REBUILDING CREDIT AFTER BANKRUPTCY

Not every debt can be discharged in bankruptcy. While bankruptcy will clear away debts like credit cards, medical bills, personal loans, evictions, judgments, unpaid bills, repossessions, and more, there are several types of debt that will remain despite a bankruptcy filing. Child support, alimony, student loans, and some taxes are just a few examples of debts that will not be discharged in either type of consumer bankruptcy. Secured debts, or debts with an asset as collateral, also won’t be discharged in bankruptcy if you keep the asset. You must remain current on all of these payments after your bankruptcy has been discharged to help improve your post-bankruptcy credit score.

It’s crucial that you pay attention to your credit report after discharging your debts in bankruptcy. While it shouldn’t happen, your creditors may fail to stop negative reporting on debts that are discharged in your bankruptcy. You can dispute these reports when you see them, which is why it’s important to continue monitoring your credit report regularly after bankruptcy.

You may be hesitant to open new credit cards after bankruptcy, and with good reason. You will be ineligible to declare bankruptcy again for a certain number of years after your discharge. That’s why many people who discharge their debts in bankruptcy choose instead to open a secured credit card through their bank. This is essentially a prepaid credit card, which will take out the risk of spending more than you can afford. Even with the reduced risk factor, using a secured credit card can help you boost your credit score after filing bankruptcy.

Obviously, it’s always better to maintain steady employment when you’re trying to recover from debt. However, your employment history is another factor that goes into future lenders’ decisions on whether to extend your credit. This shows reliability and that you will have the means to repay the potential debt. Lenders will look back 24 months, or 2 years, when reviewing your employment history for credit approval purposes.

Another way your loved ones can assist you in rebuilding credit after bankruptcy is by adding you as an authorized user to any of their accounts. Even if you don’t spend anything on the account, it will increase your available credit and could help improve your score, if the main account holder makes timely payments.

Obviously, this step shouldn’t be taken unless you trust the person who adds you to their account.  Unfortunately, you might not be approved for credit applications on your own after bankruptcy. A co-signer will be liable for your debt if you fail to repay it. This type of security net will make lenders more likely to approve your credit applications. You may be able to utilize a co-signer on auto loans, rental leases, and more. If your co-signer is hesitant, you can inform them about the mandatory waiting periods before you are able to discharge your debts in bankruptcy once again.

You’re probably aware that if you finance your vehicle, your payments towards that loan will affect your credit. However, if you keep the same vehicle through your bankruptcy, your lender is no longer required to report payments that could help improve your score. They can continue to report late and missed payments, meaning your current vehicle only has the potential to hurt your credit after bankruptcy if not paid in full.

One option many bankruptcy filers choose to utilize is surrendering their vehicle in bankruptcy. This is a great option if you have an older vehicle, one with mechanical issues, owe more on it than it’s worth, or simply don’t want the vehicle anymore. Should you finance a new (or new to you) vehicle after filing bankruptcy, that lender will be required to report positive marks on your credit. You won’t have to wait until your case is discharged to obtain lending, either- many of our clients can finance a new vehicle shortly after filing their bankruptcy petitions.