What Will Going Bankrupt Do To Your Credit Rating?

What Will Going Bankrupt Do To Your Credit Rating?

The answer really depends on how you go about filing for bankruptcy. Most people believe it is all doom and gloom and that you cannot have credit after you go bankrupt but this is not the case. Before you file your application, apply for a credit card. Don’t use it but keep it in your home. If you have no outstanding balance on the credit card you don’t need to put the details on your bankruptcy application. Most credit card companies won’t know when a customer goes into Chapter 7 or Chapter 13 unless they are due money. When your case has been settled and your debts wiped out assuming you went Chapter 7 or you have entered into a repayment arrangement under Chapter 13 you can start using your credit card. Make sure you repay the balance in full every month so that you don’t run up any credit balance. This will help to re-establish your credit rating and start improving your credit score.

Some people believe that filing for Chapter 13 has a better effect on your credit score than filing for Chapter 7 but the reality may prove different. If your debts are cleared in full under Chapter 7 you are starting with a clean slate so to speak so you should have more money to spend and therefore will be in a position to build up your credit rating faster. The first step you need to take is to build up a savings record so that you can prove that you are now financially disciplined. If you need a credit card, for example for online transactions consider using one of the prepaid credit cards on the market. But don’t use it unless you really need to as the rates of interest and fees for having the account are very high.  Your attorney and his bankruptcy paralegal will be able to give you some good ideas on how to rebuild credit as they will have first hand knowledge of your personal circumstances.


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