Credit After Bankruptcy

Posted by Wesley Scott on May 7, 2019 at 9:00 AM
Wesley Scott

 How To Get Credit After Filing Chapter 13 BankruptcyMany people fear that filing bankruptcy means they will never be able to get a loan again—their credit will be ruined and they can kiss any future large purchases goodbye. Not so. Bankruptcy certainly affects credit, but the effects are not overwhelmingly dire, nor irreversible.

A bankruptcy will be on your credit report for ten years—there is no getting around that—but filing for bankruptcy counterintuitively immediately improves your credit score. This makes sense when you think about it a bit longer. Bankruptcy discharges debt, so people who file bankruptcy can find themselves with significantly reduced or no debt. A person with no debt automatically has better credit than they did when they were drowning in debt. Lenders are more likely to extend credit to people with less debt. Also, since bankruptcy cannot be filed again for a period of years, lenders have more confidence they will be repaid. 

This does not mean your post-bankruptcy credit will be excellent at the date of discharge, but it is already trending up. Besides, people in financial situations that require debt relief probably had continually declining credit before bankruptcy. Refusing bankruptcy to keep a bankruptcy off a credit report will be much more damaging to your credit in the long run if you continue to default on your loans.

Still, immediately after bankruptcy, debtors should focus on systematically rebuilding their credit. They may be able to get loans, but interest rates will be much higher for a time. It is best to work on your credit for a while before applying for new credit cards or asking for loans. Kain & Scott’s 90-Day Credit Repair Program can help you get back to good credit over time.

When the time is right reach out to Minnesota’s FRIENDLIEST bankruptcy law firm at www.kainscott.com. You will be glad you did!

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