Bankruptcy | 3 Mistakes After Bankruptcy
Bankruptcy . Congratulations – you’ve completed your bankruptcy and are on the path to a bright new financial future. Or are you?
Roughly 1 in 7 people that file for bankruptcy end up repeating the process at some point in their life. Many of the people that do file a second time, do so within a few years of completing their first bankruptcy. How is that possible? Here are three of the most common mistakes that people make after bankruptcy that you should avoid.
1. Debt was a symptom, not the disease.
There’s no politically correct way to say this: you accumulated too much debt because you spent more than you earned. Unless you change your spending patterns after your bankruptcy has been completed, you run the risk of accumulating too much debt again. It may take longer to accumulate the new debt, but in my experience, those looking for credit can find it – it will cost more than before your bankruptcy, so it won’t take as much new debt to drive you back into bankruptcy the second time. Consider this, second and third tier lenders charge proportionally higher interest for smaller and smaller amounts of credit. The most extreme example is a payday loan. If after you’ve been discharged from bankruptcy you find yourself borrowing from these high interest lenders, then you’ve failed to adjust your spending habits and you are destined to file again.
2. The “involuntary credit”.
That is what the government calls itself when people don’t pay their taxes. The government didn’t approve you for credit – if you owe income or other taxes it is because you didn’t pay when you were supposed to. Second time bankruptcy filers often have the government as the largest single creditor because when money gets tight, many people stop making their tax payments. Unlike a commercial lender, that closely monitors your account for payments, the government has no such system – at least not one that can catch you quickly. Instead, you may fall two or three years behind before the government catches up to you. Unfortunately, once the government does catch up with you, their powers to collect can be devastating. The government may garnishee your wages or receivables, they may freeze or seize your bank account, they may even put a lien on your house or other property. For many people indebted to the government, (a second) bankruptcy becomes the only option.
3. Failure to plan is a plan to fail.
Many bankruptcies are caused by some unfortunate incident – loss of a job, illness, divorce. People didn’t plan for something bad to happen – it just happened. Guess what, lightning may not strike twice, but the world is quite willing to hit you again and again and again. If you want to avoid financial problems in the future, limit your access to credit. Credit can turn into debt, and debt can cause all sorts of problems. This isn’t just a different way of saying mistake number 1 – spending too much. It may mean spending less, but more importantly it means trying to anticipate what might go wrong and having a plan to deal with it. For example, many financial professionals suggest having 1 to 3 months’ worth of living expenses in a savings account “just in case”. If that sounds too onerous, then simply limit how much credit you apply for. If you don’t have access to credit you can’t turn it into debt. If you think you “need” something, wait until you have the cash to pay for it. Your first bankruptcy forces you to live this way while you are in the bankruptcy. – blog.startfreshtoday.com
Call attorney David Pinkston for a free consultation today: (904) 389-5880. If you are thinking about #bankruptcy, #chapter13bankruptcy or #foreclosure in the Jacksonville, Florida area, you should call attorney David Pinkston. David is very experienced with all aspects of bankruptcy law yet very personable and easy to talk to. Call Us Today! (904) 389-5880