Reestablishing Credit After Bankruptcy

Bankruptcy provides people with a fresh start by allowing them to reorganize their debts and discharge certain liabilities. Even though bankruptcy enables you to take control of your finances, it does take a toll on your credit rating. Over time, your credit rating will begin to improve, especially if you take steps to rebuild your credit. A knowledgeable Morris County bankruptcy attorney can help you understand the bankruptcy process and explain how filing bankruptcy will affect you.

Pay Bills by the Due Date

One factor that impacts your credit score is whether you pay your bills on time. When your bankruptcy case is complete, you will resume payments for your vehicle, house, and other collateral you wish to keep, as well as for nondischargeable unsecured debts like student loans and certain income taxes. You will also be responsible for making monthly payments toward any credit cards or loans you obtain after exiting the bankruptcy. If you consistently pay your bills by the due date, it will help to improve your credit score over time.

Obtain a Secured Credit Card

You may not be able to obtain a regular unsecured credit card right after bankruptcy; however, some banks offer secured credit cards to people trying to rebuild their credit. With a secured credit card, a cash deposit secures your credit line. If you use the secured card wisely and consistently make your monthly payments on time, the bank may increase your credit limit without requiring an additional deposit or may even offer you a separate unsecured credit card.

Not all secured credit cards are a good choice, however. Some cards come with a high annual fee, a steep interest rate and/or an excessive start-up fee, so shop around for the best deal. Also, make sure the bank will report your credit line and payment history to all three credit bureaus — a secured credit card cannot help your credit rating if it is not being reported.

Use Secured and Unsecured Credit Cards Wisely

When you first exit bankruptcy, make small purchases and pay off the balance each month to rebuild your credit without paying unnecessary interest and fees. Avoid big credit card purchases until your credit score has started to improve and you can get cards with lower interest rates. When you do make a big purchase, always pay at least the minimum amount due each month and pay it on time.

Review Your Credit Reports

After your bankruptcy case is complete, order all three credit reports and review them for errors. Accounts that were delinquent before you filed bankruptcy will show up for seven years from the date of delinquency, but these accounts should reflect the bankruptcy discharge. If a discharged debt still shows a balance due, if there are any accounts listed that do not belong to you, or if a creditor is failing to report post-bankruptcy payments, file a dispute with the credit bureaus. Continue to monitor your credit reports regularly — you can obtain a free report from all three credit bureaus once per year.

If you are considering Chapter 7 or Chapter 13 bankruptcy, contact a qualified Morris County bankruptcy lawyer today to learn what steps you should take both before and after you file.

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