Filing for bankruptcy can take a toll on your credit score and it may take some time to rebuild. When this happens, you may feel like you’re left with nothing.
If you’re considering filing for bankruptcy, it’s important to understand all of your options. Chapter 11 bankruptcy is a complex process that is typically reserved for businesses, but can also be utilized by individuals with high levels of debt. If you’re in need of Chapter 11 bankruptcy assistance, it’s important to work with an experienced attorney who can guide you through the process. The Pope Firm offers comprehensive bankruptcy services, including Chapter 11 bankruptcy, to help individuals and businesses get back on track financially
For some, resorting to Chapter 7 bankruptcy can be the only light in a dark tunnel of financial worries and distress. In fact, nearly 70% of Americans filed for Chapter 7 bankruptcy in 2021.
The truth is, it does not hurt to be hopeful in times like this. Talk to Chapter 7 bankruptcy lawyers and know your options should you choose to file for Chapter 7 bankruptcy. A professional legal team with years of experience and dedication to the community is what you need.
Once your debts are paid off and the remaining balance has been discharged, you can start rebuilding your credit as follows:
5 Ways to Rebuild Your Credit After Chapter 7 Bankruptcy
Going through bankruptcy is not the end of the world if you know what to keep in mind. Here are some things to note when rebuilding your credit after Chapter 7 bankruptcy.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy or “liquidation bankruptcy” is the most common type of bankruptcy in the US. It’s one of the several types of bankruptcies that lets the debtor liquidate all their nonexempt assets to pay their lenders.
Filing for Chapter 7 bankruptcy with a lawyer can expedite the legal process and work in your favor. Here’s what happens after filing for chapter 7 bankruptcy.
- Asset liquidation – the court liquidates and sells the debtor’s assets or property and pays lenders and creditors.
- Exemption – not all assets will be sold to pay off creditors or lenders. Exempt properties include clothing, your house, retirement savings, personal belongings, and more.
- Rebuild – reset and start a new financial journey away from further loss and distress.
Consult your chapter 7 bankruptcy lawyers for other properties that can qualify as exempt, including your house or vehicle.
Once you’re finished with the general process of going through Chapter 7 bankruptcy, rebuild your credit history with the following tips.
1.Review your credit report.
After completing your credit report, you’ll want to ensure you’ve learned from your misstep and not make the same mistake twice.
Reviewing your credit report will give you a detailed picture of what you’ll want to avoid. This is also the time to check if your debts have been removed from your credit history.
The first step to rebuilding your credit is understanding where and how to improve your score. More importantly, you’ll learn how to improve your financial situation and behavior towards future creditors.
2.Be responsible with your credit habits.
Be a responsible obligor by making timely payments to your existing loans or non-bankrupt accounts.
Even minimum payments will go a long way and show future creditors a good credit record. Pay your obligations on time and in whole, if possible, to repair your post-bankruptcy history.
Responsible financial and spending habits start with self-discipline. If you’re on multiple credit card use, try to reduce them to what you only need. Having the convenience of spending is one of the primary reasons you go into debt.
Paying off your balances every month rather than later also helps lower interest and rebuild credit after bankruptcy.
Finally, build an emergency savings account to cover unforeseen and unexpected expenses. Expecting the unexpected works all the time when it comes to making financial decisions.
3.Get a new line of credit.
One good strategy when rebuilding your credit is demonstrating your ability to make timely payments.
The following are some new credit suggestions you can qualify for to rebuild credit after bankruptcy:
- Secured Credit Card – While it’s important to reduce your dependence on credit cards, a secured credit card builds creditworthiness. Although this card can accumulate higher interest rates, it helps show lenders that you are a responsible holder.
- Credit Builder Loan – A credit builder loan can be smaller than traditional ones, but it helps rebuild credit. Make monthly payments to your lender, including interest, until the loan is released to you.
- Authorized User – Rebuild your credit with another holder’s credit card by becoming an authorized user. You can use the card for personal purchases and add them to your credit record, including your payments.
The takeaway from these suggestions is that rebuilding your credit requires regaining the creditor’s trust and confidence. The process can take a while, but it pays off in the end.
4.Keep an eye on possible red flags.
Previous bankruptcy is not a good look on your record, but you can always do something about it.
Being proactive with your transactions and spotting possible red flags on your credit score can help prevent another problem. Check your credit score every month and note if there are further decreases.
Common red flags include fraudulent transactions, identity theft, and a faulty or inaccurate status on your account.
5.Take it slow and be patient.
Generally, it takes two months to two years before you can see a significant improvement in your credit score. The secret to getting back on track after financial pressure is to take things slow and be patient.
It’s easier said than done, but taking the time to learn from experience truly is essential. You will rebuild not only good credit but a habit of being a responsible borrower.
It’s often asked which type of bankruptcy must be filed, either Chapter 7 or Chapter 11.
For business-related bankruptcies, filing for Chapter 11 is best. While it has similarities with bankruptcy Chapter 7, it has its edge when it comes to business-related financial troubles.
Conclusion
Resetting your finances might be the best resort to restart your financial journey. Although a history of bankruptcy affects your credit record, you can take concrete actions to get back on your feet.
Being genuine and committed to your “creditworthiness” is the first step to rebuilding your credit. Develop a sense of urgency when making payments and keep a close eye on your every transaction.
The relief of being debt-free is also unparalleled. Hiring reliable and experienced Chapter 7 bankruptcy lawyers will guide you through this confusing and scary process. Moreover, they can help you start over and present rational alternatives if bankruptcy Chapter 7 is not in your options.
