The overdrawn bank account, pile of credit cards, and financial woes that drive debtors into bankruptcy might be the result of bad financial decisions, or they might stem from unfortunate experiences like job loss or an economic slump. Bankruptcy is an incredibly tough road to travel. Many debtors make a promise that they'll never again experience the financial turmoil that precedes bankruptcy.
However, keeping your finances in good condition after bankruptcy isn't always a sure thing. You might cut up all your credit cards when you file for bankruptcy, but you'll be astonished at how quickly credit card companies will start sending you offers through the mail. Some financial experts even suggest getting a new card about six months after finishing bankruptcy as a way to rebuild credit.
Don't Forget the Fun When Budgeting
An essential activity after bankruptcy is the creation of a workable budget that won't lead to excess spending, new debts, and future financial troubles. If you're dedicated to the budget you create, you can avoid accumulating new debt after completing bankruptcy.
However, be careful when eliminating all the "fun" from your budget. A lean budget with absolutely zero dollars set aside for simple things like going out to the movies or having a date night at a local restaurant is like going on a diet where all you get to eat is cabbage and carrots.
That's great if you're a rabbit, but cutting out your entertainment budget entirely is a surefire way to make an unintended purchase and get into debt again. Even if your entertainment budget is just $30 a month for a matinee and some popcorn, make sure your life has some fun and remember to relax each week to reduce stress.
Don't Assume Health Insurance is All You Need
According to an article on Forbes, the number one reason for bankruptcy is medical expenses. As of 2010, around 62% of all bankruptcies were due to medical expenses, according to numbers compiled by Harvard University.
However, this is the most important part of that study:
One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.
Another study, conducted in by researchers from Harvard Law School and Ohio University also discovered that medical insurance didn't always offer complete protection from bankruptcy. According to the researchers, families who filed for bankruptcy and had private insurance often had out-of-pocket medical bills that topped $17,000. Uninsured filers saw their bills reach around $27,000.
For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse… Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy.
Health insurance is an essential part of any household budget, but it's not a complete safety net against high medical bills. One of the best reasons to begin a savings account or emergency fund is to make sure that the overages and extra bills that come along with major medical bills don't force you toward insolvency and overdue bills yet again.
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DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.