Recovering from bankruptcy can be tough, but it is possible if you know what to do — and what not to do — along the way. Here are five simple dos and don’ts that can make getting back on your feet a little easier:
- Do: Make Sure Your Bankruptcy Is Handled Correctly
The first step to recovering from bankruptcy starts before you ever file. Make sure you set yourself up for recovery by working with a local bankruptcy attorney and ensuring you know the difference between Chapter 7 and 13 bankruptcies. A Chapter 7, or “straight,” bankruptcy, liquidates your bills completely instead of putting you on a repayment plan, while in Chapter 13 bankruptcy a repayment plan must be filed with the court. However, Chapter 13 bankruptcy may also allow you to salvage some valuable personal assets, such as your house or car. It can be difficult to figure out which is truly the best option or how to file for bankruptcy properly without professional bankruptcy help.
- Don’t: Fall for Predatory Line of Credit Offers
When you file for Chapter 7 bankruptcy, you’re ineligible to petition again for eight years. Some predatory lenders will use this to their advantage, offering you lines of credit that you can’t truly afford just after the bankruptcy — since they know they’ll have you on the hook for at least those eight years.
- Do: Reach Out for Support From Friends and Family
Bankruptcy help has to include personal support, too. Going through bankruptcy can be emotional, placing particular stress on marriages and other close personal relationships. Resist the urge to push people away, and try to grow closer through this time instead. Bankruptcy isn’t the end of the world, it’s a new start.
- Don’t: Think You’ve Gotten Out of Jail Free
It may feel good to be out from under a crushing burden of debt, and you should enjoy that feeling. But don’t underestimate the downsides of filing for bankruptcy — rebuilding your credit, in particular. It may take around a decade to fully recover financially, and you need to be serious about a plan to do so.
- Do: Get to the Root of the Problem and Fix It
If your bankruptcy was precipitated by an unexpected event, such as the onset of a medical condition, then it’s unlikely you’ll run into the same problems again (just make sure your insurance is in order, and try to save money in an emergency fund). But if poor financial management was a major part of your initial financial crisis, take the time to educate yourself and get any help you might need. Depending on your individual situation, that might mean taking financial planning classes or seeking help for shopping addictions and the like. At the very least, you should create a strict budget and live by it for several years before allowing yourself a little more freedom again.
Do you have any bankruptcy help to offer? Share your thoughts in the comments.