Avoiding a Second Bankruptcy

Thursday, August 15, 2019 - 20:45

Bankruptcy, Money Management

Filing bankruptcy may not be desirable but in many cases, it’s the only option. It is a great way to get your finances back on track, but it comes with a price when it comes to your credit score. Therefore, it’s imperative that you don’t file a second time. Let’s consider some steps you can take to keep you out of another bankruptcy.

  1. Pay Off Credit Cards Each Month
    You may find that after receiving a discharge in bankruptcy, you become a target for credit card offers. This is a double-edged sword. To rebuild credit, it’s necessary to show you will repay your debts. However, the last thing you will want to do is to build up revolving credit card debt. If you do get a credit card, pay it off monthly. High credit card debt is a common route to bankruptcy.
  2. Don’t Buy a House Beyond Your Means
    The root of many bankruptcies is inability to pay the house mortgage. Be careful if you have just been through a bankruptcy not to overextend yourself with a house that is more expensive than you can afford. 

    Finding an affordable place to live, can be pretty difficult, so maybe consider expanding your radius just a bit, as geographic location can play quite a big role in the price point. 
  3. Keep an Adequate Emergency Fund
    Another common reason for bankruptcy is sudden, unexpected expenses such as medical bills or reduced cash flow caused by unemployment. Expect the unexpected and create an emergency fund. It should cover at least three months of your expenses, if not more.
  4. Create a Budget and Stick to It
    Many people have no idea where their money goes. In order to be in control, you must understand what is happening. Try to reduce your highest costs. Typically, these are housing costs and food. There are many budgeting apps and methods, but if you are unable to do it on your own, seek professional financial help.
  5. Rethink Your Income Source
    If you are getting into a bit of a bind financially, consider getting a second job for awhile or exploring other ways to increase your income. 
  6. Be Purposeful
    Perhaps the best advice is to be mindful of your finances. Track what is coming in and going out, and determine what expenses are really necessary. 

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