Bankruptcy happens. No matter how you get there—sudden job loss, medical emergency, financial crisis, lack of knowledge about debt management—you’re not alone. In fact, it’s a lot more common than you might think. In 2014, Indiana processed 30,000 personal filings from Hoosiers, and Kentucky’s records hovered right around 17,500. Country-wide that year, just over 910,000 people filed for bankruptcy.
Still feeling daunted by what comes next? We get it. Take a deep breath and read our 3 steps for reclaiming financial independence. We’ve seen firsthand that it’s absolutely possible, and we’re here to help every step of the way.
Step 1: Stay in the Know by Monitoring Your Credit
Consider this the fresh start you’re looking for. There’s no shame in having filed for bankruptcy, but we imagine the goal is not to find yourself filing again anytime in the next decade—or ever.
Before you do anything else, start by utilizing a free (or low-cost) credit monitoring service. A couple of great sites or apps we recommend are Credit Karma or Credit Sesame, which also provide excellent tips for credit management. You can also stay on top of monitoring your credit report at a site like AnnualCreditReport.com. Consistent monitoring ensures your debts are being reported correctly and that you’re keeping an eye out for any fraudulent activity.
Step 2: Build a More Buoyant Budget
Successfully balancing your budget is your super power for staying out of debt in the future. Figure out where you can squeeze, what can get cut altogether, and how much you can pay yourself toward emergency funds and savings—two critical elements for staying as prepared as possible for whatever curve balls the future throws you.
Step 3: Apply for a Secured Credit Card or Consider a Car Loan.
A word of warning: credit card companies see a bankruptcy filer as the fat little pig whose straw house has just been blown to smithereens—you’re vulnerable, and those corporate suits make for some hungry wolves. Look, we know how easy it is to fall back on old habits, especially in the first months or years after bankruptcy once your debt burden has lifted.
Instead—fortify. Build a new line of credit without the risks and hidden fees of too-good-to-be-true credit card offers. Deposit $250-500 in a savings account at your bank (and if you don’t have that in a lump sum, work it into your budget in whatever increment you can afford), and then apply for a secured credit card or secured loan. Ensure the creditor is going to report to the credit bureaus and that there is no annual fee. Make your payments on time each month and pay off the balance in full (or as close to full) as possible, and your credit score should be on the up and up within about 3-5 months.
Bankruptcy filers are often immediately eligible for a car loan.. By building a stronger budget and re-establishing a line of credit, you can absolutely find lenders who will work with you—and not as a favor. Shop around for the best deal and stay aware of sharks who insist their offers are as good as it gets. Be on the lookout for anyone who wants to run your credit without a clear confirmation that they’re willing to finance you, and pay close attention to hidden fees. Also, if you just filed, your interest rate may be high, so make sure the loan has no pre-payment penalties; and try to pay a little extra every month. That way, once your credit is better, you can possibly refinance under a better interest rate.
With confidence and patience, there are plenty of options still out there after bankruptcy—don’t allow yourself to believe you no longer deserve them.