Many people travel under the assumption that once you file bankruptcy, you will not be able to reestablish credit for at least ten (10) years. Nothing could be further from the truth! In fact, most people that have been through a bankruptcy proceeding find that creditors are willing to work with them and allow them the opportunity to reestablish credit again.
When creditors are making decisions about whether or not to lend you money or extend credit to you, one of the key considerations is your “income to debt ratio”. For the most part, after you have been discharged from a bankruptcy case, you will find that you have the ability to save money and, in fact, be more in control of your money because you are not trying to pay minimum payments on high interest credit that you never see the balance budge.
But so often people beat themselves up because they do not feel that they have been good money managers. “How do you become a good money manager?” you may ask. One of the most important rules is to remember that there money is neither good nor bad-it’s neutral. Money should be considered to be a tool in your tool box or your materials that you work with. In other words, we all know that if you needed to hammer a nail into wood, the most effective tool would be your hammer from your toolbox. Honestly, being a woman, I know many would be surprised to hear that if I didn’t have a hammer nearby but I did have pliers, I have been known to try and hammer the nail into the wood with the pliers. That never worked. I didn’t make much progress.
So if you think of money as a tool, consider carefully what you are going to use it for before you actually spend it. You might determine that the most effective way to use your money would be to open a savings account and have part of your net paycheck deposited into the savings account so that you can start saving for a down payment on another home or car. Or you may decide to direct an extra $50.00 or $100.00 per month on your current car or mortgage payment so that you pay it off sooner rather than later. Because you might actually have additional money that is saved, you can use that money for things that come up such as car repairs and medical co-pays. You may even decide to save for a secured credit card wherein you allow the bank or credit union to retain $500.00 in an account and you receive a credit card with a credit limit for that amount. You should be wise, however with any credit following bankruptcy because sometimes if the interest is high, that new credit can knock a door in a wall where you only wanted a window. For many years I told clients that more than one credit card generally led to more than one problem.
The important thing to remember is that money, just like a hammer, can be most effective if you are using it for the purpose intended. A hammer can be used to knock down a wall or it can be used to tap the smallest nail into the flimsiest wood….either way, effective, but what are you trying to accomplish. There is an old saying………”Credit is good-Cash is better”. Both are tools that are effective, but you have to decide what is going to be in your tool chest or, better yet……”What’s in your wallet?”
Suzanne Shinn is a shareholder of several of the Bond & Botes Law Offices throughout Alabama and Mississippi. She holds a Bachelor of Science from the University of Alabama, Birmingham, and a Juris Doctorate from the Birmingham School of Law. She joined the Bond & Botes team in 1992 as its first associate attorney and has been helping clients navigate the bankruptcy process ever since. Read her full bio here.