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    Home » Lessons People Can Learn From Bankruptcy

    Lessons People Can Learn From Bankruptcy

    AdminBy AdminOctober 8, 2023Updated:November 28, 2023No Comments4 Mins Read

    Bankruptcy can provide a fresh start, but it also forces people to rethink their money habits. A new perspective can help reduce the stress of bankruptcy and improve financial health. 

    Filing for bankruptcy is often seen as the nuclear option for debt relief. It erases most debt and protects against repercussions like wage garnishment or home foreclosure. 

    Budgeting 

    Whether you’re planning for retirement or simply trying to stay afloat after losing your job, budgeting is essential. There are many different ways to budget, from the envelope method to setting a percentage of your paycheck aside for savings to setting up recurring automatic transfers from your bank account into a separate savings or checking account each month. 

    If you find it hard to stick to a budget, try rewarding yourself for meeting your goals or finding a group of people who are on the same frugal path as you and hold each other accountable. You may also consider using a tool or app which makes tracking expenses and staying on track a breeze. 

    Budgeting is especially important when attempting to achieve medium-term academic or financial goals, such as purchasing a new laptop computer or saving for a down payment on a house. Choosing to buy an asset with debt rather than cash is often preferred, but the type of debt you choose matters as well. 

    Credit Rating 

    Whether you choose bankruptcy or another type of debt relief, it’s important to understand the consequences. Bankruptcy information stays on your credit report for 7-10 years and may make it difficult to obtain additional credit. Maintaining a vigilant approach to your credit rating is paramount in times of financial distress, especially when dealing with the complexities of a winding up petition, as it can influence the outcome and shape your financial landscape post-bankruptcy.

    You’ll also be required to complete pre-discharge credit counseling and post discharge financial management classes. Both are available through credit counseling agencies and typically cost between $10-$50, with a fee waiver for people on Social Security or unemployed individuals. If you have other options, such as debt management programs or debt consolidation loans, consider them before filing for bankruptcy. In fact, bankruptcy should only be considered as a last resort if you’ve tried other methods of reducing your debt and failing to make progress on your own. 

    Foresight for the Future 

    Many financial gurus advocate zero-debt policies, but debt is often the primary way to obtain assets like homes and vehicles. Choosing the right type of debt is

    important, and shopping for good interest rates and doing all you can to build equity are essential. 

    Foresight is an activity that seeks to understand a range of future scenarios that might be relevant for an organization. The process begins with Framing, then moves to Scanning and concludes with Analysis and Forecasting. 

    The scouting (or scanning) of trends, events and weak signals along a variety of horizons is a crucial part of the foresight process. These are then analyzed and documented to produce a suite of possible new futures for the organization to consider. 

    Foresight is action-oriented and usually focused on perspectives no more than a few years away, though it is sometimes geared to longer horizons. It is also able to build permanent bridges between actions in the present and thinking about the future. 

    Taking Action 

    A Harrisburg bankruptcy lawyer may tell you that taking action to get control of finances is one lesson people learn from bankruptcy. Often, financial woes have snowballed over time, with small debts adding up and becoming unmanageable. A good credit rating is crucial to avoiding bankruptcy in the future, which can be achieved by using a secured credit card and making on time payments. 

    Individuals who cannot pay their debts can declare bankruptcy, which allows them to start fresh by either discharging (Chapter 7) or reorganizing and including the debt in a repayment plan (Chapter 13). The process stops creditors from attempting to collect on the eligible debt, and it also prevents wage garnishments and bank account levies. 

    Additionally, those who are considering bankruptcy should try alternative methods of debt relief before filing, such as working with debt settlement or a debt consolidation loan. In some cases, these can be better alternatives that do not harm the credit report and do not require a long period of time to resolve.

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