Can You Rebuild your Credit If You File Bankruptcy?

    Yes, if you file bankruptcy you can most definitely rebuild your credit.  In fact, filing bankruptcy is the first step towards rebuilding your credit.  Bankruptcy can be the beginning of being responsible and taking control of your life.

    If your credit report indicates that you have late payments, those negative comments will remain on your credit report for seven years.  If you have a judgment against you, that judgment will be enforceable for up to 20 years.  In addition, the judgment will continue to appear on your credit report for seven years from either the time that you pay it or from the time that it expires.  Accordingly, a judgment can remain on your credit report for up to 27 years.  

    When you receive your discharge in bankruptcy, you will be either completely debt free or have your debts greatly reduced.  You will then be in a position to pay your bills on time and to save money.

    Although bankruptcy will remain on your credit report for 10 years, you need not wait 10 years to rebuild your credit.   If you reaffirmed a car loan or mortgage, your continued regular payments will help rebuild your credit. Additionally, you can use a secured credit card to start improving your credit report. When you obtain a secured credit card you give money to the credit card issuer for deposit in a savings account, which will be held as security in the event you don’t pay your credit card bill.  When opening such an account, make sure that the credit card company is legitimate.  I suggest that you select a well known company, such as Capital One, Providian or Direct Merchant.  Once you have established a good payment record, they will increase your credit line and eventually offer you an unsecured credit line. 

    You may also try applying for a credit card from a department store.  Those types of cards are easier to obtain. 

    But above all, be careful not to get into debt again.  I suggest that you limit yourself to no more than one or two major credit cards, one or two store cards and one gas card.  If you can’t pay your credit card bill in full at the end of the month, don’t use credit again until the bill is paid in full.

    Other ways to rebuild your life after filing for bankruptcy is to plan sound financial management, using the techniques you have learned in your court-mandated courses. You should budget yourself and start saving money, and put aside enough money to live on for at least two months if you lose your job.  You should save for your retirement (it’s never too early).  You should begin saving to buy a home.

    If you have followed the above advice, and have sufficient income, you may be able to purchase a home only a year or two after filing bankruptcy.  Others have done this and so can you.

Copyright © 2004-2008 by Jeffrey B. Peltz P.C.. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.