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Life After Personal Bankruptcy

written by: Robin L.•edited by: Jean Scheid•updated: 12/31/2009

Life after personal bankruptcy doesn't mean an end to credit or buying power. Learn how to recover financially from bankruptcy.

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    There is an unfortunate stigma that is associated with personal bankruptcy that can negatively impact your life after personal bankruptcy. The thing many people who have not been through the process don’t realize is that bankruptcy is not usually due to one decision or action, nor is it always the result of being irresponsible with ones money. In fact it usually takes years of little decisions that weren’t all that great to get to the point of bankruptcy. Other times, such as the recent drastic downturn in the economy, a bankruptcy could come completely out of the blue. If both people in a family lose their jobs and are reduced to making a quarter of their previous salaries, there is no way for them to remain financially afloat. This can happen to people who have shopped and saved responsibly as well as to people who were less conservative with their money. Regardless of the situation that led to the bankruptcy filing, life after personal bankruptcy can be better.

    Get Credit

    This may seem counter-intuitive to someone who has just filed for bankruptcy primarily because of their relationship with debt and credit, but it is the fastest way to rebuild your credit score. At first it may be impossible to obtain an unsecured credit card. Instead look for secured credit cards and use them responsibly. Once you are able to obtain an unsecured credit card be sure to use it each month and pay off the balance at the end of the month. It is imperative that you not roll over a balance more than one or two hundred dollars each month even if you are planning on making the payments. A little debt can lead to a lot of debt which is what usually leads to bankruptcy.

    Deep Clean

    Cleaning up your credit report is another important step to recovering from bankruptcy. It can take years to accomplish so begin as soon as the bankruptcy filings are complete. That way by the time the bankruptcy is off of your record, you will have a clean credit report with which to move forward. Make sure that any listings on the report that are marked as open or overdue weren’t taken care of by the bankruptcy proceedings. Usually filing for bankruptcy will eliminate these open or overdue accounts and having them remain active on your credit report only hurts you.

    Road to Recovery

    Once you have cleaned up your credit report and made progress on establishing good credit it is important to not make the same mistakes again. Devote money to savings so you will always have an emergency fund if something catastrophic should happen so you won’t have to borrow money or forgo paying monthly bills. Further, endeavor to purchase items only if you have the cash for them or the cash to pay for them in the immediate future. Finally, establish a budget and stick to it. This will ensure savings become a priority and you know how much money you have for fun each month.