Rebuilding Credit After Bankruptcy

Bankruptcy is not right for everyone. If you have a lot of unsecured debt, like credit cards, it might be a great option. Particularly if you do not have a lot of assets. In those cases, at the end of the bankruptcy, the debtor walks out of the bankruptcy "clean" and free of debt.

No matter what your situation is heading into bankruptcy, rebuilding your credit after bankruptcy is going to take some legwork. That's why our Lowell Bankruptcy Lawyers make it a point to talk about your plan moving forward. An experienced bankruptcy attorney will explain this before you even decide that bankruptcy is right for you. At Marcotte Law Firm, our bankruptcy attorneys take this holistic approach to our Bankruptcy clients.

One of the reasons our Lowell Bankruptcy Lawyers always hear for not filing for bankruptcy is this concern that the client's credit will suffer, or that they will never get to buy a house, or other collateral issues. However, the collateral effects of filing for bankruptcy are not usually as bad as people think.

Your bankruptcy will tell you that a bankruptcy will be listed on the debtor's credit report for between 7 and 10 years. It will be there for seven years if it is a Chapter 13 Bankruptcy filing and ten years if it is a Chapter 7 Bankruptcy filing. Sounds terrible, right? Your Bankruptcy attorney will also tell you that if you continue to miss payments, that is going to be listed on your credit report too.

If you do not make timely payments the creditor is going to keep listing those missed times. Like the bankruptcy, those missed payments last for seven years. In a sense, you are better to rip the bandage off now and start rebuilding your credit after filing for bankruptcy.

Our bankruptcy attorneys always hear that our clients think a lender will never lend them money if they file for bankruptcy. That is wrong. Most credit card companies will allow the debtor to open a credit card following a bankruptcy. Is it going to have a high credit limit? No. Are the interest rates going to be high? Yes. But, this just a start and as you make timely payments, you will be eligible for more favorable rates and limits. Your bankruptcy lawyer should be able to help create a path forward.

By getting another credit card you can start rebuilding your credit by payments on time. In an ideal world, your credit card debt should never be more than 10% of your take home pay. The average income in Massachusetts is $43,761 per capita or $81,215 per household, which equates to roughly $29,174 and $54,143 after taxes. That means the average monthly credit card bill should be $243 per capita or $450 per month in the Commonwealth. 

Another way to rebuild your credit is to take time making regular payments on your home. After a bankruptcy, you have probably worked out a deal with the mortgage company to pay back what was owed. Take advantage of that and make timely payments. Even if you do not have a credit card, the mortgage company will certainly list whether payments were made timely. The same logic applies to car loans.

The worst thing to do is to wait until the bank is about to repossess your car or foreclose on the house. At that point, a bankruptcy attorney can still help, but your credit is already going to be in the weeds. 

Call the Lowell Bankruptcy Lawyers at Marcotte Law Firm today for a free consultation at (978) 458-1229 and we can advise whether a bankruptcy is in your best interests.