Tips to Get Off to a Good Start and Remain Debt Free

If you have filed for bankruptcy or are considering filing for bankruptcy, you are probably already on information overload. There is no shortage of information out there on what to do before and after you file for bankruptcy. 

This article does not offer technical or legal information on what you should do after filing bankruptcy, but rather is designed to urge the reader to make smart decisions after filing and to adopt a debt free philosophy going forward.

After filing for bankruptcy you are probably going to be faced with many decisions that could have a long term impact on your financial future.

After filing but before discharge

  • Credit card use - Probaby all of your credit card accoounts will have already been closed at this point, but if not, don't use them.  Using credit cards at this stage could be considered bankruptcy fraud.
  • Vehicles - A vehicle loan after bankruptcy will be challenging enough, but before after you file and before discharge will be next to impossible at even close to a reasonable interest rate.  Stick with what you have at least until after discharge.
  • Finding a place to live - If you have surrendered your house as part of your bankruptcy, you are going to need to find a place to live. Needing to rent after bankruptcy may be causing some nervousness. Three things to keep in mind. First of all, bankruptcy filings are at an all time high and there are thousands and thousands of people in the same situation as you. There are homes/and aprtments available to rent where you want to live and you will be able to find something. Secondly, get an edge on your competition and save up some extra money so you can offer more of a security deposit if needed.  Lastly, don't pay too much for a rental. If the goal is too purchase a home down the road, get into a rental that you can easily afford so you can start saving money for your down payment on your next house.

After Discharge
You are now debt free.  Think about that for a minute and how good it feels.  If you accumulated some credit card debt in college or had student loans, this may be the first time in your adult life that you can say that you are debt free. 

  • Credit cards -  There is nothing wrong with signing up for a couple of credit cards after your bankruptcy discharge in order to improve your FICO score.  But don't use them for debt.  I suggest purhasing a tank of gas a month on your cards and pay most or all of the balance each month.  You don't have to go back into to debt to build your credit score.
  • House - Don't be in a hurry to buy a house.  Save up for a decent down payment and when it is time to purchase, buy something you can afford.  Don't saddle yourself with a payment you can only afford if you take on extra jobs or have to count on raises or bonuses. Buy something you can afford now and you will be able to start building wealth instead of being house poor.
  • Sinking fund - Save up to pay for big ticket items buy using a sinking fund.  Make the payments to yourself until you have enough to pay cash instead of buying on credit and then making payments to the bank.  You'll save money on interest and when you have enough money saved for an individual purchase, you may decide you want to keep the money instead of parting with it.
  • Budget - Prepare a written budget each month and stick to it.  Anticipate irregular expenses and have money saved for these when they occur.
  •  Emergency Fund - Have an emergency fund of at least 4-6 months of living exenses, in cash, in a simple money market account.  This will easily cover most emergencies including a layoff.

After filing for bankruptcy it is now the time to start making good financial decisions in order to avoid going back into debt.  If you make consistent, well thought out financial decisions going forward you will be able to make the most of the "fresh start" that bankruptcy offers.