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Bankruptcy teaches long-lasting lessons

Even years after bankruptcy proceedings, the effects of overspending can be felt acutely in a filer's financial life. Sometimes, people fail to remedy their financial practices, which can lead to continued troubles. Still, personal bankruptcy can be a helpful teacher, according to those who have already been down that path.

First, it is important to recognize that financial problems are far more common than one might think. In small towns, in particular, it is not uncommon to run into others who are undergoing bankruptcy proceedings during your court hearings. No one is immune to debt, even if they appear to have their lives in order. Financial problems can happen to anyone, given the right circumstances.

You can also keep most of your personal belongings during bankruptcy. People who are just starting the process generally fear that men with giant boxes and trucks will come to haul away everything, but that is rarely the case. But although you have declared bankruptcy, you still get to keep all of the items you purchased on credit. This can convince people that there are no consequences for their spending habits, according to experts, which can create a dangerous precedent.

Additionally, those who have been through bankruptcy know that paying for something in cash is a valuable decision. Instead of playing catch-up with credit cards, it makes sense to stick to only buying items with your debit cards or cash savings. Do not apply for new credit cards after bankruptcy, even if you are unaccustomed to living on just your salary.

Filing for bankruptcy can be a trying experience, but it generally leads to improved financial literacy, despite the growing pains involved in the process.

Source: MSN, "3 things I learned from bankruptcy," MSN Money staff, June 26, 2012

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