Avoiding Another Bankruptcy

Most clients who work with us try to begin rebuilding credit immediately, looking forward to the day that the bankruptcy will be removed from their credit reports. Rebuilding your credit after a bankruptcy takes years, but it’s never too soon to begin behaviors that could keep you from dealing with another bankruptcy when your credit is restored.

Many of our clients who just saw their credit scores on the rise after their first bankruptcy are back in the same situation again. Without a steady stream of savings or credit, the recession has been very hard on many families. Lay-offs, medical emergencies, and mounting bills can put many families back into the same situations they were in just a few years ago.

If you want to avoid a second bankruptcy after restoring your credit, look for and avoid warning signs that another bankruptcy could be on your horizon.
Excessive credit card debt

If your first impulse after bankruptcy recovery is to obtain as many credit accounts as possible, you could be in for another bankruptcy before you know it. It’s a good feeling to be able to get credit cards with larger limits again, but be wary. In a poor economy, banks are much more willing to take a chance on consumers with bad credit history who may not be able to pay their credit card debts. Just because a high limit is offered doesn’t mean it’s a good idea.
Dealing with high interest loans

If you’re living from paycheck to paycheck, it’s always good advice to be careful about how you use credit. Taking out personal credit to meet your minimum monthly bills is going to backfire after some time. Many families engage in behaviors such as taking out high interest loans or using cash advances when they’re in trouble. This could lead to a financial crisis situation for you and your family.

Before working with high interest loan sharks, keep in mind that other alternatives may be available to you. It’s better in the long run to borrow from a family member than to ruin your credit dealing with a high interest loan you may not be able to pay on.
Failure to use a budget

Many folks are headed toward a second bankruptcy because they weren’t conscious of their financial situation. Believe it or not, having an improving credit score after a bankruptcy makes many people feel like it’s okay to overspend, or be less conscious of their finances.

Developing a monthly budget and sticking to it is a great idea regardless of your financial standing. Particularly if you’re trying to improve your credit after a bankruptcy, sticking to a budget can give you control of your money by letting you assume control of your financial situation at all times.

If you’re recovering from a bankruptcy, becoming overconfident can have serious consequences for your future financial situation. By watching out for these warning signs, you can avoid future financial problems for you and your family.