How to Rebuild Your Credit After Filing Bankruptcy

How to Rebuild Your Credit After Filing Bankruptcy

Filing bankruptcy is frightening, certainly no one wants to be in this position. However, in some cases the only way out of debt is filing bankruptcy, which offers you options like:

  • Chapter 7: in brief, it is a complete liquidation of your assets, it takes a few months from the time you file until the discharge of the debt is ordered by the court and you are released from the creditors. You must be eligible.
  • Chapter 13: in brief, it is a reorganization of your debt, that must be approved by the court, in some cases, creditors may be paid in full while other balances may be discharged. You get to keep your assets.

Even when it seems a horrible thing you never want to resort to, filing bankruptcy may be the only option you have, which also offers benefits like being able to organize all your documents, and most important, leave your debt issues behind.

Chances are at the time you are filing bankruptcy, your credit score is already damaged, if not, once you file, it will temporarily decrease your credit score; meaning the first and most important step you must take after filing bankruptcy, is find ways to get your credit score to the 720 and up range and be able to rise financially again.

Bankruptcy records are held for up to 10 years, depending the chapter you file, for this reason it is of utmost importance to take action on increasing your credit score.

Let’s understand how credit bureaus calculate your credit score. FICO uses different credit data group into five categories as follow:

  1. Payment history – 35%
  2. Amount owed – 30%
  3. Length of credit history – 15%
  4. New credit – 10%
  5. Credit mix – 10%

The importance of the categories’ distribution may vary from person to person, according the time each person has been using credit. So, how do you rebuild your credit after filing bankruptcy?

Some of the steps to restore your credit after filing bankruptcy are:

  1. Request copies of all three credit reports after you receive the discharge and the case is closed. You are entitled to a free copy from Annual Credit Report every 12 months
  2. Carefully analyze the report for discrepancies. All the discharged debt in bankruptcy should have zero balance
  3. Notify in writing to the credit reporting agency, any error found, and keep checking the report until it is corrected
  4. Create a budget to keep track of your expenses
  5. Avoid spending unnecessarily
  6. Get a secure credit card
  7. If you have an account with zero balance still open, if it is possible, begin using it
  8. Find a cosigner with good credit score
  9. Only commit to credit that you can afford to pay
  10. Limit your spending and keep your balances low
  11. Be diligent in making payments of your debt on time

If you are experiencing financial hardship, filing for bankruptcy may be the best solution, understanding your options is important. Call (305) 615-2905, (844) 321-6168 or contact our office for more information.

Get a free bankruptcy consultation with Richard Adams, a Florida bankruptcy attorney at Adam & Associates, P.A. We are committed to provide the highest level of service and representation to our clients. We value the attorney-client relationship and offer top-notch service at affordable rates. Our law firm serves clients in Miami Lakes, Coral Gables, Hollywood, West Palm Beach and throughout South Florida.