4 steps in the post-bankruptcy trap to beware of
Bankruptcy is a wonderful tool for helping people get a fresh start. However, sometimes people run in to trouble when they don’t know how to handle their newfound “success.”
Here are four steps that often lead people to fall back into financial trouble following a successful bankruptcy filing and discharge:
- False sense of financial confidence. Right after you receive your discharge, you may tend to feel overconfident in your financial situation. You may have more cash on hand than usual because suddenly you don’t have lots of creditors to pay off. However, this is not the time to start spending more. This is the time to really think about your finances and make sure you’re saving some of your money.
- Credit available again. Following your discharge, it will actually become easier to get credit again. e.g., Credit cards, vehicle finance, mortgages. Because you have little or no debt thanks to your bankruptcy, you’re now an attractive customer to many lenders. However, these tend to be subprime lenders. That means that you’ll be paying a very high interest rate on any money you borrow. And high interest rates are major debt traps. So watch out and use good judgment.
- Living beyond your means. If you don’t pay attention to your limits and you try to live beyond your means, then you will quickly fall prey to bad spending habits and high interest rates. Be aware of what you can actually afford. Sure, there’s a lot of pressure in society to “keep up with the Joneses.” But now, more than ever, is the time to resist that urge and be comfortable with who and where you are. You’ll be much happier in the long run.
- Compound debt. Once you fall prey to the debt traps, it then becomes very easy to justify taking out more (high-interest) loans to pay off the debts you have. If you find yourself borrowing from Peter to pay Paul, then it’s time to stop and get some help and reassess your whole approach.
Bankruptcy is an extremely useful and powerful tool. Something that most other societies don’t make available to their citizens in the same way. But you’ll be a lot happier if you only have to use it once and not repeatedly.
For a free Las Vegas bankruptcy consultation, contact the offices of Freedom Law Firm at 702-745-8088 today.