Michigan Bankruptcy: Post Bankruptcy Tips
Michigan Chapter 7 bankruptcies are usually a one-time thing. However, 8 percent of Michigan bankruptcy filers end up filing again. Learning from past mistakes can help you avoid having to file bankruptcy a second time.
Can I File Bankruptcy More Than Once in Michigan?
Yes, you can file personal bankruptcy more than once in Michigan. If you successfully filed for Chapter 7 bankruptcy and had your debts discharged, you must wait eight years from the time you filed before you can file again.
If you decide to file a Chapter 13 bankruptcy, you can file four years after your original Chapter 7 bankruptcy. Chapter 13 is different, in that it follows a structured reorganization of your debt, with a payment plan of 3-5 years.
Most people understand the implications of filing for bankruptcy multiple times, and want to avoid it. Below, you’ll find ways to avoid having to file for multiple bankruptcies.
Avoid Another Bankruptcy By Opening a Savings Account
Many people that file for personal bankruptcy in the Downriver area do not have a savings account. If you don’t have one, and are just coming out of bankruptcy, now is the time to open one. Check with the local bank branches to find a good interest rate. Another option might be a money market account, which usually has a higher interest rate, but there needs to be a minimum balance in the account at all times.
Savings accounts help you avoid bankruptcy by having a nest egg for unexpected expenses. With over 45% of bankruptcies being attributed to medical debt, having some money to help offset the costs of an emergency surgery or visit to the ER could be crucial to keeping you out of bankruptcy court.
Additionally, if you suddenly need a vehicle to get to work, you will not have to rely on a loan to get a new car. Many bankruptcies are due to overextended personal loans, and this can be helped by having a savings account with at least 3-6 months worth of expenses, in case of emergencies.
To Avoid a Second Bankruptcy, Keep a List of Expenses & Update It
Even after your bankruptcy is over, you will still have monthly expenses. Food, necessities, housing, and utilities will still be due monthly. Write them all down, with each monthly expense itemized.
It also helps to make a plan for how to pay for these expenses every month. Use your savings account to save what is left over each month, but do not draw from it unless you are in an emergency.
Keep Track of Your Income So You Don’t Need Another Bankruptcy
Much like your expenses, you will want to keep a record of your income. It is important to keep these two records (expenses and income) together, so you can start to properly budget. Subtract from your monthly income everything you will need to meet your monthly expenses. Anything that remains should be put into your savings account.
Do not count on windfalls or one-time income sources to keep your expenses met. Often, individuals that file bankruptcy in Michigan rely too much on infrequent income to meet their expenses, and end up taking out high interest loans to cover their bills. This then becomes yet another expense, and the debt continues to pile up until it seems insurmountable.
Avoid High Interest Loans to Keep Your Finances Manageable
Payday loans are often a short term solution with long term ramifications. These are short term loans that have extremely high interest. Before regulators stepped in, payday loan companies had interest rates of 250% or more in many cases. That means for every $100 borrowed, the amount owed was $350.
Michigan caps payday loans at 15% for the first $100 borrowed, with a reduction by 1% in the cap for every additional $100 borrowed. So if you take out a $600 payday loan (the maximum amount allowed by Michigan law), your interest rate would be 75%. That is still an extra $450 owed on the loan.
Instead, if an emergency arises, you should have money saved in your savings account to cover these expenses, or at least minimize them.
Open a New Credit Card
While you may be hesitant to apply for a credit card after your bankruptcy, it would be a good idea to open a new account. After bankruptcy, your credit will take a major hit, and a small line of credit that you pay off every month is helpful in building your credit score again.
Look for cards that offer the lowest interest rate, and apply for that card. You can usually find good information from sources such as Credit Karma or NerdWallet. The interest rate may initially seem high, but it can be lowered over time with good payment history.
Make small, manageable purchases and keep track of this on your expense report. Pay off the balance every month on or before the due date, and continue to do this for several months. Your credit score will start to rise, and this will help you improve your financial future.
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