Rebuilding Your Credit After Bankruptcy

Unbeknownst to most debtors, or potential debtors, the day the bankruptcy petition is filed, your credit score drops to the lowest point possible: 350. Rebuilding your credit after bankruptcy may be daunting; however, it is not impossible.

In the days and weeks following your discharge, you will be inundated with offers from creditors. Because there are virtually no usury laws in the United States, these creditors will charge high interest rates because they know: 1. filing bankruptcy does not automatically make you financially responsible; and 2. you cannot file bankruptcy again until the statutory period of time has elapsed.* Essentially, this means, if you default, the creditor will use all legal means available to collect on the debt. For debtors who feel responsible enough to handle debt, there are ways to reestablish your credit over time making you a prime candidate for creditor’s very best rates.


Installment Accounts and Secured Debt

Every month that you pay your student loan, car loan, and mortgage on time, you inch one step closer to improving your credit rating. In addition to making timely payments on these accounts known as installment accounts, obtaining a secured credit card, or selecting a reasonable offer for an unsecured credit card, and paying the balance in full each month will enable you to reestablish your credit.


Although it may be tempting to lead an all cash lifestyle, it takes credit to build credit, therefore, unless you know that you are not able to control your credit card spending, it would be in your best interest to obtain and responsibly use credit. In as little as two to four years, your credit rating will qualify you for reasonable interest rates on unsecured credit cards, mortgages and car loans.

*a chapter 7 may be filed 8 years after a previous chapter 7 filing; a chapter 13 may be filed 4 years after a chapter 7 discharge.

Why July Is The Best Month To File Bankruptcy

The best time to file bankruptcy is when you have taken an objective look at your finances and realize you just cannot go another day with out doing something to put an end to the nightmare that is your financial life - it is probably best to make this decision with a lawyer. Once the decision to file has been made there are a lot of documents that have to be gathered, I mean A LOT. Of the documents that need to be produced in order to prepare your petition are SIX months of paystubs.

Some people are very organized and know the exact location of every paystub received since puberty. Other people, make that most people, have to search through piles of documents in order to produce these documents and even then, some may still have to contact their human resources department for this information. If you are near the month of July and can put off filing your bankruptcy until then, July is the easiest time of month to file bankruptcy in terms of NOT having to produce six months of paystubs.

Because the income reported for the means test is income earned in the six months before filing, the first paystub received in July will reflect the money you made for the previous six months exactly. That’s right, file in July and check one more item off of your document production list!

Good luck!