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Posted by Pat Raskob

How to Come Back From a Bankruptcy

How to Come Back From a Bankruptcy

The process of restoring your financial stability after facing bankruptcy is a back-breaking move. Filing for bankruptcy affects your credit score and can hinder your long-term financial goals. The only way out is to have a post-bankruptcy plan. Here are some tricks to add to the plan to restore your financial glory.


Check Your Credit Reports

Your credit score should be the first step to restoring your financial stability. Go through your credit reports, ensure they are accurate, and diagnose any wrong entries. There are two types of bankruptcy, and each has a different process for checking a credit score.


Checking Your Credit Reports after Chapter 7

For chapter 7, you have to finish your case before checking your credit score. After your case, it is best to wait for 90 to 120 days before requesting credit reports from Experian, Equifax, and TransUnion. Cross-check the reports to avoid mistakes and take note that:

Credit accounts filed with bankruptcy are titled discharged in bankruptcy and should be balanced as zero.

And debt omitted, such as a mortgage, should not be listed under discharge but should be reported.


Checking Your Credit Reports After Chapter 13

Chapter 13 bankruptcy discharge takes a three to five years payment period. So it's still okay to request your credit score after 90 to 120 days. Chapter 13 bankruptcy is sometimes included in your credit report, and creditors may or not report payments received during this period.

Remember to report any excluded payment with the bankruptcy settlement.

After your payment period, usually two and a half to five years, the IRS will mail a discharge letter to you. You can proceed with your credit report after 120 days. All the paid loans in the payment plan should be closed and balanced as zero.


Maintain Your Job and Home

If you have your job and a home, rebuilding from bankruptcy will be easy. These two factors are important if you want to take out a loan. The lenders will be convinced to grant the loan since you still have a home to mortgage, restoring reliability. Also a job shows a steady flow of income. Plus, most lenders go through your employment history before offering the loan. Not having a job or having irregular employment might cause denial of future loans. But a consistent job shows proof of steady income.


Make an Emergency Fund

After a bankruptcy, another way to recover is to have an emergency fund. An emergency fund is a type of savings account. This fund is to get you back on your feet after a bankruptcy, plus a way to circumvent disastrous and unexpected outcomes that result in debt. It is best to regularly contribute to this savings account, even if the money is inconsequential. The little denotations will add to the savings so you can start again with after such a rock bottom. When filing for bankruptcy, an emergency refund will be a go-to place because your credit accounts will be frozen or restricted. To easily have an emergency fund, you can take a new job or a side gig to generate extra income.


And finally, breathe again

A well-invested credit, such as car loans, and mortgages, can improve your credit score. But you don't have to take a new credit if you don't have a means of paying it back or have no reasonable investment to make.

Bankruptcy can be considered a way to start afresh or a new beginning to forge a stronger, reliable, and prosperous credit score. Look at it as a medium to start all over again with experience to make wiser financial choices. 





Pat Raskob
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