Putting the Pieces Together Again
Rebuilding Your Life and Your Credit

There's no magic to re-establishing yourself following bankruptcy, but the following are some suggestions:

1. AVOID CREDIT
The smart thing to do after bankruptcy would be to live the rest of your life without credit.  However, if you are determined to re-establish your credit, you will find this absurdly simple to do in the present lending environment.  Basically, to re-establish your credit, you have to do three things:  One - keep a steady job, Two - obtain your bankruptcy discharge and keep a copy of it, as well as your bankruptcy petition, with you, and, Three - find a lender who will lend you money. Most people think this last one is the hardest, but, in fact, it is not.  n the present lending environment, you will probably be solicited to buy a new vehicle once you have received your discharge.  Of course, the catch to this is that the interest rate will be extremely high.  Once you have made this first loan at the ridiculously high rate of interest and pay it off, all other things being equal, your credit should be re-established.

2. KEEP ADEQUATE INSURANCE
At all times, keep yourself adequately insured.  Those people who are forced back into a second bankruptcy are usually the victims of a cataclysmic event, such as a sudden illness, job loss, or a car wreck.  It is important to have adequate health insurance and adequate automobile insurance.  This insurance should cover both you and your family. Your automobile insurance should be as much as you can afford, since the minimum coverages are seldom sufficient protection.  Also, make sure that your automobile insurance includes the uninsured motorist rider.  If you own both a home and a car, you should ask your insurance agent about the million dollar umbrella policies that are available for a very reasonable premium.  If you have access to it, a reasonable disability policy is also recommended.  Most people have life insurance, but statistically, you are more likely to become disabled than you are to die.

3. ESTABLISH A NEST EGG
Once out of bankruptcy, start a simple savings account and save enough money for you to live for three months should you lose your job or be stricken with a sudden illness.

4. AGGRESSIVELY PAY OFF OUTSTANDING BILLS
If you came out of bankruptcy still in debt (student loans, taxes, reaffirmed obligations, etc.), you should make only the minimum monthly payment required while you are establishing your nest egg.  Once the nest egg has been established, you should begin to pay off any debts that survived your bankruptcy by making payment higher than the minimum amount required. All of your resources should be dedicated to paying off these obligations.  If you have more than one, pay the minimum payment on the larger ones and pay off the smallest one first.  Then, as you get the smaller ones paid off, take the money that you have been dedicating towards those debts and pay off the next smallest loan.  Keep paying off yourobligations in this fashion until you are debt free.  This does include your house.  There is no reason why a house note cannot be paid off substantially earlier than the thirty years for which most houses are mortgaged.

5. PAY CASH
Pay cash, pay cash, pay cash.  Most people think they cannot live without credit.  In fact, this is simply not true. It can be done, although it may mean occasionally postponing purchases, especially impulse purchases.  Anything can be purchased with cash, with the possible exception of a house, if you are simply patient enough.  This is especially true of automobiles.

6. NEVER RENT TO OWN
Never, ever purchase anything on a rent to own basis.  This includes cars, furniture, and even houses.  These seem like good deals because the payments are low, but in fact the hidden costs of such obligations are frequently equivalent to interest rates as high as 26% and higher.