How to Emotionally and Financially Heal from a Bankruptcy
You were doing fine financially. That was before the accident, the car broke down, or you lost your job; whatever the case might be. Since that pivotal moment, you’ve been struggling to pay bills and racking up more and more debt. Despite your best efforts and the mounting stress of trying to stay above water for months, perhaps years, you eventually had to admit defeat. There was no other way out. You had to file for bankruptcy.
You were told bankruptcy would erase your debts, give you a fresh start, and it can, but it’s taken a toll on both your financial and emotional well-being. Let’s discuss ways to heal emotionally and financially from bankruptcy so you can make it the fresh start that it is purported to be.
How to Heal Emotionally
Whether we like to admit it or not, financial wellness and mental health are irrevocably linked. Anyone who has ever stressed out before checking their bank account or has had the urge to splurge when doing financially well can attest to that. Joseph Goetz, the president of the Financial Therapy Association, explains that many people view bankruptcy as shameful, a sign of failure when, instead, it should be looked upon as “a path to a new beginning.”
Simply put, bankruptcy causes many people an undue amount of stress that has to be dealt with so you can move forward:
- Acknowledge that bankruptcy is stressful. Don’t downplay it. You have to acknowledge and accept your emotions so you can let them go and begin to heal.
- Talk it out. Many people are embarrassed to discuss their situation and how they feel, but holding it in will only add more stress. In doing so, you may also discover others have filed for bankruptcy too.
- Exercise daily. Exercise will act as a mood enhancer, let you forget about your problems for a little while, and help you sleep at night.
The above steps will help you be at peace and find closure, which is both powerful and liberating.
How to Heal Financially
You’ve been struggling with your finances for some time, and bankruptcy stops the struggle. Suddenly, most if not all of your debts are gone. That’s the good news. The bad news is that your credit score has suffered tremendously. When you file for bankruptcy, your credit score can drop by 200 points. This will make it hard to acquire new loans or credit cards, and if you do acquire new credit, your interest rate will likely be very high.
While you cannot expect to repair your credit overnight, you can certainly work towards a brighter credit future.
- Create a budget. Track how much money you make and how much you spend and make sure that you do not go into debt each month just to pay off necessities.
- Use cash for purchases. This is a good way to limit your spending. When you run out of cash, you are done spending.
- Pay all of your bills on time. Set up auto-pay to avoid missing payments. This will show creditors that you are reliable when it comes to paying off debt.
- Get a secured credit card. You put down cash collateral on a secured card, and that collateral is your credit limit. The goal is to show you can make your payments on the card on time.
By doing these things consistently, you will shore up your finances and show that you are worthy of having credit once again.
Don’t Forget the Student Loan
Unless you can prove it is a severe financial hardship to you, which is difficult to do, your student loan was not likely discharged through your bankruptcy. Your bankruptcy, however, is a good time to determine how you’re going to rid yourself of your student loan debt once and for all:
- Figure out what payment option is best for you.
- Pay off the loan with the highest interest first.
- Use any tax refunds you acquire towards your loan debt.
- Consolidate your loans into one.
- Understand your loan’s grace periods so you do not accidentally default.
These steps can help you pay off your student loan debt without hardship. If it does prove to be difficult, visit the Federal Student Aid website to determine whether you might be eligible for loan forgiveness.
After completing your budget and figuring in your student loan, you may determine that you cannot support your current lifestyle on your income and choose to pursue a more minimalist lifestyle, possibly in an area with a lower cost of living. This will involve a move, which, in itself, will cost money. With the right planning, you can move and stay within your budget:
- If your prior home was an apartment, collect any money you placed for a security deposit.
- Ask for a newcomer’s packet from your new bank, which will probably contain free product offers and coupons.
- Navigate your new community with a map instead of your GPS and save the cost of data, which you use every time you power up Google Maps.
- Research your new area for free attractions through the chamber of commerce or local visitor’s center.
Bankruptcy is something you never wanted to consider, but you didn’t have a choice, and it’s been hard, both emotionally and financially. You can turn it into something positive, however. With the right strategies and planning, you can use your bankruptcy to really give yourself the second chance that you deserve.