Even though filing for bankruptcy has a negative connotation at least the ways in which the media promotes it, it may be the last resort option for many people under the grip of severe debs and the corporate debtors in India. Try to find out after going through the norms of NCLT India whether you are eligible to file for bankruptcy or not, and you must explore all the other forms of debt relief before choosing this option. One of the major consequences of bankruptcy is that it is going to affect your credit score and you must analyze what you need to file for bankruptcy so that you can make a sound decision. Although you have to accept the disadvantages of declaring insolvency, there are ways to bounce back after bankruptcy and all that you need is proper planning and commitment.
Even though life after insolvency is not going to be easy as you have to repair your credit score patiently, you can certainly hit the positive note after the liquidation of your assets. To know it better, the procedure does not make your credit history clean but takes away your debt obligations. The following steps highlight how you are going to deal with the aftermath of the bankruptcy declaration.
Life after bankruptcy usually implies that you are going to pay higher rates of interest than your previous loans. However, you need to go through proper budgeting and establish good reputation to avoid getting affected with the interest rates of the loans. If you are still not aware of the ideas of budgeting, you have to start with it immediately after filing for bankruptcy. For those individuals who have fewer clues of where the money goes every month, an observation period of three months can help them to track their finances. You can start tracking your financial expenses for three months to find out how much and where you spend. After the completion of three months, you will be able to differentiate between the necessary and luxurious expenses, and that requires long-term planning. With a proper financial plan, you can create boundaries to the money you are going to spend and know how to plan your expenses over a few years.
Checking the credit report
After the completion of the bankruptcy procedure, you must pull out your credit report to find out whether all the debts mentioned there are valid, and there must be no mention of unpaid debt as it can continue to affect your score. Make sure there is no negative or incorrect information that may have entered your report by mistake. However, it is not just checking the report once after the declaration of bankruptcy, but you should continue checking it every month. Apart from checking the errors, you have to ensure that the credit bureau is aware of your financially responsible behavior such as paying bills within time. It is not enough to do the things right as far as the credit report is concerned, but you need to make sure that the good financial activities reflect on the credit report.
Spending more cash
If you have been spending ruthlessly on credit cards before the declaration of bankruptcy, it is time to change your habit. Once you have dealt with the complexities of the company law appellate tribunal, you must try to re-establish your credit with responsible usage of your finances. When you spend cash, there is a better opportunity to watch your expenses and you can stay away from the habit of overspending.
Making timely payments
The history of payments makes up for about thirty-five percent of your credit score, so you must create consistency with timely payments instead of postponing the payment of your bills. For instance, if you have a home loan, you have to boost the cycle of payments every month on the first date. However, if you fail to stay in touch with the payment schedule for the home loans, you can set up a system of automatic payments through the bank to maintain the schedule.
Avoid high-interest loans
After the declaration of bankruptcy, you must stop going for the high-interest bank loans and stay away from those money lenders who offer high-interest products. Even if you are sure to afford the bills, the best option is to ask for money from a friend or family member instead of looking towards the retirement savings.
Saving with emergency fund
If you are really keen to save money for dealing with the unexpected financial emergencies, start saving money in a separate emergency fund and make sure it covers about three to six months of your living expenses, which can take a year or even longer to save. Some people fail to recover from bankruptcy as they are not aware of the tactics to come out of the whirling debts. It requires a lot of hard work, will power, patience, and discipline to bounce back from the negative effects that bankruptcy creates on your finances.