Living Debt Free
For many people, the prospect of living debt free is one of the most exciting things about choosing to file for bankruptcy.
After all, thanks to the fresh financial start that the bankruptcy court offers filers, many people find that initiating the bankruptcy process is the first step toward financial stability.
If you’d like to find out more about your potential to benefit from bankruptcy protection, connect with a bankruptcy attorney today. You can arrange a free, no-obligation consultation with an attorney near you—simply fill out the form below to get started.
Bankruptcy and Debt
Here’s how a typical bankruptcy case works to effect debt:
- Pre-filing credit counseling: Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, all people interested in filing for bankruptcy undergo a credit counseling session to make sure that bankruptcy is the best choice for their finances. The counseling session helps filers know that bankruptcy will indeed provide them with the most effective debt relief available.
- Pre-discharge debtor education: Another requirement introduced by the new bankruptcy law is the financial management course all filers are required to take to gain eligibility for a discharge from the court. This course provides instruction in the sort of financial management skills essential to maintaining a debt-free life after bankruptcy.
- Debt discharge: Finally, filing bankruptcy may contribute to a debt-free lifestyle by offering filers a discharge of some or all of their debts. This means that whatever debts the court excuses are no longer the individual's responsibility to pay, and he or she can essentially start fresh financially.
Avoiding Debt after Bankruptcy
While bankruptcy may be an important starting point for those looking to eliminate their debt, it’s not a magical cure-all for debt. Once you’ve filed for bankruptcy, it's important to commit to a debt-free lifestyle. The following techniques may help you achieve that goal.
- Track your spending: For a month, write down every cent you spend. This includes everything from rent or mortgage payments to utilities to food to entertainment. At the end of the month, figure out what your total expenditures are and break them down by category.
- Create a budget: Based on the information about your spending habits and your income, find areas where you can cut back your expenditures. This might include buying generic products more often, eating out less, choosing less expensive car insurance, dropping a gym membership and more. If your budget is realistic and has some breathing room, you'll be likely less tempted to throw in the towel.
- Start saving money: One essential element of debt-free living is having a savings account. Whether you think of this saved money as an emergency fund or money for the future, it can save you and your finances when unexpected, emergency expenses blindside you. Even if you can only save a little at a time, it's still a worthwhile endeavor.
- Rebuild your credit: Filing for bankruptcy may mean that your credit rating takes a hit, but actively rebuilding your credit after you file can make a huge difference to your credit worthiness. By paying bills on time, paying credit card bills in full each month and being patient, you may be able to rebound your credit after bankruptcy. Rebuilding credit takes time, but it's usually worth the effort.
Can Bankruptcy Help You Live Debt-Free?
To find out whether bankruptcy could be the right choice to help you revamp your finances and jumpstart your debt-free lifestyle, contact a bankruptcy lawyer today. Simply use our free case review form below to connect with an attorney near you and arrange a free, no-obligation consultation.