Life After Bankruptcy

Ok, you filed your bankruptcy and you received a discharge of all your debts, now what?

Bankruptcy should be a two-step process, step one is to file the bankruptcy petition and obtain a discharge, and step two is to start rebuilding your credit. Once you filed your bankruptcy you may have received letters from all your credit cards saying that they are canceling your credit cards, even the credit cards that you were current on will cancel you.

Because credit means so much in America you want to begin rebuilding your credit as soon as possible.  Here are a few tips to help restore/rebuild your credit score:

Obtain a secured credit card

  • A secured credit card is a credit card that is secured by the amount of a deposit you provide the lender.  For example, to get a $500 secured credit card you must deposit $500 with the lender and on the chance that you default on any charges, the credit card company can take your security as payment.
  • Secured credit cards are one of the easiest and best ways to allow the debtor to rebuild their credit in a fast and efficient manner.
  • Companies that offer secure credit cards include:
    • Orchard Bank
    • Citibank
    • HSBC
    • Bank of America
    • Wells Fargo Bank
    • US Bank

Obtain a low limit credit card

  • Three months after your bankruptcy discharge you may receive and qualify for low limit unsecure credit cards.  This may be another way to rebuild your credit score.
  • These credit cards may limit your spending balances to $500-$1000 a month and may have extremely high-interest rates 25% or greater.
    • If you think you can use and pay for an unsecured credit card on time then this is a great method to rebuild credit because every month you pay for your debts the credit card company will report to your credit bureaus.
      • Failure to pay will allow the credit card companies to sue you and attempt to collect.  You will not have bankruptcy as an option again for many years (between four to eight years).

Continue to pay on reaffirmed debts

  • If you reaffirmed a debt in your bankruptcy then the continued payment on the reaffirmed debt will show up on your credit report as positive payments.

Pay all your regular house utility bills

  • Paying your utility bills (electricity, power, cable, water, sewer, cell phone) that are in your name will show up on your credit reports as positive payments.

Vehicle Purchase

  • If you are thinking of purchasing a vehicle, after you have filed for bankruptcy, then you may find it difficult to get approved right away.  Debtors who filed for bankruptcy have found that it takes them about one year after bankruptcy to obtain a vehicle loan.
    • Co-signers
      • If you have a co-signer (who has good credit) then you should easily be able to obtain a vehicle shortly after your bankruptcy is over.

Real Estate Purchases

  • If you are thinking of purchasing a home, after filing for bankruptcy,  you can get approved for an FHA home loan if the following conditions are met:
    • Two years after bankruptcy
    • Credit score of 650 or higher
    • 2.5% or more as a down payment