In the financial world, bankruptcy is often one of the most tragic and debilitating processes a person can go through. It can cause stress that never goes away. It can financially destroy a person’s life, making them live a lower standard of living for a long time.
It is crucial to understand what bankruptcy is and how it works. On top of that, you should also know your options for credit and loans after you have filed. Your situation may not be as bleak as you think, and you might have a few options waiting for you around the corner.
What Is Bankruptcy
Bankruptcy is a legal process that individuals and businesses can opt for when they don’t think they will be able to pay back the debts they have acquired. It is a lengthy process, and it involves many technicalities that you need to be aware of. The main thing you need to know is that there are two different types of bankruptcies you can file.
There is an entire code for understanding bankruptcy, and it is crucial to have bankruptcy lawyers be there with you to give you important advice on what steps to take. The various options for people filing for bankruptcy are usually under chapters. For example, the most common type of bankruptcy that you usually hear about is called Chapter 7. It is a bankruptcy that doesn’t require repayment, but you are required to liquidate all of your assets to repay your debts.
There are other types of bankruptcies that require you to reorganize in some way. Generally, the two types of categories are bankruptcies that destroy you financially and those that keep you operating. Your credit score will be impacted based on the type of bankruptcy you choose to undergo. It also has a massive impact on how great your loan options will be after you have filed.
Now, despite everything we have talked about with bankruptcy, there is a sobering reality that you need to be aware of. The basic reality is that you will spend a lot of time rebuilding your credit before you can even think about getting a loan after bankruptcy. Many people will never get back to where they were before, and they will never be seen as creditworthy to lenders. Going through this process essentially destroys their financial lives.
It is why you need to think very hard about filing for bankruptcy. The choice you make will have a massive impact on the next few years to even a decade of your life. It could take a really long time for you to get back to the level where you can comfortably borrow money without encountering astronomical interest rates. The good news is there are options you can consider in the meantime:
Rebuild Your Credit
The first option you have is to take the long and hard process of rebuilding your credit. After the bankruptcy process has been started, you will have to raise the money needed to repay your debts or liquidate your assets to make payments. Either way, the main thing for you is to focus your time and effort on rebuilding your credit.
The first step to the rebuilding process is to repay all of your debts on time. It also means creating financial sources that you can rely on. While your credit scores are usually a good indicator of how creditworthy you are, lenders will often look at your income. Therefore, you need to worry about getting your income back to the level that will give you many options.
Consider Foreign Business Loans
One option you might have is to start looking in other countries for loans. Many business professionals have done this to stay afloat. They usually went to banks from other countries to get loans to fund their projects. However, it might not be a great long-term financial strategy for staying above water.
The key to all of this is to remember that you will have to be patient. You didn’t get to where you are overnight, and you won’t get out of it quickly either. Building back your credit to a place where you can get loans will take a long time. Getting a loan after bankruptcy is impossible for many people, but it often takes a long time for them to get back to where they need to be for the people that it is possible for.
Make Sure Your Credit Report Is Accurate
Another step you can take is to ensure that everything on your credit report is accurate and up-to-date. By doing this, you ensure that you are providing the best possible information to your creditors. It makes sure that you are not weighed down by inaccurate information that could be causing you problems. Your bankruptcy will remain on your credit report for a long time, but you will have to manually get it removed once the time has elapsed.
Get a Secured Credit Card
A secured credit card is a great option for people with bad credit. It is usually a good first step to rebuilding your credit. A secured credit card involves having some collateral in your account to pay for your credit. It is essentially a debit card in the form of a credit card. You are still borrowing money, but you need to deposit the same amount of money into an account to offset what you spend.
Find a Co-Signer
You can have someone cosign your loans to get them approved. It is usually what younger people do to get a loan after bankruptcy. They usually have their parents cosign it with them. However, whoever cosigns is putting their reputation on the line. It is crucial that you be responsible when using that loan.
The Last Resort
There are specific loans for people who have bad credit. However, these loans are usually laden with extra fees and an excessive interest rate. You should only go with this option if you are desperate. It is an excellent way for you to borrow money and continue to build your credit.
Photo Credit: stock photo