Tips to Avoid Second Bankruptcy
Bankruptcy can work to resolve many of your debt problems, but it doesn’t solve everything. If it’s been a few years since your bankruptcy and debt is starting to creep back up, or if you are fresh from your bankruptcy and you are looking for good habits to avoid debt issues down the line, read on for tips on how to avoid a second bankruptcy. If you need debt relief help or advice and assistance concerning bankruptcy, call a knowledgeable Ventura debt relief and bankruptcy attorney today.
Pay Off Credit Cards Every Month
It’s common to start receiving multiple credit card offers right after your discharge. While credit cards are important for building back your credit, there’s a risk. Credit card debt is easy to rack up, especially when you consider your credit card bill to be a long-term debt to be paid over time. Your bankruptcy wiped the slate clean, allowing you to start back at zero. Use the opportunity to change your habits and your viewpoint. View your credit card as an extension of your bank account; you use it to pay for things but fully pay it off each month. That way, you build up good credit and avoid generating debt.
Work With Credit Counselors
In order to obtain a bankruptcy discharge the first time, you were required to take two educational courses about how to manage your finances and whether there were non-bankruptcy options available. If you are starting to get in debt trouble again, remember the lessons you learned in your credit counseling sessions, and consider taking additional sessions. Credit counselors can work with you to prepare a budget based on your income and expenses, and review your options for handling your debt.
Create a Budget and Stick to It
Whether you develop a budget with the help of credit counselors or develop one yourself, proper budgeting is key to avoiding debt woes down the line. Take full stock of your expenses and income. Look at your most expensive costs (often, housing and food), and see if you can find a way to lower them. Set a budget for food, rent, entertainment, and other expenses that is in line with your income and that leaves you some additional money at the end of each month, and stick to your budget.
Keep an Emergency Fund
Part of budgeting is putting some money aside in case of an emergency. You never know when emergency medical bills will suddenly arise, or if you might face cutbacks at work. If the COVID-19 pandemic taught us anything, it’s the importance of having a bit set aside in case hard times strike. If possible, set aside enough to cover your expenses for three months without work; six months to a year would be even better. This emergency fund can be invested in something safe, like a stock index tracking fund, so that it generates some growth for you while still being easy to liquidate in case of emergency.
If you have begun to incur additional debts, you might have options available to you before going down the bankruptcy route. You may be able to consolidate your debt via a loan or through a balance transfer credit card. Depending on your credit (which, in turn, depends on how long it’s been since your bankruptcy), you may qualify for a favorable interest rate on a personal loan that you can use to pay down all your other debt. You will then owe only the single loan with the better interest rate. Likewise, if you qualify for a low or no-interest credit card, and you can pay down the credit card before the promotional rate expires, then transferring to a new credit card could be advantageous.
Talk to Your Creditors
Creditors much prefer you to work out some sort of repayment plan rather than having you file for bankruptcy. When you file for bankruptcy, they are likely to get nothing. If they can work with you to lower your interest rate, extend your payment period, allow a few months of forbearance, or otherwise give you some relief so you can get current, they likely will. Talk to a financial advisor or debt relief attorney for help contacting your creditors and working out a repayment deal.
Work Toward Financial Independence With Help From a Seasoned Southern California Debt Relief Attorney
If you are dealing with mounting debt and considering debt relief options including bankruptcy, please contact Rounds & Sutter for a free, confidential consultation. With offices in Ventura, Santa Barbara and Westlake Village, we represent clients throughout Southern California, offering tried & true legal counsel in the face of life’s challenges.