If you file for bankruptcy, you will join the over 1.2 million people nationwide who have filed for Chapter 7 in 2012.
Chapter 7 bankruptcy filing liquidates all of your debt and you will usually receive your discharge papers a few months after. You can expect to start off with a low credit score after filing, but it’s not impossible to recover. It is possible to rebuild credit after bankruptcy.
Aside from the fact that your credit will be damaged, there is hope in the idea that you can get your credit on track and gain a sense of financial responsibility in the process.
Assess your credit
The first step to regaining credit is to actually see what’s on your report. Order your credit report from the three major credit bureaus. You can order a free report once a year, in which you can obtain online at AnnualCreditReport.com. Once you receive all three reports, look at them at the same time and make sure all the information in the reports reflect your bankruptcy. If there are errors or accounts that are open if they were closed, you can dispute them to the three three bureaus.
Bankruptcy can stay on your report for up to ten years, so be vigilant about inaccuracies.
You need credit to get credit and this will be the next step to repairing your credit history after bankruptcy. Even if you’re not qualified for a line of credit, another option is to apply for a secured credit card. This card requires a deposit and you’ll most likely get approved. You will have to put down a security deposit on the card, which will be equal to your credit line, usually around $200-$300. Use this card to make smaller purchases such as gas, groceries or a cell phone bill. Over time, your purchases will have a positive impact on your credit score.
Be timely with payments
Paying your bills on time is also an important aspect of rebuilding credit. Payment history accounts for 35 percent of your overall credit score. When you pay your bills by the due date you increase your credit standing. Always pay off the balance each month and charge no more than 30 percent of your credit limit.
If you have outstanding loans that weren’t discharged, you will be responsible for the repayment. These are more likely to be student loans that you can begin to pay off, which will also increase your score. Paying the loans on time and paying more than the minimum amount will help loan debt. Keep in mind that some lenders may not approve you for other types of loans or credit despite your increased credit score, because of the bankruptcy that shows on your report.
When it’s all said and done, take a look back at your spending habits and see where you can learn from these mistakes after filing. Set a goal to do better in managing your finances set, up monthly budgets and stick to them.
Check in your area to see if there are any free workshops or classes on managing your finances so you don’t have to go down this road again.