Best Methods to Help Pay off Debt After Filing Bankruptcy

By now, you may have learned that bankruptcy can be a long and drawn out process. Going to court and filing the case is just the beginning of the journey of overcoming your financial difficulty. But what do you do if you are still struggling after your case has been filed? Where do you start if you have to pay back your creditors? Here is a look into some of the best methods to help you pay off your debt after filing. 

Get Organized

Depending on what chapter you filed, some bankruptcy filers may have post filing debts or debts that were reorganized from filing. It may be difficult to keep track of what has been taken care of through filing and what debts you still owe. One solid way to stay on top of your financial health is to regularly check your credit reports from all credit bureaus and to maintain a solid budget. By removing discretionary expenses out of your budget, you will have a better understanding on what’s still owed and how to get started on paying those debts down.

Find Extra Funds

Clearly, most people file bankruptcy for one reason, they owe more than what they have or what they can afford. For some, filing bankruptcy can help arrange payment plans with multiple creditors. While this may help make it easier to keep track of payments, some people often end up filing bankruptcy again due to not having enough income to repay their debts or not budgeting properly. This is where having a side business or a second job can really help out. Most financially successful people have more than one stream of income to maintain a positive disposable income. Even the busiest people can benefit by running an online business or doing errands for cash. For example, you can look into driving for Uber or Lyft on the weekends. Or, you can even turn hobbies like knitting and photo editing into a side job. Obviously, this may not be possible for some people, however, most people fail to make good use of their skills and free time and end up struggling with debt in the future. 

How to Pay Down the Debt

Once you have organized your debt and assets, it is now time to take action. One popular technique people use is the Snowball technique. This entails paying off debts with lower balances or interest rates to get the ball rolling. Another useful method is the Avalanche method, where you pay off the bigger balance, higher interest rate debts first. As both methods can help you get back on track with your finances, the Avalanche method is generally more useful because paying off debt with the high interest rates means you will be paying less over time. By using the snowball technique, you will essentially end up paying more on on the high interest rate debts as time goes on. 

How to Avoid a Similar Situation in the Future

It is very important to work out a solid budget and organize your debts to get a good picture on what debt paydown method is best suitable for you. One big mistake people make after filing is incurring more debt while still paying down existing debt. The best ways to avoid accumulating further debt go back to budgeting, eliminating any unnecessary expenses, and making double payments on debts that are owed rather than new expenses.