Living After Bankruptcy: Easy Steps to Painless Recovery

Bankruptcy, while being an easy escape from substantial financial obligations and high debt amounts, is a damaging endeavor. Besides going through stress during bankruptcy filing, people experience negative consequences of their financial insolvency for many years. Bankruptcy stays on the credit report of an individual for a long time, and, besides being the reason for credit denial, may cause employment, insurance, and housing rejection as well. Besides all above, bankruptcies are not cheap either. Filing and attorney fees are usually the smallest of all expenses, as higher interest rates on loans and inflated insurance premiums, to name a few, may cost thousands extra over the term of several years. That is not counting personal damages, such as possible psychological traumas, family relationship complications, social rejection, and so forth. While bankruptcy may sound very depressing, the recovery is not difficult and is a matter of making the right steps in the right direction and keeping yourself motivated. Three easy steps may help you to minimize the negative impact of bankruptcy and start a new, worry-free life.Step One: The BudgetDeveloping the strategy is always the first thing to do, no matter what you may be trying to achieve. Very often, a bankruptcy is a result of poor planning combined with force majeure circumstances, so a solid financial plan is necessary on your trip to recovery. All you need to do is to make sure you do not live beyond your means and always save for a rainy day. Analyze your income and expenses, prepare a budget, and make sure you bring home more than you spend. Get a savings account that is hard to reach (open it in a different bank and cut your ATM card) and put a little money from every paycheck away – this would be your emergency fund. Avoid impulsive shopping – always make a list of all the things you need, make sure you can afford it, and do not buy anything else.Step Two: The Credit RepairBankruptcies stay on your credit for long, but it does not mean you cannot do anything about it. While you may not remove your bankruptcy record from your credit report for seven or ten years, you can definitely start rebuilding your credit to minimize the impact of the negative items on your credit report. First, you need to clean up your credit report. Order a copy of your credit report from all credit agencies and dispute any inaccuracy you may find – this would often boost your score without doing anything else. Second, avoid applying for new credit unless you really need it, as most lenders would reject you, while credit inquiries would further damage your credit standing. Last, establish a positive payment track. The best way to do so is to open a secured credit card account and make regular payments on it. Once your payments are reported to credit reporting agencies for few months, your credit score would start improving.Final Step: Do Not Repeat Your Past MistakesWhile this may sound obvious, some people fail to learn even the hard way. Once they see that their credit is improving, and more lenders are willing to deal with them again, they would get themselves deep in debt again. This self-destructive approach would most likely end in another financial insolvency. Living beyond your means is never good, as it limits your ability to save money and puts more stress on your finances.