Handling Emergencies: Savings vs. Credit

One of the common questions from clients is whether they will be able to use credit cards again immediately after bankruptcy.  The answer?  It depends.  Initially, it is unlikely you will be able to obtain a high credit limit.  The most likely option to get restarted is a secured credit card.

This raises is an important issue though.  What if you didn't really *need* credit?  What if you had established a personal savings account after you stopped paying high credit cards bills, and instead saved up an adequate fund to handle emergencies?  Is it really worth paying 1000s of dollars a month in bills you can't afford so you can afford the supposed privilege of being able to borrow more?

We advise our clients to establish a savings account no later than the time they file bankruptcy, and make "payments" to their savings account in the amount they were paying towards their credit card bills before filing - usually just to cover interest, fees, and penalties.  The result?  Many can save very substantial amounts of money that are adequate to cover their needs in an emergency.  And best of all?  It's their *own* money.  If there is no emergency, you can simply continue to save. 

It is much better to have your own money than to have the right to borrow money from someone else at high interest.  More questions about how bankruptcy could get you on the path to savings?  Contact us for a free consultation.