Rebuilding Your Credit

This article is designed to help you with some general advice about how to find your way back to the top after filing for bankruptcy.

What filing bankruptcy is all about:

Bankruptcy is a process whereby a person in crawl out of debt and start over again. The idea is to help out those who are in dire financial straits, and are in debt over their heads. The result is that you do not have to pay back most of your debts, you are debt free and can move on. The drawback is that it leaves a nasty stain on your credit report for the next ten years, making it hard to reestablish yourself and recover. You should seek advice from a bankruptcy lawyer about this.

Do I really have to wait another ten years before I can get a loan again?

No. As a matter of fact it is possible to get credit again almost immediately after filing for bankruptcy. However, it will be a bit more difficult. One possibility is to get a protected or pre-paid credit card which can be used by depositing money into it, like a bank debit card. This can help you rebuild your credit again, and establish yourself. After a while it can help you start to get loans and credit again before the ten years is up.

What about my debts?

One good thing about filing is that it gets rid of the creditors once and for all. They won't be bothering you anymore. Once all the paperwork is in and processed, it is illegal for them to keep harassing you. You have the law on your side! Your bankruptcy attorney will cover this.

Will everybody know that I filed?

No. Very few will actually know about it. Friends and family will only know if you tell them. However, since the file is accessible to the public it will be visible on your credit rating, and will be kept on file for ten years.

What are the changes I've been hearing about?

The original laws were passed in 1978, and were revised in 2005. The general idea of the new legislation is to make people who CAN pay some of their debts pay. The laws were being abused by those who could have paid. Here are the major changes that went into effect last year:

You have to meet certain requirements in order to be able to file bankruptcy. Your family income will be checked to ensure that it is below the state average. They also want to make sure that your family is able to make the regular payments.

You are required to submit your last year's tax return, in addition to all the other paperwork. A bankruptcy lawyer will explain this to you.

They also require that you have lived in the state in which you file for at least two years. The reason for this is that some states have more or less lenient laws.

Child support and alimony are the debts that have to be paid first

Credit After Bankruptcy. Is It Impossible?
If you are going to file for bankruptcy, it is true that you will not have very good credit after bankruptcy. However, this does not mean that you will never be able to get a loan again, and it certainly doesn't mean that you will never have a good credit history again. While it is true that there will be a short period of time during which it will be exceptionally hard to get credit, it is not true that you will have to wait for an entire ten years to get credit after bankruptcy.

For instance, if you do not have a lot of debt on your credit card, or if you have no debt on it at all, you may be able to keep your card. If you do not owe any money at all, then you do not even have to inform your credit card company about the bankruptcy - however, if they do find out that you are going through bankruptcy proceedings it is always possible that they could cancel your card anyway, just to make sure that you do not charge purchases to that card.

Most of the credit card companies will require that you affirm that you still owe money on the card before they will let you keep it. What this means is that you need to state that you will still be responsible for paying back the card balance, even if you have filed for bankruptcy.

One thing should be kept in mind: in the case of credit cards, this may result in very high monthly fees. You can also get new credit after you file for bankruptcy, however, this credit might be very hard to pay off due to the interest fees. If you are at all worried that you will not be able to pay off your credit cards in the future, then you should be wary about jumping right into new credit situations. However, if you are able to pay back your credit cards, then you will be able to start building better credit right away. Talk to your bankruptcy attorney about this.