Congratulations! You completed your Tennessee bankruptcy and have your discharge papers. Now that your financial feet are on the ground, you are ready to start over financially. Based on what you learned the past few months, this time you will find it easier to establish, build and maintain your credit in a responsible way.
Before you do that, however, there are four other things you should do, or start doing, immediately.
1. Preserve your paperwork
You may have a pile of documents relating to your bankruptcy, but at the very least you should have a copy of the following:
- Bankruptcy petition
- Notice of bankruptcy filing
- Discharge order
Do not throw these documents away, or any others that you have. Instead, put them in a file folder and store it in a safe place. Better yet, scan them into your computer and place the scans in a new folder on your desktop or external hard drive. This way you have electronic copies of these important documents whenever you need to review them or send them to someone else.
2. Obtain and review your credit reports
The three major credit reporting agencies let you obtain a free credit report each year. Between three and six months after your bankruptcy, get each company’s credit report and review it carefully to make sure none of your discharged debts show up. Also make sure that none of your discharged accounts wound up with a collection agency that could begin harassing you for payment of a discharged debt. Continue to obtain and review your credit reports annually for the next several years. A bankruptcy can remain on your credit report for up to 10 years, so it is important for you to keep monitoring your reports.
3. Start a basic budget
Budgeting is not a particularly enjoyable pastime, but creating one and then sticking to it is one of the most important things you can do for yourself. You need to know that your monthly household income covers your monthly bills. If you are like most people, however, your bills fluctuate from month to month. Therefore, you likely will need to make an educated guess about the amount of your total monthly bills at first.
After three months, total each bill and divide by three. This will give you a realistic average. Also add in the monthly average for any bills you pay quarterly or semi-annually, such as insurance premiums. At this point you should have a credible picture of what comes in and goes out each month, which is vital to paying your bills on time while taking into account the dates of your pay periods.
4. Start an emergency savings account
No matter how good a budgeter you become, unexpected expenses always crop up when you least expect them. To cushion the blow, start a savings account into which you place whatever money is left over each month. It may not be much at first, but as you get used to budgeting, you may discover that you actually do have funds you can save for that inevitable rainy day.
5. Start thinking about rebuilding your credit
Sadly, credit cards are an American way of life. Some businesses, like airlines and car rental companies, will not take anything other than a credit card. Credit cards also are invaluable for covering the cost of emergencies for which you have insufficient funds in your savings account.
Given that you have little or no debt thanks to your bankruptcy, you soon can begin rebuilding your credit. You likely will need to start with a pre-paid credit card or one with a low credit limit. Be aware that you also likely will have to pay a higher interest rate. Despite these limitations, however, obtaining one credit card that you pay off each month is an excellent way to reestablish your credit.
Bankruptcy is your chance for a financial “do-over.” Following these five steps will help prepare you for whatever financial issues will face you in the future and help you handle them responsibly.