Recovering From Bankruptcy: Financial and Emotional Restoration

November 24, 2011

Recovering From Bankruptcy: Financial and Emotional Restoration

Filing for Chapter 7 or 13 bankruptcy can be daunting. Trying to recover from the fallout may seem even more overwhelming. But you are not alone. In 2010, 1.53 million people filed for personal bankruptcy in the United States. People file for bankruptcy for a whole host of reasons. The tough economic environment has caused people to lose their jobs. During the recession, home values decreased. In addition, divorce and illness can wreak havoc on peoples' financial livelihood.

The primary reasons for bankruptcy protection are to relieve people of most of their debt so they can get a fresh start and -- to the extent of a debtor's ability -- to pay creditors in an organized fashion. So once you have bankruptcy protection, how do you move forward?

Five Steps to Recovery

There is hope. You can recover from bankruptcy, financially and emotionally. Take action by following these five simple steps.
-Forgive yourself. Many people experience guilt and shame after a bankruptcy. Rely on counselors, friends and family to help you through this difficult time.

-Learn from your mistakes and move on. Reflect on the events and decisions that caused you to file for bankruptcy and put specific plans in place to prevent similar problems down the road.

-Make a budget, stick to it and pay your bills on time. Create a budget for all of your known expenses, including items such as rent or mortgage, groceries, utilities and car and credit card payments. Include a line item for a savings account for emergencies. The budgeting process can be eye-opening when you realize how much money goes out the door each month. Find items you can reduce or even cut. Make sure you pay your remaining bills on time every time.

-Get a credit card to improve your credit score. Secured credit cards allow you to deposit into a bank account a sum of money that serves as your credit limit.

-Know the facts about the effects of bankruptcy on your financial future. Many myths persist about how bankruptcy impacts you in relation to securing a mortgage, getting credit cards, buying cars and improving your credit score.

Life goes on after a bankruptcy. Learn from the past, focus on the future, educate yourself about the true impact of a bankruptcy and put proactive plans in place to restore your credit and prevent financial distress. The road may be tough, but with the right attitude you will recover.

Article provided by William H. O'Toole & Associates
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