Getting on your life back on track after declaring bankruptcy is so essential to survival. A huge part of getting back on track in life after bankruptcy is learning to rebuild one’s credit. How to rebuild credit after bankruptcy might be a huge question that we may attempt to tackle today in a few minutes’ reading.
Before we go into the process of rebuilding credit, let’s first understand the term ‘bankruptcy.’ Nobody can just declare bankruptcy. There are a few requirements that enable one to file for bankruptcy. There are two variants of bankruptcy, one being – chapter 7 and the other being – chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a more restrictive form of claiming that you will not be able to pay any of your debts. During this process, you are required to liquidate all of your possessions that could help you repay your debt. When it comes to the liquidation of your belongings, even your home and car are included under that. All of your possessions, according to the court, can be mandated for liquidation. Usually, in chapter 7, bankruptcy is an option for individuals who have a minimal amount of income.
Chapter 13 bankruptcy
This is the more commonly used bankruptcy, which also acts like a repayment plan. During this process, a lot of your debts are immediately wiped away after the liquidation of your possessions. The state of residence and the court set up an arrangement for your payment plan that you must follow for an extended period of 5 years. If you complete all your payments, then the court forgives your debts. You must also keep in mind that while the debts are discharged, things like student loans or mortgage payments will not be discharged. Smaller more insignificant credit such as credit card and medical bills will be taken off your debt, after that giving for breathing space, to be able to pay off a major chunk of your debts, according to the plan.
Having understood these types of bankruptcy, let’s focus on how to rebuild your credit after bankruptcy:
- Make sure that your credit reports accurately reflect your bankruptcy details: it is natural for people not to want bankruptcy to appear on the credit report. But looking at from the point of view displaying outstanding or delinquent balances can be more detrimental to your credit score and report it is much better to have a declaration of bankruptcy appear on your credit report. It is always much better to show zero balance on your accounts rather than have a negative balance account. Naturally, creditors should not be able to display negative account information even after the bankruptcy discharges. So check-in, periodically, to see if your credit report is apt. The bank permits want to check their credit report and only once each year. It may cost more to check a couple of months on a regular basis. It is always better to be sure of what your credit report says rather than be in for a shock.
- Make sure to keep paying all your non-bankruptcy accounts on time: after the declaration of bankruptcy, not all your accounts will be included in that bankruptcy plan. As discussed earlier, student loans are one such account. So make sure to continue to pay them on time month actively. Doing this your help you improve your credit score easily. The goal is to show that your financial mishaps are behind you at this particular moment. Even though these accounts are not directly stored in your credit report, they will eventually be reported, especially if one begins to fall behind another payment schedule. Making sure that it doesn’t happen to help with your credit score and report.
- Look for a credit repair company: If you are a person who finds it very hard to manage your finances and make your payments on time, there are plenty of advertisements of companies that can help you build your credit score again. These credit repair companies can help you repair your credit report easily without you having to take much of a headache figuring out how to pay off all your debts.
- Avoid job hopping at all costs: Job changing won’t affect your credit score indicates that you have a problem with discipline for holding onto responsibility. This could become an issue with lenders in the future, and you might not meet the ideal type of borrower on whom Lenders can take a chance.
These are just a few of the ways that you can begin rebuilding your credit after bankruptcy. First, fully understand the type of bankruptcy that you have filed and also follow these steps to help you rebuild your credit after bankruptcy.