September 12, 2016
Small business owners generate nearly two-thirds of new private sector jobs every year according to the Small Business Administration. These entrepreneurs, and the people seeking jobs with them, are the risk takers and innovators powering our economy. But business owners sometimes face unforeseen financial setbacks that result in bankruptcy.
Not to fear, bankruptcy in no way means your credit score is ruined for good. In fact, bankruptcy codes are designed to give individuals and small business owners the chance to start fresh and come back even stronger than before. If you’re faced with the need to restore your credit after bankruptcy, consider these tips as you reclaim your financial health.
Here are four budgeting tips to get you back on track:
Entrepreneurs and ambitious job seekers know it takes discipline and patience to be successful over the long-term, and restoring your credit after bankruptcy is no different. It’s a marathon, not a sprint! With patience and the right tools, you’ll get a head start on the path to better credit.
Bankruptcy is a legal proceeding designed to provide individuals and businesses—although we’ll only be addressing individual bankruptcies in this article—some freedom from their debts. There are two main types of bankruptcies for individuals: Chapter 7 and Chapter 13. With a Chapter 7 bankruptcy, most all of your debts are discharged; with a Chapter 13 filing, your debts are restructured and you’re given a set amount of time, typically three to five years, to repay a portion of the debt you owe.
There’s no getting around the long road to building credit after bankruptcy. Once you have it on your credit file, it will be harder to get approved for different types of financing. But, you aren’t stuck with a lifetime of declined loan applications because you can always take meaningful steps towards rebuilding your credit. And over time, every step you take towards improving your credit score will bring you one step closer to being able to qualify for credit cards after bankruptcy, loans and even a mortgage.
If you’re in the process of trying to build—or rebuild—your credit, you may’ve discovered that it’s tough to do so without actually having any credit. Most credit card companies want to see that you’ve demonstrated responsible credit usage prior to granting you a credit card, but how are you supposed to demonstrate responsible usage if you don’t have any credit to use responsibly?