When someone goes bankrupt, the first thing that happens is that he has to turn over all his credit cards to a trustee. After declaring bankruptcy people have a very hard time getting a credit card even if they eventually become free of debt, which is a problem in terms of running a business, because a credit card is a necessity. A secured credit card may be the only option where Canadians are concerned. This is a card backed up by deposited funds or other assets, including business-related assets. The typical secured credit card in Canada entails a minimum deposit of $500, a very low monthly fee (in the range of six dollars), a slightly higher one time set up fee. The deposit earns interest on an annual basis. Almost everyone is approved.
Before thinking about getting back up on your feet and starting a business, you need to realize that a major change in your way of life and way of thinking is in order. You need to become a saver rather than the spendthrift you were. You can start a business, sure, but if you start making a profit you had better start saving the money. Preferably, your savings should be in a separate bank account.
How do you get back up on your feet after going bankrupt? You need to make sure that you have paid off absolutely all of your debt if you want to get a loan to start a business. Not only this, but you need to convince your lenders that you are clear. The next step is rebuilding your credit score and gaining new credit. After this, you need to start saving up for a down payment (for the business loan you need). In Canada, the minimum down payment is 5 percent of the loan. You need to remain free of debt for a period of two years and rebuild your credit for one year if you want to be sure that you will get a loan.
An important part of rebuilding your rating is never missing one payment on your secured credit card and using your new credit wisely. Another vital aspect is making sure your balance never exceeds 50 percent of the credit limit. Do not max out your card and then try to compensate by paying it off month after month. This is a recipe for disaster. Your score will plummet, and all your efforts to run a business will fail.
Always check your credit report after you make good on your debt in the wake of bankruptcy as to assure yourself that the credit bureau has reported everything correctly. Some institutions are more prone to make mistakes. A mistake like this could prevent you from getting a loan. In some cases, you may end up paying a higher interest rate than you should be paying.
Finally, if your bankruptcy included a mortgage foreclosure, and this is indicated on your report, you have to wait several years for this to disappear.