What should you do after bankruptcy?
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When you begin the process of Wilmington bankruptcy, you’re likely focused on the moment – on what you’re dealing with now, whether it’s living paycheck to paycheck, debt collector harassment, or the threat of foreclosure or repossession. The next concern is what happens during the bankruptcy including court appearances. But what happens after bankruptcy and what should you do next?
Bankruptcy is a launch pad for a better future, and it’s essential that you know what to do after you get your Chapter 7 or Chapter 13 discharge to make the most of your fresh financial start. Here are seven things to do after your bankruptcy.
1 - Understand what happened
They say hindsight is 20/20 so the first thing to do is look back and understand how your finances fell into disarray. It’s rarely a matter of overspending. Usually, the problem is job loss, divorce, a health crisis, or something else similarly disruptive. Many of the events that lead to bankruptcy are unavoidable, but what you can assess is whether you reacted to them as well as you could have and how you can prevent future troubles.
2 - Live simply
When you choose Chapter 13 for your Wilmington bankruptcy, you’ll have to cut back on your spending and live on a strict budget for three to five years during your repayment plan. Even after your plan, sticking to a modest lifestyle can help you avoid future problems. With Chapter 7, you’re out of debt in just a few months and have more room in your budget, but consider spending less, saving more and living within your means.
3 - Work on your credit
When you’re deep in debt and can’t pay your bills on time, your credit score may be dropping every month. The bankruptcy filing itself also drops your score a bit, but once you stop the cycle of debt, you can begin to rebuild your credit and should get started right after you get your Wilmington bankruptcy discharge. Contrary to popular belief, bankruptcy doesn’t ruin your credit for years to come. In fact, it’s a chance to rebuild it.
4 - Pay all bills on time
Once you’re out of debt, your top priority should be to avoid your finances getting out of control again. The foundation to financial stability is living within your means and always paying your bills promptly. Not only does this ensure your debt won’t spiral out of control again but it also benefits your credit score, which is another thing to work on after bankruptcy. Not only should you pay on time, but you should pay in full.
5 - Build up savings
Savings are critical. You need an emergency fund of a few thousand dollars that’s liquid and accessible to help with emergency car repairs, appliance replacement, etc. You also need retirement savings such as a 401(k) or IRA. Having savings is a buffer against future financial troubles. Consider how you could have better handled the financial crisis you just went through if you had more savings on hand to help.
6 - Get a credit card and pay off every month
Rebuilding credit after Wilmington bankruptcy is critical and a credit card is the fastest way to accomplish it. However, you may be gun shy about plastic after bankruptcy but there's no faster way to re-establish a positive credit history. You’ll likely have to begin with a secured card and work your way from there. Using your cards sparingly and paying off in full each month is the best way to go. You can usually begin within four to six months after your discharge.
7 – Set long-term goals
Bankruptcy is not an end - it’s a beginning to a better financial future. It means the end of stress, a stop to a debt collector harassment, and peace of mind that your debt dilemma is over and done. Then it’s time to decide what you want from the future. Perhaps you want to buy a home, retire within the next 10-15 years, or maybe it’s time to start a family. Whatever you want to accomplish, it's time to use your clean slate to get started.
If your drowning in unaffordable debt, bankruptcy might be the best solution for you. To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt. Please read reviews from satisfied clients, then call +1-919-646-2654 to schedule a free Wilmington bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.