If you read Part I of "Getting back on your feet...recovering from bankruptcy Part I", we included information about being aware of scams and the importance of writing down your goals. In Part II, we will cover specific steps for reestablishing your credit and recommended books that you can read to assist you in the recovery process.
I have a close family member who recently went through bankruptcy and is now in on her way to a much better financial future. She describes this experience as "sad" but with she says it with a sense of "optimism" ~ a new start. Like my sister, you may be asking yourself this question: Will I ever have credit again?
This is by far the most frequently asked question David B. Shaev, an Attorney at Law gets from those who are looking to reestablish their credit. He points towards the "behavioral change" that is required and says, "I must gently remind the client that in most instances, their credit is poor before they came to my office and that their credit will not renew itself without substantial change in the client's finances. The real problem to focus on is: WHAT ARE WE GOING TO DO ABOUT YOUR FINANCIAL CONDITION? If you were led into bankruptcy in part by mounting credit card bills, you have to determine how you became so indebted in the first place. Forcing yourself to stop eating out, refrain from buying appliances or cars that promise no payments for a year, and other financing plans is a first step in the right direction."
Re-establishing your credit after a bankruptcy will take patience, discipline and awareness. Your steps will be gradual but successful. Rebuild your credit by:
1. Controlling and Tracking your spending: Most bankruptcy attorneys recommend taking two credit cardsand paying them off in full each month. Spend your money on things you NEED not things you WANT. One idea is to track your spending. You can use one of several different ways to track everything (and they don't have to be fancy, overwhelming methods) such as a small 3x5 notebook where you can write each time you spend. Get a receipt each time you spend & log the total on a tracking sheet. Or, you can use a special budget register (you'll find several templates online if you do a little research). If you're not afraid of the computer, use a software program to track your expenses. Microsoft Money is a popular one (you can find it at your local Office Depot store). Again do some on-line research and you'll find hundreds of these software programs.
2. Create a BUDGET: Don't be afraid of this word. Think of creating a budget as a financial strategy for your dreams. Doesn't that sound more appealing-and more manageable? You can create a budget in less than an hour. Jeremy Vohwinkle wrote an excellent article on "How To" create a budget. He highly recommends you review your budget monthly, by doing so you will have greater chances of staying on track with your expenses.
3. Be a conscious spender: By becoming a conscious spender, you will automatically save money. It's okay to be frugal, actually...it's smart. Be aware of how you spend your money and how well that spending aligns with your financial goals. Minimize the money you spend on the things you enjoy less, in order to free up money for the things you enjoy more. That's all conscious spending is: moving money from things that drain your resources, and putting it in a pleasure zone. Why spend so much of your life working if you don't use your earnings in a way that makes you most happy? Spend your money in a way that supports your financial goals.
4. SAVE, SAVE AND SAVE some more: I was about to write a list of several ideas on "how to" save money but I read an article over the weekend that I felt was pretty powerful in terms of basic saving ideas you can kick into gear ASAP. The article is titled "7 radical ways to save money" by Jennifer Mulrean (a copy editor and writer on MSN Money). It's a pretty long article but if you're in a hurry, scroll down to about the middle of the page and you'll find a list of ideas from taming your driving addiction to becoming a homebody.Now you may not necessarily agree with her list but you'll get the idea. Create your own "radical" ways to save money. One of mine would definitely be brewing my own coffee instead of giving it to a rich guy who lives in Seattle and his rich company famously known as Starbucks!!
As a final and more serious note, don't get discouraged. You can start reestablishing your credit immediately after your bankruptcy case is closed. However, a bankruptcy can remain on your credit report for up to 10 years. Don't forget your debt has been eliminated so you can begin working on your credit score right away. You should be able to finance a home within two years after bankruptcy as long as you can make a minimum down payment and demonstrate the ability to make the monthly mortgage payments. Similarly, you will likely be able to finance a car immediately after your discharge. And, surprisingly, you probably will be receiving solicitations within days of receiving a discharge. Be careful not to get into the same trap again. Your financial well-being depends on it.
3 BOOKS WE RECOMMEND
1. Bounce Back From Bankruptcy, by Paula Langguth Ryan. A 262-page Step By Step Guide to Getting Back on Your Financial Feet, paperback version - $19.95. Why? She experienced it and she gives it to you straight!
2. Surviving Personal Bankruptcy: Your Guide to the Personal, Legal, and Financial Issues
By Nora Raum. Why? From experienced bankruptcy attorney and trusted NPR newscaster Nora Raum: a compassionate, step-by-step guide for recovering from financial crisis.
3. My sister read Charles Price's "Life After Bankruptcy: The Complete, Do-It-Yourself Guide to Surviving and Prospering After Personal Bankruptcy" and found it valuable.
If you are interested in meeting with a financial planner and would like a recommendation, please email us at mjeantet@repgmac.com.
Copyrighted Material, produced by Chris & Maria Jeantet~ Real Estate Professionals GMAC.
Comments(3)