Bankruptcy is sometimes a result of wrong decisions, often involving reckless spending or credit habits. Often considered as a last resort effort to dig out of unmanageable debts, bankruptcy provides a business or an individual with the opportunity to make a fresh start and turn around their finances. While some believe that bankruptcy represents failure, experts believe that it is a financial tool that helps in identifying your mistakes, learning from them, and coming out stronger and better. Seek the help and guidance of a professional bankruptcy attorney to recover from bankruptcy and restore your creditworthiness. Here are some ways to recover after bankruptcy:
1. Check Your Credit Reports and Maintain Good Credit Habits
Since bankruptcy leads to a significant drop in your credit scores, you will need to take steps to improve them and restore your creditworthiness. The extent of the drop in your credit scores depends on several factors including the status of your existing credit accounts and the type of bankruptcy filed by you. While Chapter 7 bankruptcy wipes out all your debts, it has a significant impact on your credit scores, the Chapter 13 bankruptcy involves a restructuring of the debt thereby allowing you to improve finances. The negative impact of Chapter 13 bankruptcy on your credit report is lesser than that of Chapter 7 bankruptcy.
2. Review Your Past Mistakes and Do Not Repeat Them
Identify the mistakes that led you into bankruptcy and take steps to not repeat them. This involves re-examining your earlier spending and borrowing patterns. Carefully consider how you had intended to repay your debts before, identify your shortcomings, understand mistakes and plan a more realistic path forward. You can take the help of a professional or a certified credit counselor to devise a realistic budget and plan for rebuilding your credit. There are no quick fixes to improving your credit scores and rebuilding credit will take time, patience, and discipline.
3. Rebuild Your Credit
This involves the identification of factors that determine your credit scores and adopting habits that will help you improve them. Some ways to rebuild your credit include taking a credit-builder loan, getting a secured credit card and using it for regular payments like monthly bills. This will help you create a pattern of regular and timely payments thereby building up your credit score. You can even take small-duration loans and pay them back on time to build your credit scores.
4. Make a Concrete Business Plan
Outline a post-bankruptcy plan outlining what you wish to achieve and identifying ways to do that. You already have a stock of your current assets, debts, property, and accounts receivable. Use this information to formulate a workable and realistic plan. You also need to regularly review your plan and monitor your expenses to prevent sliding back into debt.
5. Have Proof of Discharge from Bankruptcy
You will be discharged from bankruptcy after a certain period when all your debts have been paid off or settled. While a chapter 7 bankruptcy shows on your credit report for ten years, a chapter 13 bankruptcy is visible for seven years. Seek a copy of the discharge letter that specifies that your debts have been discharged and that the creditors should not attempt any further collection. Once you have the proof of discharge you can start working on rebuilding your credit and increasing your credit scores.
Grab the opportunity to come out of bankruptcy by fixing your problematic financial habits and taking your business on the right path.