The past year has been hard financially on many in Miami. Furloughs, layoffs and a tough economy spelt financial disaster for many. Even those who have since been able to return to work may find it is at reduced pay or reduced hours. When it comes time to decide which bills to pay and which to put off another month some people may consider filing for bankruptcy. However, they may be concerned about how the bankruptcy filing will affect their credit, especially if they plan on getting a mortgage or a car loan once they are back on their feet. Fortunately, there are ways to rebuild your credit following bankruptcy.
How will filing for bankruptcy affect your credit?
It must be said: bankruptcy will affect your credit, at least for a while. A Chapter 7 bankruptcy will show up on your credit report for as many as 10 years. Discharged debts that showed up on your credit report before you filed for bankruptcy will stay on your credit report for seven years from the date of delinquency. Discharged debts that were not reported on your credit report prior to filing for bankruptcy will stay on your credit report for seven years starting from the date you filed for bankruptcy.
A Chapter 13 bankruptcy will show up on your credit report for as many as seven years. Discharged debts that showed up on your credit report before you filed for bankruptcy will stay on your credit report for seven years from the date of delinquency. Discharged debts that were not on your credit report prior to filing for bankruptcy will appear on your credit report and will fall off at the same time as your Chapter 13 bankruptcy.
How to rebuild credit following bankruptcy
There are ways you can proactively boost your credit score even if you filed for bankruptcy. First, take a look at your credit report periodically to ensure that any errors are fixed and that discharged debts are listed as having a zero balance. Second, always make payments on any remaining debts on time. Late payments could have a negative impact on a credit score that has already been damaged. Third, ensure your credit utilization ratio — the amount of credit you use versus the amount of credit available to you — stays low. Fourth, consider obtaining a secured credit card that requires a security deposit to serve as your credit limit. If that is not an option, see if you can become an authorized user on another person’s credit card, such as a family member or good friend.
Learn more about bankruptcy
Bankruptcy is not something to be dreaded. It can be a good way to settle unmanageable debt so you can move forward on fresh financial footing. This post is for educational purposes only and does not contain legal advice. Our firm’s webpage on life after bankruptcy may be a useful resource for those who want further information on this topic.