Declaring yourself bankrupt is the hardest financial decision you’re ever likely to make – and not an option that anyone really wants to choose. But it doesn’t herald the end of the world, as there is a way to bounce back after being bankrupt.
Here is my guide on how to do just that.
The effects of bankruptcy
Before you can look at how you will recover from bankruptcy, it is worth knowing the full consequences of being in this situation. When the court declares that you are no longer in control of your finances, they take away your assets to pay off your creditors.
The fact that you have been made bankrupt will stay on your credit file for six years, during which time you will find it very difficult to get credit for loans or a mortgage. It’s not impossible though. With the right help from companies such as Create Finance and others, it could be possible, depending on your case.
Keep in mind, however, that bankruptcy may also mean that you lose your job if you work in certain sectors like the police. Therefore, this will have a huge impact on your finances, especially as you won’t immediately earn money to help you get back on your feet again. Most of us need our wages to pay for our living costs, so this is a very serious consequence if it applies to you.
Find a solution to your finances
If you have no other solution and need to declare yourself bankrupt, you should start looking towards the future. What’s done is done, and there’s nothing you can do to change it now.
That’s why I think the best way to move on is to work out how to manage your finances. You obviously came into difficulty in the past (in a serious way), so you need to learn how to control your finances now, otherwise you have every chance of making the same mistakes again.
Once you have addressed your faults, seen where your weakness with money lie (perhaps you take too many risks with your cash?) and found a way to change your bad habits, you can finally look forward to a future debt-free.
Re-establish your credit rating
Okay, so it’s going to be really hard to get any credit for the first six years after your bankruptcy, if ever! But don’t let this defeat you. Try as hard as you can to try to re-establish your credit rating by taking out credit cards. You may be thinking, “That’s the last thing I want to do!”. However, if you are able to get approved for a credit card, and you pay it off fully every month, you will help yourself build a positive credit score for the future.
The first hurdle is, of course, getting the credit card in the first place. I’m not going to lie to you – this isn’t going to be easy. Obviously, financial services providers want to make sure you can pay them back every penny you borrow and a troubled financial past doesn’t really demonstrate this. But, if you try to get one (and even perhaps wait six years until your name is cleared), you may strike it lucky and then you can be on your way to improve your score; just make sure you don’t get behind on the payments again.
Get financial help
Not everyone finds it easy to ask for help, and I’m assuming, seeing as you suffered such serious financial difficulties, you are one of these people. However, I can’t express how important it is that you do so now. From the moment you are declared bankrupt, seek financial assistance to help you get back on your feet. This could be even more necessary if you have a business to run. Most businesses tend to do a bankrupty search of the firm or business before making a business deal with them. If they find the said firm in poor financial standing, they may refrain from finalizing any deal. So, it might be essential to take help and improve your financial status as soon as possible.
But of course, it would be much wiser to look out for other options first before finally declaring bankruptcy. Check out experienced and dedicated IVA providers from Varden Nuttall and learn ways to help keep your finances in check.
Advisors will guide you through the process and help you rebuild your assets – they will also be there to assist you years on if you need support in making important money-related decisions, such as when applying for a mortgage or loan, or if you’re uncertain whether you will return to your old spending habits.
Have you got any tips that can help those who have been bankrupt get back on their feet?