How long does it take to rebuild your credit after a bankruptcy?

On Behalf of | Sep 21, 2021 | Bankruptcy Law |

Filing for bankruptcy is an aggressive debt solution ideal for those dealing with aggressive creditors. If a company wants to repossess your vehicle, foreclose on your house or take you to court over an unpaid debt, then filing for personal bankruptcy might be the appropriate response.

You can avoid a lien against your house, the lender reclaiming collateral property or a garnishment of your wages with a timely bankruptcy filing. The automatic stay granted by the courts when you initially file will stop repossession and foreclosure efforts while also leading to the dismissal of pending lawsuits.

However, when you file for bankruptcy, you will immediately limit your credit options. How long does it take to rebuild credit after a bankruptcy?

You will probably start getting credit offers shortly after your discharge

When you finish your repayment plan in a Chapter 13 proceeding or receive your discharge after a Chapter 7 filing, you no longer have to worry about the balances on your discharged debts. Still, you probably won’t have any revolving lines of credit, which can make balancing your household budget a little difficult.

There are credit card companies that specifically target those who have recently filed for bankruptcy. You may need to pay a security deposit and likely won’t have the best financing terms, but you could have a credit card again within a month or two of your discharge.

Proactive credit habits will make rebuilding easy

If you have not already started doing so, your bankruptcy discharge is an ideal time to start checking your credit report. There are numerous free services that allow you to review your credit report and credit score. You can also request a free copy of your credit report from each of the bureaus annually.

In addition to keeping an eye on your credit report and credit score, you will need to cultivate good practices with new lines of credit. When you do get a new credit card, make sure you pay off the balance in full every month. Trying to keep the balance to only a third or less of the total available credit is also wise.

With several well-maintained credit sources and a habit of checking on your credit report, you may find that your credit score goes back to where it was before bankruptcy within two to five years of your discharge. By the time your bankruptcy comes off of your credit report, your credit score could easily be higher than it was prior to bankruptcy.

Thinking about your long-term financial goals can help you handle the process of rebuilding your credit after a bankruptcy filing.



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