Bankruptcies in the United States have been on the rise in recent years. In 2020, about 500,000 Americans filed for bankruptcy. However, this was a decrease compared to the years before, and many attribute this to the robust policies implemented during the pandemic.
Several factors can contribute to someone filing for bankruptcy. For example, job loss, medical bills, and credit card debt are common reasons people might seek bankruptcy protection. However, this is for personal bankruptcies. When it comes to business bankruptcies, many more systems are at play, but it’s still centered on one thing: your business can no longer pay its debts.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also known as liquidation bankruptcy. This is the most common type of bankruptcy in the United States. When you file for Chapter 7, an appointed trustee will be in charge of your assets. The trustee’s job is to sell any non-exempt assets and use the proceeds to pay off your creditors.
In a Chapter 7 bankruptcy, you can usually keep your home and car as long as you’re current on the payments. However, other assets such as jewelry, second homes, and investments can be sold to repay creditors.
To ensure that your bankruptcy is true, the court might also ask you to secure subpoenas from certain banks and financial institutions. This is to get any financial accounts that may help your case. If your bank is found in another country or another state, you might be asked to file a CPLR 3119. This is used to get subpoenas from institutions located outside your state.
Once your debts have been paid off, any remaining debt is discharged. This means that you are no longer legally responsible for the debt, and the creditors can no longer take any action against you.
So what do you do after that’s all been said and done in your bankruptcy? First, you rebuild, usually starting with your credit line.
Things That Are Essential to do After Bankruptcy
One of the things you should consider after bankruptcy is your credit. Filing for bankruptcy means that you’re having a hard time getting credit in the future. This is because bankruptcy stays on your credit report for ten years, but this can lessen depending on what you do. The best way to reduce this limit is by regaining your credit score. You can do this in various ways.
Get a New Credit Card
You’ll want to start by getting a secured credit card. This is a credit card that is backed by a deposit you make. For example, if you have a $500 credit limit, you’ll need to deposit $500 into an account. If you don’t make your payments, the creditor can take the money from your account.
Making on-time payments is one of the best things to improve your credit score after bankruptcy. However, you should also consider using a credit monitoring service. This will help you keep track of your progress and ensure that there are no mistakes in your report.
Pay Your Bills on Time
This one might seem obvious, but it’s worth repeating. One of the best things you can do to improve your credit score is to pay your bills on time, every single time. This includes utility bills, cell phone bills, and any other kind of recurring bill you might have
If you’re having trouble keeping up with your payments, you can set up automatic payments. That way, you don’t have to worry about forgetting a payment or being late for payments. This is a sure way to regain your credit score and confidence among many banking institutions.
Keep Your Balances Low
Your credit utilization ratio is the amount of debt you have compared to your credit limit. It’s important to keep your credit utilization ratio low because it shows lenders that you’re a responsible borrower. You can do this by paying down your balances and keeping them low. You should also try to keep your credit limits high. This will help you keep your credit utilization ratio low.
Have a Good Mix of Credit
Having a good mix of credit is another way to improve your credit score after bankruptcy. This means having different types of debt, such as installment loans, auto loans, mortgages, and revolving lines of credit. Having a good mix of credit shows lenders that you can handle different types of debt. However, we only suggest you do this once you’re stable enough.
Once you regain your credit score, you can start a business again by getting a business loan.
Bankruptcy is a legal process that allows you to discharge your debts and start fresh. It’s important to understand the bankruptcy process and what it means for your future before you decide to file.
Filing for bankruptcy will stay on your credit report for ten years, but you can rebuild your credit during this time. You can do this by getting a new credit card, paying your bills on time, keeping your balances low, and having a good mix of credit.
If you’re considering filing for bankruptcy, make sure you understand the process and what it means for your future.