Struggling with an overwhelming amount of debt is undeniably stressful. Filing for bankruptcy may seem like a viable solution to overcome such circumstances. However, you may have questions on what life after bankruptcy will be like.
Whether you will be able to rebuild your credit is a common concern among those filing for bankruptcy. Because your credit may not currently be in the best state, doing anything to further diminish your credit score may seem impractical.
Restoring your credit after bankruptcy is feasible
Your credit score will not improve overnight. Yet, with determination, good habits and the fresh start that filing for bankruptcy provides, rebuilding your credit is very possible.
If you file for Chapter 7 bankruptcy, that filing will remain on your credit report for 10 years. This may seem alarming but, in many cases, this proves to lenders that you have taken steps to amend your finances. It also may relieve some lenders to know that filing for bankruptcy again is not possible for another eight years.
Steps to take to rebuild your credit
Here are some ideas to help restore your credit back to a healthy position:
- Review your credit score. Consistently assessing your credit report is important. You can access free annual credit reports online, which can help give you an accurate picture of where you stand.
- Prioritize existing debt. Chapter 7 bankruptcy does not wipe out all forms of debt. Actions like paying on time and paying extra when you can all go a long way to show lenders that you are making progress.
- Apply for a secured loan or credit card. Taking on more debt can seem counterproductive. However, applying for a secured loan or credit card, which requires a deposit, is a cautious way to responsibly use credit if needed.
- Cosign with a family member or friend. Cosigning can help alleviate a lender’s reservations about taking you on. It is important to be certain that you can repay your obligation to avoid consequences your loved one could face.
Good things will come with time and patience
Even smaller steps like budgeting and creating an emergency savings fund to cover unexpected expenses can all contribute to improving your credit. While you cannot control the time that your bankruptcy filing will remain on your credit report, you can fill that time with positive steps to offset the negatives.