Rebuilding Credit after Bankruptcy: It Won’t Happen Overnight, but It Will Happen

As odd as it sounds, the first thing you need to do is begin rebuilding credit after bankruptcy and how to get this credit. You may be thinking, “How is that even a possibility?” It’s understandable to think that no lender will take a chance on you, now that your credit score is in the dumpster and you have a bankruptcy on your credit report.

The truth is, you can get credit, but you will be paying more – at first – to borrow money. Now is not the time to worry about which credit cards offer the lowest interest rates. As a “subprime borrower,” you represent a higher risk to lenders while rebuilding credit after bankruptcy. That means you will you have to find lenders willing to take a chance on you by giving you credit at higher interests rates and levying penalties for defaults. You can also apply for, and likely get, a secured credit card that will allow you to charge and repay on time. (A secured credit card forces you to put up the month you are charging against so, essentially, you are establishing credibility.)

When evaluated by a potential lender, they compare your income to the amount of debt you currently have. The reason why it won’t be as difficult as you think to get a loan after bankruptcy is because after Chapter 7 liquidation, you have significantly reduced your debt-to-income ratio. Additionally, since you won’t be able to apply for another Chapter 7 bankruptcy for another eight years, the lender may view you as less of a risk.

Same goes for those who file for Chapter 13 bankruptcy; the debt to income ratio is reduced. However, it will take longer to benefit from that considering the fact that you are still paying back creditors based on the established schedule.

If both cases, it’s critical to watch your spending; don’t try to over-borrow and don’t think that you have carte blanche to spend now that you don’t have the creditors calling. Make timely payments every month to help get back on track. Before you know it, your credit score will be enviable and lenders will be looking to give you credit at better terms.

For information about debt negotiation or bankruptcy, speak to the experienced lawyers at Garland & Mason, L.L.C.. We have helped countless people get back on financial track and we can do the same for you and your family.



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