually afford to pay toward credit card purchases each month. If, for example, you only have $150 to put toward credit card debt each month, $150 should be what you spend on your card.
- using auto-pay features to make sure you're never late. If you're really bad at tracking your bills, set up an automatic transfer to your credit card. This way, even if you forget to pay your bill in full, you will always make the minimum payment on time. This is really important to restore your credibility with lenders after a bankruptcy.
4. Use your bankruptcy payment to save.
After you have finished your court-ordered repayment schedule, you will have gotten used to living on less. Instead of going back to living large with the money you get to keep instead of put toward debt, put at least half in savings to prevent your need for using excessive credit in the face of emergencies. Having a large savings-to-debt ratio also improves your credit score.
If you need the services of a bankruptcy attorney, find one through a website like http://www.wflaw.net.