How to Bounce Back from a Bankruptcy


How to Bounce Back from a Bankruptcy

The decision to file for bankruptcy is a tough one to make. Many potential filers choose not to file or at least hesitate before doing so because of perceived the damage a bankruptcy filing can cause to that person’s credit score.

However, a bankruptcy filing is not necessarily a death knell to the filer’s credit score. It is possible to bounce back following a successful bankruptcy case.

How does Bankruptcy Affect Your Credit Score?

According to FICO, a bankruptcy filing can lower a person’s credit score by as much as 240 points. In fact, FICO includes a bankruptcy under a person’s payment history, which is one of the most important factors that determines a person’s credit score.

A bankruptcy will stay on someone’s score for anywhere from seven to ten years. However, that does not mean that the consumer will necessarily need to wait that long to improve his or her credit score.

According to a recent study from LendingTree, the filer’s credit score will not stay down for too long. In fact, more than 40 percent of American consumers ended up with a credit score of 640 one year after filing for bankruptcy. Additionally, 65 percent of bankruptcy filers surveyed saw the same score for at least three years after the bankruptcy case was over. Within a two-year period, 65 percent of those surveyed by LendingTree also had a credit score above 640.

How Do You Bounce Back From a Bankruptcy?

With proper planning and financial guidance, it is possible to come back from a bankruptcy. The best way to rebuild credit after a bankruptcy is to continue regular, timely payments on secured debts such as mortgages and autos. Another way to rebuild credit is through a credit card. It may seem counter-intuitive, especially if a credit card is why the individual got into a poor financial situation initially. However, through use of a secured credit card, the individual may be able to slowly begin to rebuild credit. A secured card is connected through a savings account to ensure that the individual has the money to back up his or her purchases. The card’s credit limit is equal or less than the amount in the account.

It is recommended that only a few purchases be made using the secured card every month and that the bill is paid in full every month. The secured card can be quite helpful in rebuilding credit.

The individual will only need the card for a short period of time before he or she can apply for standard credit card, which many financial experts say is approximately two years after filing for bankruptcy.

It is recommended that the consumer do research before signing up for a secured credit card. Many banks offer these types of cards with reasonable fees and rates, while other banks charge a high rate with a low spending limit. Many other companies will require the cardholder to purchase additional products, including an insurance policy, to qualify. Therefore, doing the research before signing up for a card is very important.

Another recommendation is to look back at the circumstances that led to the bankruptcy filing. If over spending was a problem, it can help to prepare a household budget and stick to it. A budget ensures that necessary monthly expenses are met first before additional purchases are made.

If an individual does use credit cards for daily expenses, it is important that he or she pays the credit card balance off in full on a regular basis. Credit reports evaluate whether the person can continue to make regular and on-time payments before a higher score is assigned. The problem many people run into is they spend more than they have in terms of monthly income. Credit card balances can add up quickly and can become a problem that the person cannot control.

Big expenses do come up just like anything in life, and it helps to have a built-in savings in the event a medical or other financial crisis occurs. By having emergency savings, the person will not have to resort to using credit to get by.

Following these tips can help an individual build up his or her credit from a bankruptcy. It may seem like an impossible feat, but with hard work and determination, it is possible. A financial planner, as well as a bankruptcy attorney, can work with the client on developing the best plan for that person’s life situation.


An experienced Texas bankruptcy lawyer can educate you on the best methods to bounce back after going through bankruptcy and can help address any concerns you have about the bankruptcy process. Call the Law Office of Marilyn D. Garner at (817) 505-1499 NOW for a free consultation to discuss how bankruptcy may help you.

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