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How soon can you start rebuilding credit after bankruptcy?

If you have been struggling with credit card payments, home mortgage or auto loans, or other types of debts, the protections offered by a Chapter 7 or Chapter 13 bankruptcy filing might warrant a second look.

For starters, the automatic stay will immediately require creditors to stop their aggressive collection tactics. During that safe harbor, the bankruptcy trustee will review a debtor’s assets, income and liabilities to obtain a complete picture of his or her financial health. The filer's debt obligations will be prioritized, and the completion of either the Chapter 7 or Chapter 13 will hopefully result in many debts being discharged or paid off. 

Yet our law firm emphasizes that bankruptcy is not only about obtaining relief from unmanageable debt struggles, but starting over with smarter and better habits. First of all, unpaid bills and over account balances probably meant that a debtor had an unflattering credit-to-debt ratio. The ratio is calculated by dividing the amount of debt an individual has used by his or her available credit. The resulting figure is a consumer’s debt load.

After the completion of a Chapter 7 or Chapter 13 filing, many or most of those overdue accounts may have been discharged. That means that a filer’s debt load may once again be low. To start rebuilding one’s credit, it may be a good idea to keep one of those accounts open, using it only to accrue small debts that can be paid off in full each month. That positive payment history will go a long way toward raising one’s credit score and becoming a more attractive candidate for new loans. 

Source: Credit.com, “How to Get a Loan After Bankruptcy,” Jeanine Skowronski, Jan. 22, 2016

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  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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Goldman & Beslow, LLC

Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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EAST ORANGE
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East Orange, NJ 07017
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