Declaring bankruptcy is a serious life decision. For many, bankruptcy might seem like the end of a person’s financial life. However, this is not true. Bankruptcy might be a very serious consequence to financial actions, but it does not spell the end of a person’s financial future. There are still many ways to improve your financial standing after a bankruptcy and rebound from its effects. Yes, there is life after bankruptcy.
What happens after declaring?
When you formally declare bankruptcy, you are stating that you are unable to repay your debts and that you need to enter into a formal agreement with your creditors for you to make a monthly repayment that you can reasonably afford, and then for the rest of your debt to be written off. The period of bankruptcy will also mean restrictions on your financial freedom. When you declare bankruptcy, you must follow your bankruptcy plan or face further restrictions. Whilst you may be discharged from your bankruptcy after a year, your repayments can last for three years.
What must be accepted?
Your life may appear very structured after declaring bankruptcy. Your assets are used to pay off your creditors and you must continue with the agreed contribution from your income which usually lasts for three years, so consumption and investments may seem impossible to fulfil. Living within the budget established is necessary: food, utilities, and shelter must be a bare minimum. Gaining new credit during your bankruptcy is restricted and for example you are unable to operate as a Company Director. The bankruptcy itself is a mark on your financial record for six years. Accepting this, not wallowing in pity, is extremely important if you want to take your life back.
When to Start Rebuilding
The first step is following through with the bankruptcy rules and ensuring all the terms are abided by and there are no problems. Your bankruptcy discharge will normally be made after twelve months and this is the point when you are legally freed from the bankruptcy order. You must realise however that you will probably still have a commitment to make monthly repayments to your creditors for a further two years and you must ensure this is done so you have no further problems. After your bankruptcy discharge your credit file will still show that you have been made bankrupt for a further five years. You will almost certainly be unable to get a mortgage immediately after discharge but there are some options available to you on the credit front. Pre-pay credit cards can be used relatively quickly and over the course of a number of months you will find that there are impaired credit lenders who will consider credit on an individual basis.
How to Rebuild
Maintaining the behaviour and discipline you had during your bankruptcy is actually the key to fiscal success. Living within your means and within a budget, paying bills by their deadlines, and ensuring you pay off credit or debt on time will bode well with lenders after your discharge. It’s all about living within your means. Make cautious and safe investments and control your spending habits.
There is Hope
Never give up hope. Bankruptcy is a very hard decision to make and can be extremely stressful and emotionally draining. But, if you work hard, you can come out of your bankruptcy financially strong and prudent, and importantly, able to make a fresh start free of debt.