After going through the bankruptcy process, whether it be Chapter 7 or Chapter 13, one of the first thoughts most have is: will I ever get my credit back? Arguably, a debtor’s credit score will take a hit after a case is filed, but that does not mean the credit score will stay low forever. It is possible to improve credit after the bankruptcy is finalized.
The type of bankruptcy that the debtor finalized will be a factor in rebuilding credit. Chapter 7 bankruptcy may have a different effect on the filer’s credit score than Chapter 13 will have. Both negatively affect the filer’s immediate credit score. Chapter 7 bankruptcy may stay longer on a credit report than Chapter 13. In either situation the following tips will help get a filer back on track.
1. Repaying Other Obligations
One method of improving credit is to repay financial obligations that were not included in the bankruptcy but still show up on the debtor’s credit report. This would only occur if not all debts were discharged in the bankruptcy, such as a home mortgage or auto payment.
If some were left out intentionally, make a concerted effort to continue to repay other obligations.
2. Pay Other Bills On A Timely Basis
Another good way to improve credit is to continue paying other bills, not including those that would be considered “debts.” This list includes utility bills, rent payments and other obligations.
If the debtor is concerned with staying on task and not missing a payment, one good way to do this is to utilize automatic payment services. The debtor needs to show that he or she is capable of timely meeting obligations and not missing payments on a continued basis.
3. Monitor The Credit Report
The debtor’s credit report can become his or her new friend. It is the best way for the debtor to see where he or she is starting, in terms of how low the score is following bankruptcy, and where the debtor needs to go to improve the score.
As time goes by, it is recommended that the debtor see the progress being made by taking advantage of the free annual credit report that is offered through most credit bureaus.
4. Consider Secured Credit
One of the best ways to rebuild a credit score is through use of secured credit. The debtor can contact a bank or financial institution to obtain a secured credit card. These cards require the debtor to put a security deposit with the card issuer. Annual fees do come with these cards, as well.
The debtor will not need to keep the card for a lengthy period of time, but it is encouraged that he or she make regular purchases on it and pay off the card on a regular basis. Once credit is restored, he or she can then go with an unsecured credit card with a lower fee.
5. Be Cautious with Financial Counseling
It is recommended that the debtor pursue credit counseling and assistance in budgeting, but it is also recommended that he or she be selective when choosing these services.
Many credit repair services exist which offer lofty promises on repairing the debtor’s credit, but they can come with extremely high fees and very little follow-through. Do the homework when choosing someone to work with. If something sounds too good to be true, it usually is.
6. Set a Budget and Stick with It
It is of extreme importance that the debtor realizes what his or her limits are when it comes to how much money comes in monthly and what types of expenses are covered. One of the biggest fears debtors have is that they will end up with high balances on credit cards again and will end up right back where they started.
It is okay to use credit cards for expenses and is even encouraged, but it is also recommended that the debtor only spend what he or she can afford to pay.
7. Do Not Close Accounts
The debtor may be tempted to close all credit card accounts he or she has and never use credit again once bankruptcy is over. However, this idea is not a good one.
In fact, it will end up hurting the debtor in the end. It is wise to keep the accounts open and simply keep the balance down or at zero. If the debtor is tempted to use the card too much, cut it up or keep it at home.
CONTACT AN ARLINGTON BANKRUPTCY ATTORNEY TODAY
An experienced Texas bankruptcy lawyer can help you with any questions you may have about how a bankruptcy filing will affect your credit. Call the Law Office of Marilyn D. Garner now at (817) 381-9292 for a free consultation to discuss how bankruptcy may help you.The information contained in this article is general in nature and should not be considered to be legal advice, consulting or any other professional advice. In all cases you should consult with professional advisors familiar with your particular factual situation for advice concerning specific matters before making any decisions. There is no assumption of responsibility or liability for errors or omission in the content of this site. The information is without guarantees of completeness, accuracy, usefulness or timeliness and without any warranty whatsoever, express or implied. There is no warranty that the site or information downloaded from this site will be error-free, omission-free or free of viruses.