Debtors exiting bankruptcy after receiving a fresh financial start need to understand the road that led them to bankruptcy n the first place if they plan to find financial success after bankruptcy. Below are three personal finance mistakes that debtors need to avoid if they plan to avoid filing bankruptcy for a second time:
- Using credit cards like a primary cash source for your basic everyday needs. One of the biggest mistakes that debtors who file for bankruptcy have made is using their credit card to pay for basics such as groceries instead of using cash. Using credit cards in this manner can give debtors the illusion that they have more money than they actually do and cause them so spend more taking them one more step closer to a second bankruptcy filing.
- Failing to create and maintain an emergency fund. Having an emergency fund could mean the difference between taking advantage of your second chance after bankruptcy and sliding into another debt sinkhole. When a debtor doesn’t have an emergency fund, they often rely on credit cards or other forms of debt when they have an emergency. This can lead to credit card balances, you simply can’t repay.
- Failing to get and keep health insurance. Medical debt is another leading cause of bankruptcy. If a debtor gets sick and is forced to spend significant amount of time in a hospital, he/she could face medical debt in the tens of thousands of dollars. And how many people have $40,000 laying around to pay for medical debt? Not many. That’s why maintaining a good health insurance policy is important to avoiding a second bankruptcy.