How to Bounce Back from Bankruptcy

Alexandra Heep By Alexandra Heep, 2nd Aug 2010 | Follow this author | RSS Feed
Posted in Wikinut>Business>Accounting & Finance

How to avoid the circumstances that led to bankruptcy.

Common Questions

It would be logical to assume that the best way to recover from bankruptcy is to avoid the patterns that brought on bankruptcy. Sounds easy enough, doesn't it? What if circumstances that brought you to bankruptcy were beyond your control? How do you recognize the other ways that can sneak up on you and get you back to the same dilemma? What about making your budget work in a declining economy? How do you re-establish good credit? All these questions will be addressed, as the answers are vital for bouncing back from bankruptcy.


It's true that circumstances like medical bills and divorce are mostly beyond your control. It's also a fact that these are the top reasons in the USA for filing bankruptcy. But, there are things you can do to control these scenarios for the future.

Perhaps you can get different and better employment with a better medical plan. If that is not an option, there are plans such as AFLAC you could check out. As far as divorce goes, it can teach a valuable lesson about potential partners for the future. Use what you have learned during your bankruptcy counseling in your favor.

Once you feel you are approaching a serious relationship again, discuss finances with your potential partner. Know exactly who will be responsible for what, and most importantly plan ahead. This means to be prepared that the relationship may not last forever, and that you will need to be able to function solely with your own income.

Also, think carefully about joint accounts and major purchases. Even when in a relationship, always keep at least one account that is just in your name and don't touch that money. If a person you get involved with balks at discussing financial issues or is in other ways financially irresponsible, think hard about whether it's worth it to you to build that type of future.

There are of course other ways that lead to bankruptcy. What it boils down to is that more money is going out than is coming in. Overextension on credit is another reason many file for bankruptcy. Use the tools you learned during counseling and the financial materials you were given (that you hopefully kept) to recognize the warning symptoms and address them before they spiral out of hand.


Part of the bankruptcy counseling was for you to make a budget. However, months or even years have passed since this counseling took place. Chances are that in those months or years your income has stayed the same or even been reduced, due to the current economy. Yet, prices have risen.

This means that the budget you did then no longer works now. Use what you learned during bankruptcy counseling to your advantage and make a current budget. You need to either find a way to decrease your expenses, or increase your income.

Chances are that you already decreased your expenses significantly, and that most employers are loath to give raises. In that case, find ways to make extra money. Use the Internet for all it's worth and market your skills. If you are good at something use it.

Offer tutoring, write articles on websites such as Helium, baby-sit, make arts and crafts and sell them, etc. Only you know what you are good at. Don't wait for someone to recognize it in you and pay you, market your skills and find that extra income. It's not easy to get started, but many others have succeeded and you can too. Even if it's just a few extra dollars, it can make the differences between recovery, or slipping back into debt.


We are told we "need" it, and that a bankruptcy will stay on your credit report for seven years. But, what does this really mean in regards to your living situation right now? If you have adequate shelter, reliable transportation, and a steady income that is all the foundation you really need to bounce back from bankruptcy.

What you don't need is to amass credit cards with high interest rates, or buy things just to establish credit from places that cater to people with bad credit. This will have you slipping back in no time. If you simply pay your rent and utilities diligently and on time, this can establish credit as well.

While utility companies and private landlords don't report to credit bureaus, they will most likely write credit reference letters if you ask. The money you would have to spend on monthly payments for credit purchases is much better off in a savings account, IRA, etc. at this time.

Ironically, once a person has bankruptcy discharge papers, credit offers roll in through the mail higher than before. Everyone is screaming at you that you "need credit" or need to "re-establish yourself by buying now". It's sad but true, but it's how the free market system works. What do you do in this case? It's simple: exercise the same freedom that allows you to make decisions for yourself, and shred those offers without looking at them.


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Meet the author

author avatar Alexandra Heep
I am a freelancer and I can write about any subject. I have a professional background in administration, real estate, marketing, and mortgage post-closing. Other areas of expertise include health and beauty as well as spirituality and self help iss...(more)

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author avatar Retired
3rd Aug 2010 (#)

Alex; this is just the information people need. Bankruptcy is becoming more and more common in this uncertain economy. Great article:)

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author avatar Orby
31st Aug 2012 (#)

I really like this article.

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