Tips for Handling Your Finances When You File Bankruptcy

Sunday, January 24, 2021, 6:00 AM | Leave Comment

While you may not want to file for bankruptcy, it’s sometimes the only way you can get a fresh start.

You will need to make good use of that fresh start by taking better control of your finances following the discharging of your debts.

The ensuing guide will help you build a better financial profile to ensure you won’t wind up back where you started.

Tips for Handling Your Finances When You File Bankruptcy

  • Build a Working Budget

    A budget isn’t something you create and shove into a file where it will never again be seen. Instead, you should follow your budget month to month and review it every six months to ensure it’s still accurate. You should begin your budget by listing all sources of income in one column and all of your bills or debts in a second column. This will help you make sure you’re earning enough money each month to meet your financial obligations.

    You should also have at least 10% of your income left over each month. If you can’t meet that goal as a starting point, you will have to find ways to cut your spending. This can involve eliminating redundant expenses. For example, if you subscribe to streaming services, you can cancel your cable subscription.

  • Get a Secured Credit Card

    After a few months of managing your finances successfully, you should start thinking about taking a more active role in rebuilding your credit. One of the most effective ways of doing this is to obtain a secured credit card. This type of card is linked to a checking account, which must maintain a specified balance.

    Your balance in that account will be equivalent to your credit limit, which is usually between $200 and $500. As you use the card and make on time payments each month, your transactions will be positively recorded on your credit report. Depending on your situation, you can see an improvement in your credit score in as little as six months after you start using your new card.

  • Start a Savings Account

    You will still experience financial emergencies from time to time, but you won’t have the good credit that will give you access to loans and credit cards. You also will want to avoid borrowing as a means of addressing these problems.

    The 10% or more of disposable cash you have left after each month’s bills have been paid should be deposited in a high interest savings account. This will help you build up a modest nest egg over time, which you can use to make household repairs, get your car fixed, or pay for unexpected medical bills. As a rule, you should keep enough money in your savings account to help you cover all of your living expenses for three to six months.

  • Pay All of Your Bills on Time

    If you have had to create a repayment plan with a bankruptcy trustee for some of your debts, you’ll need to make sure those payments are always made on time. Failing to do so may disqualify your bankruptcy, which will leave you without any recourse.

    Additionally, all of your bills, including rent, utilities, and subscriptions, must be paid on time. One late payment will adversely affect your credit score and undo any progress you have made in rebuilding your credit. Even though your bankruptcy won’t fall off your credit report for at least seven years, maintaining a good payment history will work in your favor.

  • Pay Cash

    A good practice is to withdraw the cash you’ll need to meet your budgeted expenses every month and keep that money in a glass jar. This will keep you from overdrawing on your checking account, which will result in bank fees that will throw off your budget.

    As you meet your financial obligations, you’ll see that stack of cash get smaller, which can help you spend more frugally. It can also help to use multiple glass jars and label each jar with a specific expense. This will help you avoid spending money that’s allocated to your rent or electric bill.


While it will take time to rebuild your credit after you file for bankruptcy, every smart money move will get you closer to your goals. If you miss a payment or pay a bill after the due date, don’t get discouraged. Resume your financial plan and pledge that you won’t make that same mistake again. Eventually, your perseverance will help you reach a better financial position.

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