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Overcoming Bankruptcy: Steps to Take to Bounce Back

Posted by in Bankruptcy
7
Sep 2020

Financial problems can be a burden which can manifest in several ways, and negatively impact an individual. Financial stresses can lead to many physical and psychological health problems, including depression and anxiety.

 Overcoming bankruptcy: Steps to take to bounce back

Fortunately, for individuals who have become overwhelmed by debts and have no means to relieve themselves, there is an option they can turn to. This option is filing for bankruptcy, which can help give individuals a chance to start fresh and rebuild their lives without the burden of unpaid debts.

Bankruptcy is filed through a Licensed Insolvency Trustee who will be able to meet with you to review and discuss your debts, assets, budget, and review the costs associated with filing for bankruptcy to determine if it’s the right option for you.

By filing for bankruptcy, you will be able to rid yourself of unsecured debts, stop collection calls, and be given a chance to start fresh. However, as pleasing as this may sound, the aftermath of filing for bankruptcy must be dealt with. With the right help, you can successfully overcome bankruptcy and bounce back onto your feet.

The first thing to remember is that bankruptcy isn’t as scary as you may think and can be a lot less intimidating than receiving calls from collection agencies. Overall, bankruptcy can be a way to help you learn how to manage your money and start with a clean slate, which is why we’re here to offer some tips to help you rebuild your life after bankruptcy and get you back on track towards a healthy financial future.

What happens after I complete my bankruptcy requirements?

Once you’ve filed for bankruptcy, you’ll work with your Trustee to complete all of the duties in bankruptcy. Once all duties have been appropriately completed, you will be given a discharge, which is an official certificate of how all of the duties of bankruptcy were completed.

Unfortunately, a record of your bankruptcy will remain on your credit report for many years following your discharge, and your credit score will decrease significantly following your filing.

Other than the record of bankruptcy on your credit report, your credit status will be clear, similar to an individual who is just starting. You will have to rebuild your credit and the trust of potential creditors.

If it’s your first time filing for bankruptcy, your filing and your debts will remain on your credit report for 6-7 years from your date of discharge. However, this doesn’t mean that you have to wait 7 years before you start to rebuild your credit history. If you are eager to start fixing your credit, you could start right away.

How to rebuild your life following a bankruptcy?

Although bankruptcy is usually considered a last resort, it doesn’t mean the end of your financial future, but rather the start of a new and fresh one. There are several ways that you can use to take control, rebuild your life, and thrive post-bankruptcy. Some of these ways include:

  1. Organizing your finances

    With or without realizing it, you can begin to hemorrhage money, lose track of where it goes, and starting a savings account seems impossible. It’s important to make it a priority to organize yourself and your finances, before and after bankruptcy.

    Downsize to a smaller place and only spend on necessities until you are back on your feet financially. Be sure not to allow any debts or loans to build up and stick to using cash whenever possible so that you aren’t tempted to overspend.

  2. Create a budget

    Budgeting is one of the best ways to manage your money and ensure that you don’t spend more than you have. Use a spreadsheet to list all of your monthly expenses, including mortgage or rent payments, bills, insurance, etc. Ensure that you can pay for all of these expenses, put aside money for emergencies and save whatever you possibly can for the future.

  3. Securing a job

    If you were running your own business before the bankruptcy, it is certainly a big loss, but one which can be restarted once you’ve reestablished yourself. Start by securing a job to have a steady source of income while you get back on your feet. If you already have a job, don’t take risks or make any big moves right away until you’ve settled yourself financially.

  4. Think positive but remain realistic

    Tell yourself that you will get back on to your feet and regain the financial comfort you may have once had. The road to recovery and rebuilding can be long, so remain realistic and ensure that even if your steps are small, make sure they are in the right direction. Set goals for your future, such as purchasing a home, and remain determined to work hard to achieve all your financial goals, even if they seem far off.

  5. Don’t be afraid to ask for help

    We all need a helping hand now and then, and there is no shame in seeking help as you rebuild your life following a bankruptcy. Don’t be afraid to reach out to your family, friends, or professionals to help you create a plan and manage your money wisely. You may get a lot more support and compassion than you expect.

How do I rebuild my credit following a bankruptcy?

If you’re eager and motivated to begin rebuilding your credit right after your discharge, it’s important to start by taking a look at your starting point and following a step by step process:

  1. Examine your credit report

    Take a look at the current status of your credit reports from the credit bureaus following your discharge to determine if the credit report is accurate. It’s important to ensure there are no inaccuracies in your credit report, which could lengthen your rebuilding process. If you find any errors, be sure to fill out a form to indicate any inaccuracies so that your report can be updated.

  2. Apply for a secured credit card

    Once you’ve confirmed that your credit report is accurate, you can apply for a secured credit card, which can offer you revolving credit. Revolving credit means that you can access any available credit as many times as you need as long as the payments are maintained.

    To get a secured credit card, you will have to pay a deposit in case you default on the account; however, the security deposit is usually very affordable. Be sure to act responsibly and continue to pay the credit card off in full every month, slowly increase your credit score, and show your lenders that you are responsible with your money. Use calendars, alerts, or pre-authorized payments to ensure that all of your due payments are made on time.

  3. Consider a loan for an RRSP

    Once you’ve used your secured credit for a while, and if it is affordable within your budget, you can try establishing your credit by considering a loan for an RRSP. This type of loan is relatively small, with payments made over a one year term, and the RRSP account is available to you after the loan payments are completed. This small loan is a good way to establish your credit because it increases your net worth and offers an income tax deduction.

Filing for bankruptcy is no small decision and should be made after seeing advice from a Licensed Insolvency Trustee, in the absence of any other ways to relieve yourself of your debts.

If you choose to go down the route of bankruptcy, it can be a great opportunity for you to start fresh and begin to rebuild your credit and financial future without the pressure of past creditors. Filing for bankruptcy can allow you to rid yourself of your poor credit and begin building it up as you move forward.

For many individuals, bankruptcy may seem like the end; however, it should be considered a fresh start. It’s okay to make mistakes, but how you choose to remedy those mistakes and prevent them from occurring again in the future is what determines your future.

If you feel overwhelmed by debt and other financial troubles, don’t be afraid to seek professional help. At Kevin Thatcher and Associates, we are here to help you navigate through your financial concerns and create a plan that is best suited to your needs and unique situation.

To learn more about how to bounce back from debt through a bankruptcy and consumer proposal, call Kevin Thatcher and Associates at 1-866-719-8547 or contact us here.

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