Bankruptcy is more common in the United States than you think. About 700,000 Americans file for bankruptcy annually, and it’s never an embarrassing or shameful moment for anyone. Instead, it’s a time of recovery and recollection. If you ever find yourself in this position, consider these options so you can survive and finally recover from bankruptcy.
Recover Your Savings
The first step to surviving and recovering from bankruptcy is recovering your savings. This is a massive step in the right direction and one you should start doing from day one.
Cash is one of the most fundamental assets you can ever have, and from a business perspective, it’s a low-risk asset. On the other hand, investments in stocks are high-risk assets. So if you want to build your savings, it’s good to have cash over investments. Sure, your money might not grow in a couple of years when compared to investments, but at least you’re not at risk of losing them.
If you want to turn them into low-risk investments, you have multiple options. For example, there are high-yield savings accounts, cash deposits, and individual retirement accounts. These options have low risk, but they take some time to grow compared to high-risk options.
Start Monitoring Your Spending
Once you’ve filed for bankruptcy, you need to monitor your spending every day. You might not need to reduce your overall spending, but you certainly need to know how much money you’re using. This includes your groceries and utility bills. The main reason for this is to have an emergency fund ready for the future.
Have an Emergency Fund Ready
To ensure that your savings are safe from any financial mess, you’re going to need to have your emergency fund ready. This fund needs to be made from cash and doesn’t come from loans. It needs to be ultimately yours. Moreover, never put your emergency funds into an investment, regardless of what some financial experts tell you to do. You never want to lose these funds, especially if you’re at risk of losing everything.
Your main goal is to have at least three months’ worth of spending in cash in a secure bank account somewhere. This is why you should monitor your average spending, so you know how much you’ll need for your emergency fund. Make sure you can have access to this money at any time because it can certainly make a difference during disasters while you’re still recovering from bankruptcy.
Rebuild Your Credit Line
Once you’ve filed your bankruptcy, you say goodbye to your credit line, regardless of how much of a good payer you were back then. Rebuilding your credit line can take years, but as long as you can pay them in time, then you should be able to get it back in no time. You might only be allowed to use your credit card during the first year, but the more you rebuild your line, the more you’ll have access to other loans.
Refinance Your Mortgage
Your paid mortgage is a versatile tool that you can use for investments or maybe recovering from bankruptcy. It’s one of the few financial options you can have access to once you’ve reached the first year of your bankruptcy. However, this depends mainly on the kind of bankruptcy you’ve found. For a chapter 13 bankruptcy, you can do the one we’ve indicated above. However, for a chapter 7 bankruptcy, you might have to wait two to four years before you can refinance your mortgage.
Refinancing your mortgage is a smart choice right now because of the low mortgage rates. Moreover, a reliable mortgage broker can strike a beneficial deal for you that can help you recover from such a tragedy. But don’t take the risk if you can’t pay the intended amount as of the moment. Wait until you’ve rebuilt your business and can deliver your lower refinanced rates before making this move.
Small Business Loan
Many people will tell you that you can’t get a business loan right after you’ve filed for bankruptcy. They’ll argue that you have to wait five to ten years before you can do it again. However, this isn’t the case.
Sure, you might have to wait for a couple of years before lenders can trust you again, but not for that long. Once you’ve rebuilt your credit line, then you can eventually borrow a business loan again. This can take between two to three years, and with the help of a credit repair company, you can even expedite the process. However, credit repair services are never guaranteed, and you shouldn’t rely on them.
Instead, rely on paying your credit on time and working hard on your savings. Once you do these things, you can get a business loan once again.
By following these financial strategies, you can survive, recover from bankruptcy, and start your business again. Learn from your previous mistakes and adequately run your finances this time.
