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Reestablishing Your Credit After Bankruptcy

Posted on in Bankruptcy
Reestablishing Your Credit After Bankruptcy

Those who need to rid themselves of their debt or are unable to pay off their debt may consider filing for federal bankruptcy. Individuals, municipalities, businesses, international parties, and even family farmers are able to file bankruptcy in federal court. When the court grants bankruptcy petitions, the debtor is resolved of debt in its entirety or is provided with a plan to pay off the debt over time. Although this may be beneficial to debtors, there is the remaining fear of how one's credit will be evaluated following bankruptcy. Reestablishing one's credit after filing for bankruptcy is important for financial recovery and security.

What Will Bankruptcy Do to Your Credit?

Initially, it will be difficult to rebuild your credit. Having bankruptcy on your financial record will often lead lenders to require you to pay more to borrow money. Such debtors may face:

  • Higher interest rates
  • Increased fines for missed payments
  • Penalties for defaults

Will You Be Able to File for Bankruptcy Again?

Once you have filed for federal bankruptcy, you lose the ability to file for bankruptcy again for a certain number of years. This ensures creditors that you are taking steps to ensure financial security as planned through the initial bankruptcy proceeding.

Are There Benefits to Being Able to Rebuild Your Credit?

Although it is challenging to rebuild your credit following a bankruptcy proceeding, the opportunity to reestablish your credit may prove to be the best option. Following a bankruptcy proceeding, debtors are often able to be better equipped to manage their finances in a more efficient manner. In some instances of proper money management, a debtor may be able to refinance out of its bankruptcy.

What Should You Do to Reestablish Credit?

Rather than quickly borrowing money for expenses, it is often best to rebuild credit by making timely payments over time. This allows loans to be on more favorable terms, increasing your credit score and making you more attractive as a borrower to lenders.

It is also recommended that, following a bankruptcy proceeding, debtors begin to set aside an emergency fund. This fund, which can be in the form of a savings account, will allow a debtor to set aside money over time to provide further financial security. In the event that another financial crisis occurs, you will be better equipped to handle the situation.

Some financial advisers also recommend opening a secure credit card account following a bankruptcy proceeding. Making a deposit into the account will allow the bank to provide you with a credit line. After the credit line has been established, you may make payments over time to pay off your credit card debts and, in turn, rebuild your credit.

Are You Recovering From Bankruptcy?

Filing for federal bankruptcy may seem like a daunting task, as you risk losing your assets, your money, and the struggle of rebuilding your credit following the proceeding. However, with proper financial and legal guidance you will be able to recover after your bankruptcy proceeding. The attorneys at the Newland & Newland are highly experienced in bankruptcy proceedings, and can provide the financial and legal guidance you need from start to finish, to post-bankruptcy. Contact our office today to schedule your consultation.

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