Rebuilding Credit After Bankruptcy

One of the biggest questions and concerns when filing for bankruptcy is how it will affect your credit score in the future. After filing bankruptcy in Illinois, your credit score will go down, there is no getting around that. Often, if you are considering filing for bankruptcy, it is likely that your credit score is already low, so the bankruptcy might not have a severe impact. However, after filing for bankruptcy, there are ways to rebuild your credit and set yourself up for future financial success.

Often, individuals who file for bankruptcy are worried that there will be no way to rebuild their credit after a Chapter 7 or Chapter 13 discharge. This is not correct. After a bankruptcy discharge, potential creditors might think that you are in a better position for financial obligations than before your discharge. It is not unlikely for individuals to receive credit card offers or even offers to finance a new automobile purchase. Therefore, you should not avoid bankruptcy to “protect your credit rating.” A bankruptcy is a huge decision and will affect your overall credit, but it should not be avoided in fear of future financial obligations.

Re-Establishing Credit After Bankruptcy

A bankruptcy will stay on your credit report for 10 years. This should not be a deterrent to filing, though. Late payments, foreclosure, and repossessions also have a negative effect on your credit rating and report. One of the purposes of bankruptcy discharges is to give you a “fresh start” and get back on your feet.

After filing for Chapter 7 bankruptcy, you are able to re-establish credit after you receive your discharge. Generally, you will receive a discharge about 60 days after filing the case. This means that after discharge you can start applying for different lines of credit. Some credit may be harder to obtain, such as a home loan or larger credit cards. If you reaffirmed any debt during the bankruptcy, such as a home mortgage or automobile loan, the payments that you continue to make will reflect positively on your credit score. Over time, more lines of credit will be available to you as long as you make payments on time.

Re-establishing credit after a Chapter 13 bankruptcy is a little different. Chapter 13 bankruptcies take anywhere from 36 to 60 months to complete. After the bankruptcy is confirmed, creditors are allowed to report negatively about you to different credit reporting agencies. The creditor does not need to report that you are paying as needed, but there will be a record of your bankruptcy instead. Any reaffirmed debt will continue to be reported to the credit reporting agencies. The court can grant permission for new credit during the Chapter 13. You may seek lines of credit without permission after your Chapter 13 case is discharged.

If you are considering filing for bankruptcy and have questions about the process, Hamilton & Antonsen, Ltd. can help. The Joliet bankruptcy attorneys have years of experience in filing bankruptcy petitions and helping you build a better credit future. Contact us today to have any of your questions answered.