If you’re like most people, financial struggle doesn’t hit overnight; it was built over years, layers of events that all combined created the need for a fresh start.
The effect of living in this kind of debt cycle is you lose perspective on what normal feels like. You can’t picture a day that doesn’t involve evading creditors, worrying about what new bill will pop up, if your debit card will be denied at a store, and countless other stressors that chip away at us and begin to shape the shame we feel about not being “good” with our money.
So what does life feel like immediately after filing bankruptcy?
The Phone Stops Ringing
One of the most powerful tools bankruptcy provides is the automatic stay; the minute you file bankruptcy the automatic stay, or commonly understood as bankruptcy protection is triggered. The protection operates to prevent collection efforts from all creditors. This means the harassing phone calls must end; the anxiety that comes from feeling like you cannot answer the phone when it’s a number you don’t know starts to dissipate and you will feel more in control of your daily life, where before it felt like you were living a life of “duck and cover” to avoid the scrutiny of your creditors.
The debts that remain, you can pay with confidence
Generally, after filing bankruptcy all that you are responsible for paying are rent or mortgage, car payments, and normal living expenses. When you are not having to pay any money towards unsecured debt you likely have more cash flow each month; it is this breathing room that allows you the security to know that when bills come due, as long as your income is sufficient (meaning working full time) you have the money to pay. Paying bills on time feels good and serves as a reward for the hard work we put in at our jobs; this small win builds upon itself and contributes to the overall feeling of a fresh start and that things in our lives are moving forward and feeling fixed.
Your Credit Score Will Improve
One of the major factors that go into computing our credit scores is our debt-to-income ratio. The Federal Reserve Bank commented that because bankruptcy cancels out most of a person’s debt their credit score will rise after filing bankruptcy because the debt-to-income ratio is now vastly improved. Additionally, the debt that remains reporting is usually secured debt, like a mortgage or vehicle; as you continue to pay timely on those debts your score will increase rapidly because timely payments on secured debt is viewed more favorably than payments on unsecured debt.
Ability to save cash
Perhaps one of the most powerful advantages filing bankruptcy gives is the opportunity to actually build cash savings. When your budget is cleared of extraneous expenses and left with only necessary living expenses you will have more cash flow each month. Prior to filing, the stress, anxiety, and uncertainty of bills creates a cycle of crazy that we feed into; the result being that our lives feel crazy and our spending is extreme, which all contribute to the vicious cycle continuing. The relief of filing begins to clear the crazy and allow more steady rational behavior to settle in; the result of this is consistent intentional spending; and when we are being intentional with our money, saving is easy.