You have not been making nearly enough money to pay off your creditors and you've taken the most frightening step to deal with the constant calls and letters by filing for bankruptcy. While this means that the legal proceedings against you can stop, the mental and emotional minefield this step will cause you has only begun.?
Insolvency can seem overwhelming, especially emotionally, because you may be tossing and turning at night over your so-called damaged reputation and your concern that you will be cast out of the financial world for the rest of your life.
However, this does not have to be the case, especially if you are committed to making the most of the second chance bankruptcy has afforded you by taking the proper steps to safeguard your current mental health and your future financial endeavours.
Guilt and shame are common emotional reactions to filing for bankruptcy. Insolvents worry that they have become a failure, to themselves and those depending on them, and that their reputation may never recover. However, combating this cycle of negative emotions is the first step an insolvent should take. Realise that life is full of challenges for everyone and use the opportunity to work on your self-discipline, your strategy, and your attitude.
The second step is to focus on what is important to you. Ask yourself important questions about how you failed, what could have been done differently, and what you learned. Also ensure that you have a great support system in your friends and family. Avoid meeting with people who do not support you in a positive way.
Your third step will be to work on your budget, paying what you owe in terms of the bankruptcy requirements, which will be the most important. While you won't be able to pay everything immediately, prioritise your expenses - including bond repayments and utility bills - and ensure that new bills are paid immediately. Understand how much money you have to spend, spend only what you need to, and don't worry about objects that imply status, such as the latest car or the biggest house. You may also need to consider changing habits that result in you spending unnecessary amounts of money, such as visits to the fleamarket or travel.
Remember to keep all your bankruptcy documentation for your records, as creditors may sometimes attempt to collect discharged debt or you may need the records to clear old debts on your credit report. Check your credit record as often as you can after the first few months to ensure that the debts you are clearing are being registered with the authorities. Focus on repaying your creditors systematically to build up a good credit record.
You can also consider a secured credit card to help rebuild your credit reputation: Some of these cards use money in the bank as collateral for the credit, while others are prepaid. Avoid cards that have high interest rates or start-up fees and ensure that your transactions are reported to credit bureaus. Some banks may need you to wait a certain amount of time before you can apply for such a card, though.
Finally, put some money aside for a rainy day. No matter how small this amount is, remember it all adds up in the end, making the long wait to a return to financial normalcy worth it.