Rebuild Credit After Bankruptcy

Posted on December 19, 2012 at 10:22am by

People file for bankruptcy for any number of reasons. They may have used credit cards a bit too often. A recent divorce or death in the family may have made times difficult. Or, a string of bad luck involving unemployment and unexpected medical bills may have led to financial problems. Bankruptcy may be the best opportunity for someone to reorganize their finances so that their future earnings are going toward upcoming expenses instead of past mistakes.

Even though filing for bankruptcy is a major decision, the financial improvements you see should start immediately. However, those who file should also be concerned with overcoming the negatives associated with it. A recent study showed that, over time, people who file for bankruptcy match non-filers in important measures like home ownership, savings, and credit card use. If you are considering filing for bankruptcy, a Kansas City bankruptcy attorney can explain the effects of bankruptcy and the steps you can take to rebuild your financial life following it.

Life After Bankruptcy

Bankruptcy offers debtors a chance for a fresh start. By living within their means, adhering to a budget, and responsibly building credit step by step, bankruptcy filers can overcome their past financial difficulties. The following are some of the steps that can lead you on the way to rebuilding your credit in the aftermath of a bankruptcy:

  • Obtain secured credit cards. With secured credit cards, you deposit in cash the amount of your credit limit with the bank. This way it is impossible to exceed your credit limit or fail to make payment. Be sure to check that the bank reports the credit limit to the credit bureaus so that your score can reflect this new credit.
  • Regularly review your credit reports. One report is available free from each of the three credit bureaus per year. Immediately after a bankruptcy, it is important to check these reports to ensure that they reflect the bankruptcy and that they do not list balances due on debts or accounts that the bankruptcy eliminated. Dispute errors in the reports immediately.
  • Avoid making purchases on credit until your credit improves. You may file for and be able to obtain credit immediately after bankruptcy, but it will likely be from sub-prime lenders with high interest rates and fees. If you obtain credit on these terms, you may spend a lot of extraneous money. Hold off on making purchases on credit (particularly large ones like a house or car) until your credit score improves. In the long term, this will save you a lot of money in interest and fees.

Despite the sometimes negative consequences of bankruptcy, it is possible to overcome these hurdles in time with planning and patience. Contact a Kansas City bankruptcy lawyer at The Sader Law Firm to learn more about filing for bankruptcy and rebuilding your financial life afterwards.



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