Avoid These 4 Common Mistakes After Bankruptcy

Mistakes to avoid after bankruptcy

Image Source: Flickr User Topher McCulloch

Bankruptcy represents a fresh start for consumers trapped in debt. But things can turn bad again if you don’t make the most of your new financial freedom. Think of it like this. Imagine if there was a pain-free, miracle weight loss surgery that would instantly take all of your excess weight away. Amazing, right? But if you don’t change your habits after the medical intervention, you could see the pounds pile back on – so it is, too, with debt. Here’s a look at four common mistakes we see after bankruptcy you should avoid.

#1 Failure to budget

Typically, it’s not a lack of budgeting that gets people into dire financial straits, but it can certainly make things worse. If you’re not adept at managing your finances, now is the time to educate yourself. In addition to the knowledge you can gain from the required bankruptcy debtor education course, you can look online for free resources. There are expert sites to teach you how to set and stick to a budget, what your spending limits should be for categories of expenses, and other practical financial advice.

Sites to check out include:

• NerdWallet.com
• Mint.com
• BudgetTracker.com

#2 Not preparing for an emergency

For most consumers, it was some crisis that led to their bankruptcy filing. Sometimes it’s a job loss, for others a divorce, or an accident or illness that impacts their earning ability or triggers excessive expenses. Post-bankruptcy, setting up an emergency fund is a top priority followed by setting up a savings plan to ensure you’re protected both now and in the future and have a buffer against future financial mishaps.

#3 Rushing back to debt

After filing Chapter 7 bankruptcy, within a few months, you will likely find credit offers hitting your mailbox. Even though your credit score will initially take a dip, creditors know that your financial slate is clear. You’ve got more money to spend after a bankruptcy, so you’ll get credit offers once your discharge is issued. But it’s important that you not rush back into debt and carefully weigh the offers you get. Initial offers will be for higher interest rates and less favorable terms. Pick and choose carefully.

#4 Not cleaning up credit

While bankruptcy will improve your credit score, it’s not something that will happen without effort. You should pull your credit reports from all credit reporting agencies before you file then a couple of months after your bankruptcy discharge. Make sure that all your accounts in the petition reflect that they were discharged in bankruptcy. Look at related collection accounts as well. Where there are errors, contact the agencies to get them corrected. Then begin to rebuild credit once the report is accurate.

Bankruptcy can be a life-changing experience

Many consumers languish in untenable debt for far too long. You don’t have to live paycheck to paycheck, worry about your utilities being shut off, and hiding from debt collection calls. There is a better way. Chapter 13 bankruptcy can give you the time to catch up on past due balances on your mortgage or car loan to stave off foreclosure or repossession. And Chapter 7 bankruptcy can wipe out balances on unsecured debt like medical bills and credit cards.

Before you decide that bankruptcy is too drastic a step or that one chapter is better for you than another, contact a reputable North Carolina bankruptcy attorney to discuss your options. The initial bankruptcy consultation should be free. You can bring in your financial documents and talk to an experienced bankruptcy attorney about your debt circumstances and get their expert advice about your best options for a brighter financial future.

Call +1-833-627-0115 to reach the Law Offices of John T. Orcutt. We have offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington and are ready to help you get the financial peace of mind you deserve. Call today for a free, no-obligation, North Carolina bankruptcy consultation.