How to Do Business with Creditors After Going Bankrupt and Discharging Debts
Monitor your credit report., Create a budget and stick to it., Establish good spending habits., Build your savings., Consider starting with secured loans.
Step-by-Step Guide
-
Step 1: Monitor your credit report.
Filing for bankruptcy is a significant blemish on your credit report, but that doesn't mean you shouldn't worry about anything else.
Check your report carefully and act quickly to have any errors corrected.Do everything you can to start rebuilding your personal credit, and you'll start to find it easier to do business with creditors.
But try to be patient – rebuilding after bankruptcy can take several years.
Any small business you start will have its own credit report, particularly if you requested a new employer identification number (EIN) from the IRS to use with your business.
Your business essentially won't have any credit history – it can take several years to establish a business credit report that will actually help you.
Because of your business's lack of credit history, any traditional lenders or investors are going to want to look at your finances and credit report as well.
This means if you want to start a new business, both are essential. -
Step 2: Create a budget and stick to it.
Look at your regular household spending over the course of several months to build a realistic budget that includes all necessary expenses.
Estimate your income conservatively to account for potential changes.For example, if your hours at work fluctuate, budget your income based on the least amount you've regularly earned.
It's okay not to consider an outlier, such as a week where you missed several days of work due to an illness.
When looking at your expenses, list the non-discretionary expenses such as mortgage or rent and utilities first.
These are the things you absolutely must pay every month.
Don't forget to include a reasonable amount for groceries and personal needs.
After you've budgeted your non-discretionary expenses, look at how much you have left.
This amount you can allot to various discretionary expenses such as dining out or going to the movies.
When you've finished your budget, it may look incredibly strict.
If so, try to carve out some money you can use to have a little fun.
If you can't be happy living on a budget, you won't follow it. , If you continue treating your finances the same way you did before you filed for bankruptcy, you'll end up right back in the same situation.
It can take time and effort to develop responsible habits, but the improvement is worth it.Shopping around for the best deals can help your money go further.
Avoid using credit cards for unnecessary items.
Pay your bills on time every month.
It can help to set up automatic payments, but make sure you can guarantee the money will be in the bank to cover them.
If your finances are tight, at least sign up for payment reminders so you don't miss a due date.
Plan outings in advance and give yourself a spending limit.
For example, if you are going out to a movie, you may want to take $40 in cash and leave any credit or debit cards at home so you aren't tempted to spend more. , If you've just come out of a bankruptcy, you may think the idea of being able to save money is ridiculous.
However, no matter how limited your income, it still is possible to put a little away each month.Open a savings account at the bank where you have a checking account.
You may be able to save on fees on both accounts if you set up a regular transfer from checking to savings.
Look at your budget and see where you have some room for savings.
Since you budgeted your income conservatively, you might be able to set up a regular transfer with your bank that way.
For example, suppose you budgeted your income at $300 a week.
However, many weeks of the year you bring home $400 or more.
Make an arrangement with your bank so that when your pay check hits your account, any amount over $300 is automatically transferred to your savings account.
This makes it easier to save because you're never touching the money.
From your standpoint, you never had the money, so you're not tempted to spend it. , If you're unable to get approved for any unsecured credit, you may be able to take out a secured loan by pledging either personal or business assets as collateral.Many banks will offer a secured line of credit if you open up a certificate of deposit account.
Keep in mind that you must first have money to put in that deposit account, and you usually must maintain a relatively high minimum balance.
Secured credit cards are another option.
The credit card company may only give you as much credit as the amount of money you're willing to keep on deposit, but some offer 10 or 20 percent more.
When you can deposit more money to secure the card, you can get a higher credit limit.
You also may be able to take out loans for your business using business equipment or personal assets such as your home for collateral.
Be careful when you do this, however, and make sure you're not over-extending yourself to the point that you risk losing the property you've pledged.
With any of these options, make sure the creditor reports to credit bureaus before you take on the loan – otherwise it won't do you any good in terms of rebuilding your credit. -
Step 3: Establish good spending habits.
-
Step 4: Build your savings.
-
Step 5: Consider starting with secured loans.
Detailed Guide
Filing for bankruptcy is a significant blemish on your credit report, but that doesn't mean you shouldn't worry about anything else.
Check your report carefully and act quickly to have any errors corrected.Do everything you can to start rebuilding your personal credit, and you'll start to find it easier to do business with creditors.
But try to be patient – rebuilding after bankruptcy can take several years.
Any small business you start will have its own credit report, particularly if you requested a new employer identification number (EIN) from the IRS to use with your business.
Your business essentially won't have any credit history – it can take several years to establish a business credit report that will actually help you.
Because of your business's lack of credit history, any traditional lenders or investors are going to want to look at your finances and credit report as well.
This means if you want to start a new business, both are essential.
Look at your regular household spending over the course of several months to build a realistic budget that includes all necessary expenses.
Estimate your income conservatively to account for potential changes.For example, if your hours at work fluctuate, budget your income based on the least amount you've regularly earned.
It's okay not to consider an outlier, such as a week where you missed several days of work due to an illness.
When looking at your expenses, list the non-discretionary expenses such as mortgage or rent and utilities first.
These are the things you absolutely must pay every month.
Don't forget to include a reasonable amount for groceries and personal needs.
After you've budgeted your non-discretionary expenses, look at how much you have left.
This amount you can allot to various discretionary expenses such as dining out or going to the movies.
When you've finished your budget, it may look incredibly strict.
If so, try to carve out some money you can use to have a little fun.
If you can't be happy living on a budget, you won't follow it. , If you continue treating your finances the same way you did before you filed for bankruptcy, you'll end up right back in the same situation.
It can take time and effort to develop responsible habits, but the improvement is worth it.Shopping around for the best deals can help your money go further.
Avoid using credit cards for unnecessary items.
Pay your bills on time every month.
It can help to set up automatic payments, but make sure you can guarantee the money will be in the bank to cover them.
If your finances are tight, at least sign up for payment reminders so you don't miss a due date.
Plan outings in advance and give yourself a spending limit.
For example, if you are going out to a movie, you may want to take $40 in cash and leave any credit or debit cards at home so you aren't tempted to spend more. , If you've just come out of a bankruptcy, you may think the idea of being able to save money is ridiculous.
However, no matter how limited your income, it still is possible to put a little away each month.Open a savings account at the bank where you have a checking account.
You may be able to save on fees on both accounts if you set up a regular transfer from checking to savings.
Look at your budget and see where you have some room for savings.
Since you budgeted your income conservatively, you might be able to set up a regular transfer with your bank that way.
For example, suppose you budgeted your income at $300 a week.
However, many weeks of the year you bring home $400 or more.
Make an arrangement with your bank so that when your pay check hits your account, any amount over $300 is automatically transferred to your savings account.
This makes it easier to save because you're never touching the money.
From your standpoint, you never had the money, so you're not tempted to spend it. , If you're unable to get approved for any unsecured credit, you may be able to take out a secured loan by pledging either personal or business assets as collateral.Many banks will offer a secured line of credit if you open up a certificate of deposit account.
Keep in mind that you must first have money to put in that deposit account, and you usually must maintain a relatively high minimum balance.
Secured credit cards are another option.
The credit card company may only give you as much credit as the amount of money you're willing to keep on deposit, but some offer 10 or 20 percent more.
When you can deposit more money to secure the card, you can get a higher credit limit.
You also may be able to take out loans for your business using business equipment or personal assets such as your home for collateral.
Be careful when you do this, however, and make sure you're not over-extending yourself to the point that you risk losing the property you've pledged.
With any of these options, make sure the creditor reports to credit bureaus before you take on the loan – otherwise it won't do you any good in terms of rebuilding your credit.
About the Author
Jeffrey Powell
Enthusiastic about teaching hobbies techniques through clear, step-by-step guides.
Rate This Guide
How helpful was this guide? Click to rate: