Rebuilding Your Credit 2018-05-23T21:58:35+00:00

Rebuilding Your Credit

Improving your Credit Score after Bankruptcy in Mesa, AZ

Contrary to numerous bankruptcy myths, you will be able to rebuild your credit once your bankruptcy case has concluded. The process of restoring your credit rating can take time, but with diligence and proper management of your finances, your credit score can be improved.

Some of the steps you can take to regain your credit ranking include:

  • Getting a secured credit card . Most banks and credit unions will allow you to acquire a secured credit card, which involves giving them a specified amount of money to hold. In exchange, they will issue you a card with a credit limit that of the amount you deposited to secure the card.
  • Pay all of your remaining bills on time. Once your bankruptcy case has finished, paying any current bills on time is vital, and will show creditors that you have your finances under control.
  • Monitor your credit report. Make sure that the information on your credit report is accurate, including bankruptcy and post-bankruptcy data. Errors can slow down the credit rebuilding process, and should be corrected immediately.

Rebuilding your credit will also depend on your ability to live within your means and not spend more than you make. Preparing and sticking to a budget can help you keep your spending on track. If you are considering bankruptcy, speaking with a Mesa bankruptcy lawyer can be extremely beneficial. Knowing ahead of time what your life will be like after bankruptcy is important when it comes to financial planning and credit rebuilding.

Rebuilding Bankruptcy Credit in Phoenix

Those considering bankruptcy frequently worry that they will never get credit after a bankruptcy, or that it will be 10 years before they can get credit. Neither is true. Obtaining credit after bankruptcy is easy and strongly recommended.

  • Can I keep a credit card?
  • Can I get new credit?
  • Can I ever buy a home?
  • Is my credit record ruined?

Can I keep a credit card out of the bankruptcy for use later?

If you owe money on a credit card at the time you file bankruptcy, you must list the card as a debt. Remember, the schedules are filed under penalty of perjury: perjury in connection with your case can lead to denial of discharge of all of your debts. It is also a federal crime. Besides, credit card debt is not something that is worth reaffirming since you will have plenty of new credit card offers after you file your bankruptcy.

You do not have to list the credit card as a debt in your bankruptcy if you have a zero balance when we file your bankruptcy. Note, however, that they may find out through other means and cancel the card as a precaution, or raise the interest rate on you. American Express is notorious for this.

Even though most credit card companies will allow you to keep their credit card for use after bankruptcy if you agree to reaffirm the balance on the card and enter into a new agreement, signed after the bankruptcy filing – it is often a very bad idea to do this because when you complete your final payment to them on your balance they can cancel your card, raise your interest rate, etc. We never recommend that you reaffirm a credit card unless it is beyond absolutely necessary for business purposes. The decision is up to the creditor, but most creditors want to avoid the loss incurred when the debt is discharged, and wantyour future business.

Our experience is also that newly discharged debtors are frequently solicited for new cards!

Can I get new credit after bankruptcy?

In today’s competitive lending environment, credit is available to everyone, especially the recently bankrupt. It may be more expensive than before in terms of higher interest rates, and available with lower limits, but it will be offered. A secured credit card is usually available post bankruptcy at lower rates than unsecured cards. Secured cards are also better scored on your credit report than unsecured cards. A secured credit card is a prepaid credit card obtained at a bank. You can simply put a sum of money down (i.e. $500) and use the card for up to $500.

Rebuilding credit worthiness after bankruptcy is extremely important and a matter of obtaining a toe-hold in the credit world and treating that credit with respect. Use credit cautiously and pay on time. Use secured credit cards.

Can I buy a house after filing bankruptcy?

Absolutely! In Arizona, studies show that 18-24 months after a bankruptcy discharge, bankruptcy debtors can qualify for a loan with the same terms as if they had never filed bankruptcy. That means that the lender will be much more interested in your down payment, the stability of your income, and the relationship between the loan payments and your monthly income than your past financial troubles. Remember that your debt to income ratio is now extremely positive after a bankruptcy. Your debt to income ratio is a huge factor in obtaining credit.

Is my credit record ruined by filing bankruptcy?

It depends on how perfect your credit score is prior to the bankruptcy! In my opinion, bankruptcy is no more harmful to your credit score than the financial circumstances that lead to the bankruptcy filing. For example, if you have been through a foreclosure your credit is already worse than it would ever be through a bankruptcy. Not paying on credit cards, or simply having too much debt may all lead to terrible credit scores. I believe it is much more important for your future financial health to look at your net worth (assets minus debts) than at your ability to borrow in the future. Your ability to borrow in the future is easy to re-establish.

Most debtors in bankruptcy proceedings, even those who have never missed a payment, couldn’t get new credit from a lender who truly looked at their financial condition. So the fact that there are no negatives on their credit report is only marginally meaningful when looking at the whole picture. Remember the debt to income ratio we discussed earlier. Bankruptcy at least makes all the debt shown in the negative history unenforceable. Objectively, a debtor is a far better credit risk after bankruptcy than before. Subjectively, credit managers are individuals who may not always understand bankruptcy or look beyond its negative aspects; except in our current financial crisis a bankruptcy is very understandable.

Remember that a bankruptcy is not going to erase the record of your debts listed in your bankruptcy. Credit reporting agencies are within their rights in showing accurate history about your financial affairs. You want to make sure that the bankruptcy discharge also shows on the credit report so that creditors understand that those old creditors have no legal claim remaining. Correct any errors on your credit report.

Bankruptcy Attorney in Arizona

If you are looking for a way out of debt, an attorney from Dodge & Vega, PLC can give you valuable legal advice regarding your financial situation. We have successfully represented many clients in bankruptcy cases, and know the difficulties a person faces when they can no longer pay their bills. Our firm will explore all of your debt relief options, and explain their pros and cons. We are committed to helping you resolve your financial situation, and will provide whatever legal support and assistance you need.

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