While they don't represent the majority of bankruptcy debtors, they tend to get the most attention, debtors who are serial filers. They've filed bankruptcy once, twice or maybe even three times yet continue to fall into the same financial troubles. Well one of the biggest pitfalls of serial bankruptcy filers is that they don't understand or won't acknowledge the harsh realities to accumulating too much debt.
Let's take a look at a few facts:
In the beginning, right after your bankruptcy exit, things are running smoothly again. It feels like you just got a raise because less of your money is going to creditors. This is a great feeling but many debtors take this as a sign that it's okay to spend and fail to save. Your credit is improving and credit card companies, vehicle financers and even mortgage lenders all want your business. Many post-bankruptcy debtors "fall in love" with the idea of having good credit and end up taking on sub-prime loans with astronomically high interest rates. But having high interest loans don't faze some post-bankruptcy debtors. They rack up credit card balances that match or even exceed the debt they carried before they filed bankruptcy and they purchase a home and/or vehicle that is way beyond their means, simply financing it with expensive debt.
The final step in this descent into another bankruptcy filing is that debtors quickly become overwhelmed with their debt payments. First they try to take out more loans to pay off the old debt while their credit is still good. But eventually, they end up defaulting on most, if not all of their debt simply because they don't have enough income to finance their debt diet. Post-bankruptcy debtors must understand that when they exit bankruptcy, they cannot take on the same amount of debt they had before they filed. Post-bankruptcy survival requires that debtors make a drastic change and reduce their debt levels to the absolute bare minimal.