If you are drowning in debt, you may be considering bankruptcy to get rid of it and have the opportunity to rebuild your finances from scratch. Certainly, bankruptcy can be very helpful in regaining control of your financial life, but you should keep in mind that after you receive your discharge, your credit will be severely impacted by the process.
The bankruptcy will remain on your credit report for up to 10 years, but its impact will fade over time. In fact, it is possible that sometime after your bankruptcy filing, your credit score will be even higher than it was before because you made the decision to stop fighting against debts you couldn’t afford to pay and decided to get a fresh start. To do that, you should know what you need to do to rebuild your credit after your bankruptcy filing. Keep reading to learn more!
If you need help with your bankruptcy filing or need advice during the process of rebuilding your credit, speaking with a Los Angeles bankruptcy attorney, such as KT Bankruptcy Lawyer, could be very helpful. This law firm is always available to help you, so feel free to contact them for a completely free consultation.
Track your credit score
It’s smart to review your credit score each month to evaluate your progress. This will tell you when you’re on the right track and when you need to make adjustments to reach your goal.
Keep up with your remaining debt
While bankruptcy will eliminate most of your debts, it will not erase all of them. A crucial step in rebuilding your credit is to keep up with the debts that survived the bankruptcy (which are often referred to as secured debts).
Seek a useful credit product
After filing for bankruptcy, you may not be considered a reliable borrower by lenders. Therefore, you will have to work to assure that you will repay the money you borrow and that you will not lose it. Some credit products that can help you achieve this are the following:
Secure loans or Credit-building loans: These are usually offered by credit unions or community banks. It involves receiving a loan against what you have on deposit at the bank, so you can start rebuilding your credit score after bankruptcy.
Secured credit cards: This type of credit card is backed by what you have on deposit at the bank. However, it comes with annual fees and high-interest rates, but you would only use it to fix your credit until you are eligible for an unsecured card again.
Avoid credit repairs companies
You may see many advertisements or receive e-mails from “credit repair companies” that claim to be able to remove the bankruptcy from your credit report. Don’t be fooled, these companies can’t do anything for you. They may file a dispute in exchange for your money, but that won’t do anything for you. The bankruptcy will go off your credit report on its own after 10 years. In the meantime, you should worry about building your financial future.
Consider a co-signer
You can ask a family member or friend who has a good credit score to co-sign for you. Basically, this person will be pledging to pay the loan if you are unable to do so. This is a big ask since the other person will be risking his or her money and credit score for you. However, this can help you rebuild your credit much more quickly. Just make sure you can afford to repay the loan and keep in mind that not doing so could damage your relationship with the other person permanently.
Understand that it will take time
Time heals everything, including your credit report. Keep in mind that eventually negative information, such as your bankruptcy filing, will fall off your credit report. In the meantime, you should be concerned about filling it with positive information to increase your credit score.
Keep learning about the law on Legal Facts!
If you want to learn more about bankruptcy or any other legal topic that might interest you, visit Legalfacts.org. Here you’ll find up-to-date legal information on all types of legal issues and easy-to-read articles that will help you understand the law without spending hours to do so. You can also connect with bankruptcy lawyers near you who are ready to help.