What to expect after your Bankruptcy

We have found that credit scores routinely will increase as much as fifty points after the bankruptcy has been filed since all or most debts have been eliminated and your debt to income ration has been substantially decreased. Still, in order to improve your credit, there are a number of things that you can do:

• Learn to pay your bills on time

• Try to use only a small amount of the credit that you have available

• Make sure that you do not apply for too much credit at the same time

• Regularly check your credit report, this is free if you go to the government mandated website, www.annualcreditreport.com

• Make sure that all debts that were listed in bankruptcy are listed as “included in bankruptcy” on your credit report. You may find that there are other errors on your credit report and now is a good time to repair those.

For myself, as a young practicing attorney, I noticed that a judgment was recorded against me when in fact I was merely the attorney representing the defendant. After a fair amount of effort, I was able to correct my report. Without fixing that error, I could not even qualify to get a cell phone.

The first credit card that you will be able to get will likely be a “secured credit card” wherein you deposit money into a bank account and are given a credit card to use to make purchases. This is similar to a debit card.

When you get your secured credit card, you may only have limits of $200.00 to $500.00 depending upon how much you deposit in order to get the card. Make sure that you do not use all of the available credit that you have since maxing out your credit card will hurt your final credit score. Try not to charge more than 30% of your credit limit and it will be even better if you were to fully pay off the balance every month.

When you apply for your secured credit card, make sure that there is no application fee and only a reasonable annual fee. Make certain that your secured credit card will convert to an unsecured card after 12 to 18 months of you making your regular and timely payments. And finally, what good is a good credit score if they don’t report it to the three major bureaus? So make sure that Equifax, TransUnion and Experian will be notified of your timely payments.

Don’t forget that student loan obligations are almost never dischargeable in bankruptcy. Since you are no longer making credit card payments on your discharged credit card debts, you may want to make larger payments to your student loans so that you can pay them off sooner. Because the loan payments are being made timely, you will improve your credit score that much quicker.

Before the banking crisis of 2008, we could confidently advise people that they could obtain residential home mortgages for 8% right after their discharge in bankruptcy and after two years would qualify for a FHA loan. While banking policies are still being developed, it is safe to say that 2 or 3 years of good credit history after your discharge in bankruptcy will allow you to get a low-interest rate residential home loan.

Bottom line, after your debts are discharged in bankruptcy and after you have established a pattern of timely payments on those debts that were not discharged in bankruptcy, your fresh start will come quicker than what you might otherwise have believed.