4. Financial Life After Bankruptcy
So you’ve paid all your bankruptcy costs, and you’ve eliminated all debt allowed. What now? The bankruptcy will remain on your record for years to come, ordinarily ten years. Your credit score is sure to dive, making it difficult to obtain any loan. You may qualify for some types of loans, but the terms and interest rates will not be as favorable as they used to be. Those of you who lease your homes may find difficulties as well. Many landlords require background and credit checks at the time of the application. The bankruptcy will show up on there, forcing you to enlist the help of a family member or friend to help co-sign a lease.
Those of you who negotiated a repayment plan will have to stick to it. There is no bankruptcy after bankruptcy. This plan requires maintaining a steady income, timely paying your bills, and keeping a reasonable amount of cash in your bank accounts. The strategy will help build your credit score and help you when you are ready to take out a loan. Finally, yes, your spouse (if you have one) will be part of the bankruptcy in all matters.
A few questions to ask yourself before filing for bankruptcy:
- Do I own or lease my home?
- How long do I want to live there?
- Will my current car last another 10 years?
- What is the cost of the bankruptcy verus the cost reduction I can get on my own?
We also recommend you read a bankruptcy blog to get real stories from people who have lived through it. Try to find someone in your state, as each one has specific and varying laws.
Other Bankrupcty Alternatives
Just because you have tons of debt doesn’t mean bankruptcy is the only option. There are others you should also consider such as:
- Debt consolidation.
- Transfer of credit card balances.
- Contacting credit card companies directly to negotiate a new debt.
- Contacting medical providers and others directly to negotiate a new debt.
- Home equity loan or HELOC.
- Tapping into savings or retirement.
We recommend using this debt calculator from Bankrate to help determine if which, if any, of these options are right for you.
Speak With a Professional Before Taking Action
Remember to utilize a consultant or coach before taking any permanent course of action. Expert advice may appear daunting, especially when cash reserves are low. Experience shows the cost of expert advice will pay for itself in the long run, especially in terms of creating best practices and processes that will negate the situations that caused the bankruptcy in the first place. Understanding the reasons for bankruptcy is vital to reversing a negative trend. The right consultant or coach can bring SWOT, PEST, DiSC, John Maxwell, and other analysis tools to remedy many situations.
The causes and effects of bankruptcy are diverse, and every business hardship is unique. Do you have any questions about the benefits and downfalls of bankruptcy, along with life after bankruptcy? Feel free to share your comment below, and we’ll do our best to answer.
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