How to Rebuild Your Credit after Bankruptcy 

How to Rebuild Your Credit after Bankruptcy 

People often ask how to rebuild their credit after filing bankruptcy or how bankruptcy will affect their credit.  I am often asked if filing for bankruptcy will destroy credit for 10 years.  Most clients are surprised at how quickly their credit rebounds after filing their cases.  The ability to get a credit card or loan after filing is relatively easy to do.  Of course, we don’t recommend incurring debt during or immediately after filing but getting a credit card is typically achievable.  By getting a small secured credit line at your bank where you are putting in a collateral of cash in a deposit account can rebuild your credit. Additionally, becoming an authorized user on someone else’s credit card will also help build good credit history.

Making other payments such as your car payment on time will help rebuild your credit.  While it’s not unheard of to get a car loan upon filing for bankruptcy, most car lenders will require a discharge which happens 90 days after filing your case in order to get a car loan.  Bankruptcy allows you to surrender a car that is underwater without having to pay anything to the lender.  This allows people to buy a car outright or get new financing and a lower car payment without having to trade in a car with negative equity.

Regarding home loans, there are different types of home mortgages that you could be eligible for.  In order to qualify for a conventional mortgage, it can take anywhere from 2 years to 4 years from the date of your discharge.  To qualify for an FHA or VA loan, it may take as little as 1 year and up to 2 years from your date of discharge. I recommend once some time has passed after you receive your discharge to contact a licensed mortgage broker to see what type of loan you might be able to qualify for.

Should you have any questions, feel free to contact my office at (813) 463-8000 and we would be happy to answer any of your questions or concerns.

Bankruptcy vs. Debt Consolidation

Bankruptcy vs. Debt Consolidation

Let’s discuss in this article two types of bankruptcy filings, some of the bankruptcy eligibility requirements, major benefits to filing for bankruptcy and why this author finds it preferred in certain cases to file for bankruptcy Chapter 7 or Chapter 13 compared to a debt consolidation situation.

If you are eligible to file for a Chapter 7 bankruptcy that is always preferred to debt consolidation since it allows you to completely discharge all of your unsecured debt without having to repay it. It allows you to wipe the slate clean and restart your credit and life debt-free again.

There are certain income requirements to qualify for the Chapter 7 which is dependent on your household size. For a household size of 1 its $53,152, for a household size of 2 its $66,748, for a household size of 3 its $71,689, for a household size of 4 its $85,203. Those threshold amounts usually increase twice annually.

If you are only eligible to file a Chapter 13, you would be in a payment plan to the trustee. Potential clients are often under the impression that in a Chapter 13 you must pay 100% of your debt back. Some clients pay as little as 5% -10% of their total debt. Your payment is completely dependent on your income and expenses. Every client has different income, different payroll deductions and different expenses, therefore different plan payment amounts.

One of the major benefits to filing the bankruptcy is the automatic stay – creditors cannot sue you or pursue collection efforts against you while you are in bankruptcy which is not the case in debt consolidation. Second, potentially not all creditors file claims in the case and that debt gets discharged without a payment. Third, interest stops accruing when you file the bankruptcy, so you are not making interest only payments indefinitely and you know your plan will be completed in five years and you will be debt free.

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