Repairing Your Credit Score After a Bankruptcy

Declaring bankruptcy provides a second chance for those who cannot pay their bills. There are many factors that can lead to a bankruptcy, such as unemployment or illness, or maybe even a death in the family.

Although a financial second chance is a great opportunity, there are consequences to declaring yourself bankrupt. For example, reopening lines of credit can be difficult. However, it is not impossible to reestablish good credit if you commit to creating a budget and paying your current bills.

There are several ways to start your fiscal life over and utilize the opportunity that bankruptcy affords. Your second chance will not only relieve you of the worry of debtors, it can assist you in beginning again with new lenders that you can repay responsibly.

People usually file Chapters 7 and 13 bankruptcy. With a Chapter 7, you get to walk away from your debts, virtually debt free. Debts that are not eliminated by a Chapter 7 bankruptcy are:

  • Child Support
  • Student Loans
  • Court Fees
  • Taxes

If you have the ability to repay your debts, and you just need to reorganize your finances and gain some extra time to begin making structured payments, a Chapter 13 bankruptcy might be a better option. Although you do not walk away from your debts, you will be able to reestablish credit sooner as you will prove to creditors that you are willing to repay your debt money that you owe. A Chapter 13 bankruptcy can be your first step to raising your credit score.

There are several other things you can do to begin raising your credit score immediately after your bankruptcy. The first thing you must do is find and maintain steady employment if you do not have a job already. Not only will your stable job help you pay your bills on time, lenders will take into account your time at your job as a sign of a responsible lendee. Stability is a big factor for creditors when they are considering extending credit to someone who has declared bankruptcy.

In addition to a job, if you choose to move after your bankruptcy, you will need to find a place of residence that you are able remain in for a year or more. Lenders also look at the length of time you are in your home when making their decisions. They also take into account your utility bill payments. Make sure you pay your household bills each month. Paying your rent, electric, water, and sewage, and even paying bills such as your student loans on time, will show your commitment to your credit score and credibility.

If you declared bankruptcy because of tragic circumstances, you can write a letter of hardship to request that lenders take your hardship into consideration. A death, illness, or divorce can contribute to your inability to pay your bills.

Some creditors will begin lending you money shortly after your bankruptcy if you can prove that you pay your bills in a timely manner and honor credit agreements. Whether the lender accepts your letter or not, you will need to follow the same steps previously described. Finding a residence, maintaining a job, paying utilities on time, and applying for a secured credit card are all great ways to make your credit score rise.

Make sure you apply for a secured card that reports to credit bureaus so that your credit score reflects your payment record. You will also need to open a checking account if your banking institution approves you. With a checking account, you will be able to show that you can hold a positive balance and that you pay your bills and can manage a checkbook, or keep track of debit card transactions.

By putting all of these actions into your financial planning, you will create a responsible track record for creditors to see that after you declared your bankruptcy, you paid your bills on time. This way, you will begin to receive the benefits that a good credit score affords.

This was a guest post by the Westbrook Law Group.

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