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Learning to live after filing bankruptcy

Many people rely on credit cards and other lines of credit to cover regular life expenses. When the bills from these credit accounts become overwhelming, there comes a point when you might realize that you need to do something. One answer to this is filing bankruptcy.

Sometimes, filing for bankruptcy is seen as a failure. This isn't how you should view this option. When you have debts that are drowning you, bankruptcy might be the most responsible choice you can make. Making the decision to file for bankruptcy brings up the question about what you are going to do about living life after you file.

Cut things down to necessities

Whether you have a Chapter 13 with a repayment plan or a Chapter 7 without one, you need to learn how to distinguish necessities from desires. Cutting your budget down to just necessities is something that can help you learn to live frugally. This doesn't mean that you have to continue with this lifestyle forever, but taking the time to live frugally now can propel you into the habit of being able to avoid luxuries when things are tight. This also gives you a chance to work on the next suggestion -- creating an emergency fund.

Work on an emergency fund

Have you thought about what you would do if you were laid off tomorrow? How would you pay bills? If you are sweating just thinking about this, you need to get moving on creating an emergency fund. It can be intimidating to think about having to get six months' worth of income into a savings account, but this is your ultimate goal. You can do this in baby steps. Set your first goal at $500 and then $1,000. From there, move on to one month of income, then two months, and so on, until you have what you need to live for six months without any income.

Avoid dipping into retirement accounts

As you live on cash, you might find that you sometimes want a little extra boost. Avoid the temptation to dip into your retirement accounts to pay off debts or handle bills. These accounts are your safety for later in life and you don't need to have to pay penalties for taking money out or have to worry about how you will replace the funds later. Instead, find creative ways to get money, such as starting a side job or finding a part-time job.

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Law Office of Ginger C. Cord, PSC
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Lexington, KY 40507

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