How to Recover from Bankruptcy?

Once you have filed for bankruptcy and you are on the path of recovery, it is very important that you plan your future course of action carefully. This is important so that you do not meet any new roadblocks in the future. Bankruptcy should always be looked as a means of starting afresh, of making a new beginning. Thus keeping this in mind, it is important that you follow a strict regime that will get your credit score back in track and also allow you to lead a normal financial life.

5 Steps to Recover from Bankruptcy

1. Re-establish Financial Independence and Self-Evaluate Your Finances: The first step to recovery from bankruptcy is by re-establishing your financial independence. If you have lost your job or you had declared your business bankrupt, do not sit at home and brood. Instead re-work on your resume and try to get a job. If you look diligently, it won't be difficult. The point is to become financially independent. At the same time, introspect into what went wrong. Take counselors help if necessary.
2. Protect your Future and Make a Plan: Let bankruptcy never touch you again. For this you will need to protect your future. Introspection should have given you reasons about what went wrong. Make a plan of action that will ensure that such a mistake will not happen again. Prepare a monthly budget and stick to it no matter what. From your monthly income, save for an emergency fund that can be used when a medical emergency comes.
3. Set Your Credit Score Correct: Unless you have discharged all your dues, your credit score cannot be corrected. However, once that is done you can start building your credit score again. Maintain reports of your credit cards. Equifax, TransUnion and Experian, the credit-reporting agencies issue yearly credit report. Request for one by visiting www.annualcreditreport.com.
4. Start Using a Secured Credit Card: A secured credit card is different from a normal credit card. A secured credit card will enable you to purchase things on credit depending on the amount in the account. When you open a secured credit card, you will have to make an initial deposit as collateral. If you regularly pay your credit on time, the limit on the secured card will also increase. This is a good way of limiting your expenditure and taking control of your finances.
5. Apply for Loan Only When Credit Score is Good: Once you have declared bankruptcy, the road to normalcy is quite long. It might take you 2-4 years to become completely stable. Even then, do not apply for a loan unless your credit score is good. Since you already have a bankruptcy record, you do not want to harm your credit score by taking an untimely loan. You can apply for a FHA-approved loan only after two years of declaring bankruptcy. Even if you want to apply for a loan, make sure you have the down payment ready.

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