REBUILDING CREDIT AFTER A BANKRUPTCY
Although a Chapter 7 bankruptcy stays on your credit profile for 10 years, and a Chapter
13 bankruptcy stays on your credit profile for 7 years there is no need to wait any length
of time to rebuild your credit.
Here are some good ways to start rebuilding your credit right away:
1. A secured credit card. Many banks let you put a nominal sum in a savings account at
their bank (often as little as $100 or $200). They then issue you a Visa Card or
Mastercard with a credit limit which is double or triple the amount you have on deposit.
It is a good idea to get a secured credit card. (They are designed specifically for people
with bad credit and for those who have recently filed for bankruptcy). Charging things on
a secured credit card and making the monthly payment on time helps rebuild you credit.
(If you pay the full balance off each month you will incur no interest charges).
And, with a low credit limit (say, $500), you can't get in too much trouble. Also, you need
a credit card to order something over the phone or over the Internet, or to rent a car.
Finally, it is advisable to have at least one credit card card in case of an emergency.
2. Car loan. Even if you have just been discharged from a bankruptcy, you can still get a
car loan. The only catch is that if you are getting a car loan close in time to when you
completed your bankruptcy, you will probably get a high interest rate (Because of the high
interest rate, car dealers will be eager to give you a loan-- they make alot of extra money
on account of the high interest rate). To get a car loan after a bankruptcy, you will
probably need some proof that you have income-- ie. from employment or some other
source of income. And remember, after a banklruptcy, in a few respects you're not that
bad of a credit risk-- because you now have no (or few) outstanding debts and (if you've
just been discharged from a Chapter 7) you can't file a Chapter 7 again within the next six
years. Important tip to keep in mind: If you make your car loan payments on time for the
first year, most lenders will allow you to re-finance the loan down to a lower interest rate.
3. A mortgage. If you've just been discharged from a Chapter 7 bankruptcy, you have to
wait just two years and then you can apply for a mortgage without the bankruptcy being a
factor in the mortgage application-- This is the FHA's guidelines. (Some of my clients have
informed me that they've been able to get a mortgage a year after being discharged from
their Chapter 7. However, if only a year has elapsed from the time of discharge, you may
be charged an interest rate penalty.) Keep in mind-- after having completed a bankruptcy,
in some ways you are a better credit risk because you now have no (or very little)
outstandfing debt. This can improve your ability to get a mortgage. When someone
applies for a mortgage, the lender calculates a ratio, comparing the applicant's income to
their outstanding debt. A person with perfect credit can be turned down for a mortgage
due to having too much outstanding debt, as compared to their income (The bank is
thinking; "How are they going to be able to afford to make their mortgage payments with
the amout of debt that they already have?") The best situation to be in when applying for
a mortgage is to have a steady job (preferably two years or longer, with the same
employer) and as little debt as possible. And remember-- after your bankruptcy is over,
you will have no (or very little) outstanding debt.
Alan Pressman, Attorney At Law
1797 Veterans Highway Suite #22
Islandia, N. Y. 11749
(1/4 mile southeast of the Long Island Expressway, exit 57-- across from the Islandia
CALL TODAY FOR A FREE CONSULTATION!
I have been actively handling Chapter 7 and Chapter 13 bankruptcy cases on Long Island
since 1981. My practice is 100% handling bankruptcy cases. I am a solo practitioner
and, as such, will handle your case personally.
Thanks for taking the time to visit my website.
Copyright 2011, Alan Pressman Attorney At Law