How Bankruptcy Impacts Your Credit
Bankruptcy does significantly lower your credit score. As a result, you may be unable to get a car loan, mortgage, or business loan while the record of your bankruptcy impacts your credit rating.
How long will that be? A bankruptcy remains on your credit report for six years from the date of your discharge. It takes about nine months to get to the discharge phase, so the total is almost seven years. If this is your second bankruptcy it will remain on your credit report for 14 years.
This doesn’t mean you can’t get any credit products during this time. In fact, it is important to get a starter credit card and develop good habits with it. Doing so can help you rebuild your credit. Anyone who has declared bankruptcy should seek professional help about how best to rebuild their credit, so they can avoid a second bankruptcy.
Businesses can also declare bankruptcy. If you’re a sole proprietor this process is no different than filing for personal bankruptcy. If you own an incorporated business, it can go bankrupt without impacting your personal credit. However, you may need to sell the assets of the business in the insolvency process.
Pre-Bankruptcy Options for Businesses
As it has long-term effects on your credit and other costs, it’s best to avoid bankruptcy whenever possible. Depending on your businesses’ situation, one of these options may help you recover financially instead:
Debt counselling can help your business develop a plan to recover from your debt before you’re forced to declare bankruptcy. Professional guidance can show you how you need to change your specific financial habits to get your debt under control.
That professional may also suggest a debt consolidation loan. This kind of loan combines all your debt sources into one, even dropping the interest rate down on some of the debts. Paying only a single payment and collecting less interest will help you recover from the debt.
Sometimes your situation warrants a Business Proposal instead. This is an offer you develop with a licensed insolvency trustee that helps you recover financially, often focusing on consolidating your debt and lowering the interest rate.
If you’re a business owner, you have other tools that can help you get back on track. Invoice factoring is one option. It gives you a healthier cash flow, so that you can make debt payments more regularly.
As an owner of an incorporated business you may be able to combine factoring with other pre-bankruptcy options. Call J D Factors today to find out of invoice factoring is an option for your business.
