A lot of people who are struggling with debt are afraid of the bankruptcy process. Much of this anxiety is spurred by a lack of knowledge, as there are often a lot of misconceptions about what bankruptcy means and how it positions you once the process is completed.
The bankruptcy process doesn’t leave you completely broke. In fact, you can enjoy a number of bankruptcy exemptions that ensure that you have a firm financial foundation as you move into your post-bankruptcy life. For some people, though, there are still lingering concerns about the long-term implications of a bankruptcy on their credit score.
How bankruptcy affects your credit score
It’s true that a bankruptcy will negatively impact your credit score. Depending on the type of bankruptcy that you pursue, it could remain on your credit report for as long as 10-years, and your score will initially take a dive. When you think about it, this makes sense. In exchange for the debt discharge that you receive through bankruptcy, future creditors are put on notice that lending money to you may be a risk.
But it’s not all doom and gloom. In fact, a lot of people who successfully navigate the bankruptcy process are able to obtain lines of credit and work on rebuilding their credit score shortly after their bankruptcy is completed.
How to rebuild your credit score
Although it may take some time, you can work to rebuild your credit score post-bankruptcy. Here are some ways that you can go about doing that:
- Pay bills on time: Even after your bankruptcy, you may have monthly bills that come due. Make sure that you’re paying all of those bills on time, preferably well before their due date. Falling behind will just lower your credit score even more.
- Consider a secured credit card: A lot of people think that they can’t get a credit card once they’ve gone through bankruptcy. This isn’t true. The credit that you’re able to receive may just look different. For example, the most easily accessible credit card post-bankruptcy is one that is secured. Here, you may have to deposit money that covers the credit card’s limit so that the lender can turn to that if you struggle to pay, but this is a safe way to start to rebuild your credit. Once you’ve increased your credit to a certain point, you can then turn to an unsecured credit card.
- Check your credit report regularly: You’ll want to make sure that your credit report is accurate and that discharged debts are removed. So, make sure that you’re checking your credit report periodically.
- Create a budget and stick to it: You don’t want to over-extend yourself financially after coming through bankruptcy. You can better position yourself for success if you’re able to create a budget and stick to it. So, be realistic with yourself and create a budget to which you can adhere.
Do you want to learn more about bankruptcy?
For most people, there’s a lot of uncertainty about the bankruptcy process. But you can learn more about what bankruptcy can do for you by discussing it with an attorney who is experienced in this area of the law.
Hopefully, by doing so you can determine the best course of action for you and your family. That may include securing the debt relief and the fresh financial start that you need. We know taking that first step can be scary, but please know that legal teams like ours are here to support you every step of the way.