Bankruptcy is a nasty word to most people. And, there is a reason for that. It can cause embarrassment when denied credit. It can be the cause of being turned down for employment. It can result in you being turned down for housing opportunities. Perhaps one of the most profound impacts of bankruptcy is on relationships as it results in the end of relationships for many people. However, bankruptcy does not have to be the bleak thing it is made to be. There are ways to get out this and turn the negative into a positive.
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First, lets break down the two most common forms of bankruptcy; Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy requires the liquidation of many of your assets that are sold to satisfy your debts. Chapter 13 organizes the debt in a way to allow you to make supervised payments through the courts for a period of 3 to 5 years. While under the protection of Chapter 13 bankruptcy, creditors are not allowed to attempt any sort of collection activity. Chapter 13 is a common form of bankruptcy because it allows a person to keep many of their assets.
Now that you know the common forms of bankruptcy, lets begin talking about the steps you can take to recover from bankruptcy.
First thing you will need to do is to come up with a budget or financial plan. Many people get into trouble because they do not even know where the trouble lies. This is done by simply keeping track of income and expenditures. You can do this in a paper log, spreadsheet, financial planning software or any other tool that fits your needs.
Next you will want to make every effort to repair your damaged credit. It is true that the bankruptcy mark will remain on your credit report for up to 10 years. However, there are other things on your credit report that you may be able to work to get cleaned up. Many people get so overwhelmed with their financial tribulations and the bankruptcy process that they do not know everything that is causing negative scores on their credit. Furthermore, you can look for errors on your credit report and take the time to get those removed; because it can take a great deal of time and patience. This alone can help boost your credit score.
Lastly, you will want to consider your financial priorities as you emerge from bankruptcy. A big culprit to falling into financial hardships is spending money on and investing in things that do not align with ones priorities. The budget created in step one will help develop these priorities and make sure you live within your means. Bankruptcy can be stressful and expensive. However, following a steady plan coupled with some patience can turn the negative impact of bankruptcy into a positive thing in the long run.
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