Filing bankruptcy is a difficult decision for those overwhelmed by significant debts. After years of trying to fix the problem and make ends meet, filing Chapter 7 or Chapter 13 was the only option left. The feeling of relief cannot be understated.
However, after a bankruptcy is discharged, some consumers find themselves tempted by credit offers, reverting to old spending habits and getting back into the same trap.
To many people’s surprise, in the weeks following the discharge, countless credit card companies will attempt to get consumers to sign up for a new credit card. Many will get countless emails and pamphlets in mailboxes. But why? Lenders and credit card entities know that consumers cannot file bankruptcy again for several years. So they try and trap people who just received a discharge into getting more debt, this time with the inability to erase it.
Simple steps to avoid bankruptcy backslides
1. Shred or throw away enticing offers
The best option for consumers who just received a bankruptcy discharge is to immediately shred or throw away any loan offers. Do not look at the enticing or “too good to be true” language.
If consumers absolutely need to obtain a loan for an unexpected emergency, they should opt for a credit card that offers a very low credit limit. This can reduce the chances of overextending what they can pay off.
2. Budget
Developing and consistently adhering to a monthly budget may not be something done in the past. However, the lack of a budget is often what gets consumers trapped into the debt cycle.
Thinking of a “new normal” is a good way for consumers to implement discipline in their financial matters. There is no right or wrong way to develop a budget, as long as it works and individuals can stick to the plan. Some use an extensive Excel spreadsheet, some simply write their expenses on a white board.
3. Set up a savings account
Prior to bankruptcy, many people didn’t have the luxury of opening a savings account for expendable income. However, post bankruptcy, it could help individuals who wish to purchase a big ticket item in the upcoming future.
Let’s say it’s March and you wish to buy an expensive item as a gift for a friend at the end of year holiday season. Opening a savings account and transferring just a few dollars a week could add up and help pay for the item and avoid the temptation to open and use a credit card.
