Bankruptcy is a legal procedure where people find relief when they lack behind on payments and get overwhelmed by debts. The decision to choose bankruptcy can be difficult, but it is the best way to achieve a new financial start in many cases.
Once you initiate bankruptcy, you can file under several “chapters.” A Chapter 11 business bankruptcy attorney can help determine how to reconstruct your financial obligations, reorganize sales, and many more.
How to rebuild credit after bankruptcy?
Many people hesitate to file bankruptcy when they get to know that bankruptcy can stay on their credits for up to 10 years. However, it is only applicable for chapters 7 and 11 bankruptcy cases. In the case of chapter 13, you can pay before or even pay off at any time, but it may not always result in sudden discharge. It can result in unfavorable plan modification pursued by the trustee or the insurance claim holder. These matters should be discussed with your attorney so that you can evaluate the risk and benefits.
Best practices to rebuild your credit.
Below are some steps you can take to rebuild your credit while completing a bankruptcy plan.
- Have a secured credit card
While you are working for better credit, a secure credit card is helpful. You can make purchases through a card like a traditional credit card. But it is considered “secured” because you have to put some money as a security deposit to open an account.
- Become an authorized user
If you have someone you trust with a good credit score, they can add you as an authorized user in their account. It will make you allow purchases. But the primary account holder will be responsible for payments. If they use the account responsibly, it will help boost your credit score.
- Pay your bills on time.
Paying all bills on time is easier said than done. Your payment history is the main driver of your credit score. Negative history like missed payments or late credit card payments can affect your credit score for years.
- Review the credit report for inaccuracies and dispute them as needed.
A number of factors can affect your credit score. So it is better to know what is mentioned in your credit report to figure out exactly where you stand. Your credit score will give you a general sense of creditworthiness. The credit report can offer more details.
- Keep some credits available.
The amount of credit used is known as credit utilization. It is important because keeping your credit card utilization below 30% shows that you manage your credit responsibly.