Slim Down Your Lifestyle Post-Bankruptcy
You’ve declared bankruptcy. It’s final. You’ve received your discharge. You have a fresh financial start…and some new challenges to deal with. Firstly, your credit rating has taken a hit. Considering the nature of bankruptcy, it probably wasn’t great to begin with, but bankruptcy will still affect your score. Your bankruptcy will be listed on your credit report for 10 years and due to this, lenders will see you as a bad risk. You’ve legally written off at least a substantial portion of your previous debts; it’s only logical lenders seeing that will be more cautious in offering you a loan or credit for purchases. For some time post-bankruptcy, you might be unable to access credit that was readily available to you earlier in your life. Once you are able to access credit again, the interest rates, fees and credit limits will not be what you were previously used to.
Filing for bankruptcy should be considered a safety valve. It’s an accepted legal practice and no longer results in major social recrimination. In most cases, it doesn’t result in any negative social stigma at all. The only repercussion on your social life will be your own efforts to create a fiscally sensible lifestyle to suit your situation post-bankruptcy.
Slimming down your lifestyle is a vital piece of the puzzle for many post-bankruptcy.
If you filed for Chapter 13, you’re paying off some of your debts as agreed upon in the reorganization. You’ll have agreed upon a set amount to live on for the next 3 to 5 years and the remainder of your income is divided up amongst your creditors by the court appointed trustee monthly.
In this situation, the frills have been cut out of your life. It’s a forced slimming down of the lifestyle. It could mean altering the very basics of your life: the cost of your living quarters, the amount you spend on groceries, etc. The court has to approve any “new” debt like a car loan or a credit card. But at the end of the agreed upon time period for the reorganization, your obligations to your past debt are gone and your income is yours again to do as you see fit. The only thing that will continue is the record of your bankruptcy filing on your credit report – until the 10 years from the date you filed.
Those who filed for Chapter 7 simply walk away from most of their debt. Your salary is yours to do with as you please (unless you don’t have one), and the bankruptcy is recorded on credit reports for 10 years just as in Chapter 13. For those who file Chapter 7 it is helpful to think of your lifestyle as a cash lifestyle. You have a certain amount of money coming in each month (your income) and you won’t have access to any form of credit that you can depend on “in a bind.” Start living on cash; what you have rather than expecting to depend on credit regularly. It is highly recommended that individuals build up an emergency fund post-bankruptcy.
For more hints and tips on how to survive your bankruptcy filing unscathed, contact the bankruptcy experts at Westgate Law.