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10 ways to bounce back from bankruptcy

If you've been through bankruptcy, you probably think your credit is as shattered as Humpty Dumpty's shell. It may be, but the difference is you can put it together again.


During the 12 months ending June 30, 2005, more than 1.6 million people filed for personal bankruptcy according to the Administrative Office of the U.S. Courts.

Credit after bankruptcy is difficult to obtain. You will likely end up paying higher interest rates when you can find it, and you could be targeted by unscrupulous lenders who believe that desperation makes you an easy target.

Despite the difficulties, there are some simple things you can do to start re-establishing your good credit.

"Regardless of your situation, your goal after filing bankruptcy should be to straighten things out and start establishing good credit," says Mark Oleson, director of the University of Missouri Office for Financial Success.

Here's how:

1. Make a budget.  "Track your expenses for three months to get an idea of how much you're spending and where that money is going. Then create a realistic budget that fits within your monthly income. The first step to saving is to set boundaries on your spending," says Greg McBride, CFA, senior financial analyst for Bankrate.com.

2. Learn to love cash.  One of the benefits of bankruptcy: Many people who've been through it develop a "depression-era mindset," says Chris Farrell, host of the nationally syndicated television show "Right on the Money!" and author of "Right on the Money: Taking Control of Your Personal Finances." "And that's not a bad thing." The result: You pay with cash, buy only what you need and save more.

"But don't fear credit. You must re-establish credit after bankruptcy unless you plan to buy everything in cash -- including a house or cars. Even future landlords or employers will want to see that you have rebuild credit after bankruptcy. Love cash, but learn to manage and respect credit," says Justin Harelik, Bankrate's Bankruptcy Adviser.

3. Pay all your bills on time. Even the small ones.  Also important: your bank. "If you are bouncing checks, have overdrafts or are incurring bank fees, that will show up (on your credit report) as well,"says Ric Edelman, author of "Discover the Wealth Within You."

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4. Watch your credit report.  You've been through a bankruptcy to get a clean slate, and you need to make sure this is accurately reflected in your credit reports. You also want to take control of your finances and start making some smart moves, which means monitoring your report regularly for errors. "Most people are scared of credit and finances because of the numbers, and they don't understand it," says Oleson. "But you ought to know what people are seeing when they look at you."

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