Putting Your Bankruptcy Behind You

Bankruptcy often brings a mixture of relief and guilt. There’s relief that the creditors will now stop calling and the bills have disappeared. At the same time, there is the guilt of having failed to pay your bills off and filing for bankruptcy. You are probably also experiencing fear that you are now labeled as “bankrupt” and at the bottom of the barrel financially. Those who recover the fastest, though, are those who make a choice to move forward with their lives. Here is how:

Understand that you are not alone: There are at least another million people who have filed the same year as you. They come from all walks of life, and all kinds of personal and professional backgrounds. There is even a long list of famous people who have filed. Try to accept that this is a season of your life, and it, too, will pass. 

Get help if you are depressed: Clinical depression is more than just the blues. If you are depressed, you may feel completely overwhelmed and unable to find any happiness or joy in your life. Depression can also leave you unable to move forward with your dreams and goals. Research by Myvesta shows that people with debt problems are more likely to be clinically depressed than the average population. You can visit the free depression screening website to find out whether you might need help getting back to your old self.

Take care of your health: Medical bills can easily lead you into another bankruptcy down the line. While you can’t prevent every illness or injury, many of our most common and costly diseases are preventable with the right diet and regular exercise. As a bonus, you will look and feel better as well.

Try to find a way to budget for health insurance . Having health insurance might not keep you out of bankruptcy, since data shows that consumers with and without health insurance are both at risk for filing due to large medical bills. But it may at least help pay for medications and make seeing a doctor more affordable, so you can keep minor problems from developing into worse ones.

Create Your “Ace In The Hole:” Give yourself some peace of mind by developing an extra source of income you can fall back upon when unexpected expenses arise or your job falls apart. Ideally, this side business will require little capital and will allow you to test the waters with something you’ve always wanted to try, whether it is catering or computer repair. You can learn more in a book I co-authored, Invest In Yourself: Six Secrets to a Rich Life .

Budget Before You Have Children: I understand this sounds harsh, but I will tell you what Harvard Law professor Elizabeth Warren writes in The Two-Income Trap: Why Middle Class Parents Are Going Broke :having children is the single greatest predictor that a woman will end up in financial ruin. Children can be one of our greatest joys, but they require far more financial resources than most of us anticipate. If you do want to expand your family, start planning and saving as soon as possible.

Start Earning What You Are Worth: While the lending industry often portrays consumers who file for bankruptcy as frivolous spenders, the truth is that it is harder these days to keep up with rising expenses and lower wages. Not to mention the fact that you may be your own worst enemy when it comes to earning your worth. Financial recovery expert Karen McCall once told me that clients in debt are often “underearners.” She coached Barbara Stanny , who was broke after losing her fortune as an H&R Block heir, back to financial health. Barbara went on to write several excellent books, including one of my favorites, Overcoming Underearning . If you never seem to earn enough to get ahead, it’s the next book you will want to read.

Become a Saver: The American savings rate is dismal. Start saving now, even if you have to start small.  Don’t put this advice off. Today set up automatic transfer of any amount ($5 if that’s all you can afford) from your checking account to a savings account. If you have a partner or family, brainstorm some creative ways to save together – and a fun goal to save for.

Get Organized: Keep a file with your bankruptcy discharge papers. You may need them if a collection agency calls about a debt that was discharged, or if you apply for a mortgage. But while you are at it, make sure you have organized all your financial papers. You will feel empowered and free up your energy to focus on bigger and better things. Here’s more information on how to get your finances organized after a bankruptcy.

Get Help:  In his book Drugs, Drunks and Debits, Doug Thorburn points out that drug, alcohol, and other types of addictions are often tied to reckless financial behavior. Thorburn describes himself as a financial professional who learned about addiction the hard way, vowed "never again," and then proceeded to learn everything possible about this under-studied subject. If you suspect that addiction is an issue for you or a family member, get Thorburn’s book, and get help.

Rebuild Your Credit: You’ll find practical tips here for rebuilding your credit reports and credit scores after a bankruptcy filing.  Follow them, and you will be surprised at how quickly you can rebuild your credit. Bankruptcy does not need to chain you to bad credit for the next seven to ten years, but you have to be proactive in order to recover.

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