After your debts have been discharged in bankruptcy, whether it is through Chapter 7 liquidation or Chapter 13 restructuring, you are probably wondering what your next financial move bought to be. After bankruptcy, most of your debts will have been wiped away, giving you an unpresented opportunity to make a fresh start and make some great financial choices going forward. But where should you begin? After all, it is likely that your credit has taken a turn for the worse, and you will likely find it difficult to secure any new loans for a while. But there is plenty of good news coming out of bankruptcy. Your financial picture is clearer than ever, and with a little help and some solid money management strategies, you will be well on your way to financial success in no time.
Money Management Strategies
First things first: you will need to find a way to rebuild your credit score after a bankruptcy. While bankruptcy does not automatically put your credit score in the tank, it can do it no favors, and it remains on your credit history for a number of years. Rebuilding credit is a slow process that takes a lot of patience and some getting used to rejection, but it is absolutely possible. Most people coming out of bankruptcy seek to obtain a secured credit card or the like. This will allow the slow rebuilding of credit through small purchases repaid in full each month, and is a useful tool for teaching good money management as well as building new credit.
Money management is going to be the key to your financial future coming out of bankruptcy. In this case a Chapter 13 gives you a head start, since it teaches money management through the mandatory repayment process; however, some studies have shown that Chapter 7 bankruptcy is actually better for rebuilding credit, since it wipes out debts right away, while Chapter 13 repayment can be more limiting. Either way, money management strategies are going to be the key to getting the most out of the fresh start that bankruptcy has bestowed upon you.
The best money management strategies are deceptively simple, yet powerful, such as setting up an automatic savings plan, for example. If that money is automatically taken away from your account each month, you simply learn to live on the smaller amount, as though you are being paid less; but all the while you are building a savings that can be used as an emergency fund or to help pay other unforeseen expenses down the road.
Living within your means and knowing what you can spend are two of the most basic money management strategies, and also two of the most difficult to put into practice. Maybe it's because following these strategies involves daily willpower and the ability to say no to all unnecessary purchases.