The Elephant in the Room: Re-establishing Good Credit After Bankruptcy - Westgate Law

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The Elephant in the Room: Re-establishing Good Credit After Bankruptcy

There’s no use ignoring the elephant in the room. At some point in your life, you’re going to want to have access to some form of credit, but you’ve just declared bankruptcy. It’s a double-edged sword of moving on after bankruptcy. The mismanagement of credit is often a part of the problem that led to declaring bankruptcy in the first place, but in order to successfully rebuild your financial health, you’ll need to get credit.

Once your bankruptcy has been discharged (you’ll receive official notification of the discharge), you need to immediately make plans and take action to re-establish your good credit. (Right away for Chapter 7 or after the reorganization is completed for Chapter 13). There are no rules set in stone for how to do this. How fast you rebuild your credit is dependent upon a number of factors and post-bankruptcy situations vary greatly.

If you have access to a lot of resources, you may be able to rebuild your credit faster. If you have a high income you’re ahead of the game. If you were able to retain your home ownerships, paying your mortgage on time each month will make a difference in improving your credit score (as long as the loan was reaffirmed while your bankruptcy was active). If the loan was not reaffirmed, then future payments will not be reported to the credit reporting agencies by your home lender.

It seems strange, but individuals who file for Chapter 7 will often have an easier time re-establishing good credit. They can start the process of creating positive reports to the credit bureaus immediately upon receiving their discharge while Chapter 13 filers need to wait until they complete reorganization terms (3-5 years). During the reorganization of a Chapter 13, the filer’s options are fairly limited when it comes to opportunities for credit. Once you fulfill the terms agreed upon for the reorganization, you can begin repairing damage done to your credit, but someone who filed for Chapter 7 at the same time will already be well on their way to enjoying good credit again.

If you need to discuss your options and the difference between Chapter 7 and Chapter 13 call one of the experienced bankruptcy attorneys at Westgate Law today.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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