Bankruptcy offers the promise of a fresh financial start, but it can also offer a few challenges in your day to day life. Below are four common obstacles you may face after bankruptcy and a few tips on how to overcome them.
Difficulty Renting
A fresh bankruptcy discharge may make it difficult to rent an apartment, but there are a few things you can do to overcome this challenge.
- If possible plan ahead. You may find it easier to rent an apartment before you file bankruptcy. Your bankruptcy won’t show up on your credit report until it’s closed, so if you have a decent credit score renting before you file will give you an advantage.
- Pay a larger deposit. Many landlords feel wary of anyone with recent credit problems. However, paying a larger security deposit may go a long way in assuaging their fears.
- Get a roommate. In some cases you can get a roommate to co-sign a lease, at least until your bankruptcy grows older. A year or two after bankruptcy, renting an apartment on your own shouldn’t be a problem.
- Get an alternative credit report. If you have been paying your bills on time getting an alternative credit report may work to your advantage. An alternative credit report will show your payment history on bills such as cable, phone, utilities, and previous rent that don’t show up on a traditional credit report. This may help a potential landlord better evaluate your ability to pay your rent on time.
Trouble Financing a Car
While there are lenders willing to overlook recent financial setbacks and low credit scores, many of these lenders are predatory:
- Purchase a used car. Start by evaluating your transportation needs to see if a used car will work for you. Shop around to see how much a used car will cost. If you can, save for the entire cost of the car and pay cash.
- Make a large down payment. You may be able to get lower monthly payments and interest rates.
- Get a pre-approved car loan. Having secured a pre-approved loan is like walking into a dealership with cash in hand, plus this will equip you with the knowledge of how much you can spend and may help you negotiate for a lower price.
Challenges Traveling
Since you won’t have unsecured credit cards right after bankruptcy, it could be difficult to rent a hotel room or car.
- Get a secured credit card. You can handle this challenge by getting a secured credit card with enough money on it to cover any required deposits or holds.
- Your debit card may be enough. Also most hotels and car rentals will allow the use of a debit card but may put an additional hold on your account for a certain amount.
Budget Difficulties
Not all debts disappear after a bankruptcy discharge for example you may still have student loans, a mortgage payment or a car payment.
- Create a budget. Take the time to carefully look at your monthly income and expenses. Give yourself a budget for discretionary items such as entertainment and eating out that tend to be areas that lead to overspending.
- Track your spending. Watch were your spending your money and know when you are close to going over your monthly budget.
- Set short and long term goals. Whether it be saving for a vacation or paying for your kid’s college tuition create a plan. Accomplishing these goals makes the challenges of creating a budget and tracking your spending worth it.
Some bankruptcy filers accustomed to living beyond their means may have difficulty creating and keeping a budget. But you can overcome this issue by using free budgeting tools or working with a personal finance coach or financially savvy friend or family member to guide you through the process. Being good at budgeting is a skill that can be learned.
As your bankruptcy discharge nears, remember that you may face challenges post-bankruptcy but with preparation and commitment you can overcome them.
