Few New York bankruptcy debtors regret filing bankruptcy, but I’m sure it’s not anyone’s life goal. Many debtors, then, will be interested in taking the necessary steps to avoid a second New York bankruptcy—and of course, I’m not referring to debtors who choose to file a chapter 13 case after a chapter 7 case, aka “chapter 20.” Here are five things debtors leaving bankruptcy can do to not go back.
(1) Assess why you ended up in bankruptcy in the first place. For most debtors this will be pretty easy advice. Bankruptcies that are prompted by significant unforeseen events, such as medical crises, job losses, or divorces, are what the bankruptcy system is designed for. It’s not so helpful for debtors who have debts that are hard to discharge or have trouble securing well-paying work. Nevertheless, if you borrowed a lot of money on your credit card before losing your job, then reevaluating your spending habits should bear fruit.
(2) Budget your expenses, starting with your nonnegotiable ones. Remember the forms you had to fill out to show that you didn’t have to take the means test? They can be a good template for crafting a budget for your expenses. In the process, focus on the expenditures that you can’t do without: housing, food, fuel, health insurance, etc. Then add more discretionary items. As your expenses get closer to your income, see what you can cut. If that doesn’t work, then you’ll need to turn to the cornerstone expenses, like housing. Remember, though, that if you need to use your credit cards to pay for your mortgage, then you know something is very wrong.
(3) Reevaluate monthly charges. In between fundamentals like housing and discretionary expenses like coffee shops are recurring charges, usually monthly, that you might not consider reducing. In fact, these can be quite negotiable. See if you can get a cheaper Internet provider, get rid of the cable TV, or see if you can get by on a lighter mobile-phone plan.
(4) Save up a cash buffer. I’ve given this advice for getting out of debt, but it’s applicable to staying out of debt too. When you’ve finished crafting your budget, make sure that some is left over for a couple thousand dollars in cash savings. The point is to use this for a rainy day when something goes wrong that you don’t want to put on a credit card. Speaking of which…
(5) If you use a credit-card, then repay it each month. Banks will be happy to extend you credit again—and why not? You can’t discharge it for up to eight years if you filed in chapter 7. This is compelling reason to keep your credit-card use low.
Fortunately very few debtors end up in bankruptcy a second time, but the tips for staying out of it are good ones for rebuilding a solid financial future. If these tips didn’t help, or if you haven’t filed bankruptcy ever and are in serious financial difficulties, then talking to an experienced New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.