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Filing bankruptcy can provide a clean slate for someone facing overwhelming debt. After you file, it’s up to you to make the most of the second chance. Thankfully, there are several strategies you can use to regain your financial footing and raise your credit score.

How to Recover From Financial Difficulty

1. Devise a Budget 

Sticking to a budget prevents more debt from racking up because it helps you live within your means. Having the ability to make payments on time rebuilds your credit, so account for all essential expenditures each month to create a budget that works.

For most people, housing is the biggest financial obligation. As a general rule, you should spend up to 30% of your family’s gross income on housing. For renters, this figure should include utilities. Homeowners, on the other hand, must also account for property taxes, mortgage interest, and maintenance. 

2. Get a Secured Credit Card

bankruptcyThese cards are backed by cash deposits, so you may qualify for one even with a low credit score. When you open this account and stay on top of monthly payments, you slowly rebuild your credit.

For your convenience, some secured cards can be converted to traditional credit cards after a certain period.

3. Create an Emergency Fund 

When you have funds set aside for emergencies, you don’t need to take on more debt to cover unexpected expenses, such as car repairs. Set aside a portion of each paycheck to create this safety net.

Even if you can only afford to save $20 a week, that amounts to more than $1,000 a year. To accumulate more interest, open a separate savings account for your emergency fund. 

 

 

To get a fresh start after financial trouble, turn to Robert A. Schwartz. Practicing out of Rochester, NY, this seasoned bankruptcy attorney has been in the legal field since 1982. He is well-versed in Chapter 7 and 13 cases, helping you avoid foreclosure, vehicle repossession, and creditor harassment. Learn more about bankruptcy on his website, or call (585) 334-4270 to schedule a consultation.

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