A common concern of bankruptcy clients is about credit after bankruptcy. During a bankruptcy consultation at the Indianapolis bankruptcy office of Kainrath Law Firm, P.C., I remind clients that filing bankruptcy does have a negative impact on credit rating, but, equally as important to understand is that this drop in your credit rating is temporary. And you may actually have a chance to have a higher credit score faster than if you had not filed bankruptcy at all.
Credit is especially important in our current national financial situation. In order to obtain necessary purchases, such as homes and cars, a good credit rating is imperative. That said many clients understand that assuming a lower credit rating for an interim period in order to be relieved of many financial debts is necessary, and a temporary situation. It is also important to understand that rebuilding your credit after filing bankruptcy takes work and personal commitment from you.
What Happens to Credit Rating after Bankruptcy
Once you file bankruptcy, all debts discharged will be listed as bankruptcy, or BK, debts. These will remain on your credit report for several years – 10 years for a Chapter 7 bankruptcy and 7 years for a Chapter 13 bankruptcy. These ratings do not preclude you from qualifying for significant loans; however you may notice an impact to your terms.
For example, once some time has passed from filing bankruptcy – about a year – you may qualify for a home or car loan, but your payment terms may not be as favorable as they were on purchases previous to filing bankruptcy. You may not be able to rent or lease, but you should still have access to student loans. Finally, you must understand your fiscal responsibility for these loans, as you will not be able to file another Chapter 7 bankruptcy for 8 years.
Ways to Rebuild Your Credit after Bankruptcy
With hundreds of bankruptcy clients at Kainrath Law Firm, P.C., our Indianapolis bankruptcy attorneys can help you understand your options for rebuilding credit. In order to rebuild your credit after filing bankruptcy, some important items to consider include: open a savings account and add a little bit every week; ask a close friend or family member to name you on their credit card, but do not make any charges on the card; once you’ve saved enough to open a secured credit card, do so in your name only, making minimal purchases and paying off the balance each month; pay all bills on time and inform your bankruptcy trustee or creditor immediately if you will be unable to pay a bill; and finally monitor your credit rating and challenge any inappropriate debts.
During the duration of your Chapter 13 bankruptcy you may be required to get permission or a letter from your bankruptcy trustee giving you permission to obtain additional credit. Consult a knowledgeable bankruptcy lawyer to understand your options.