Chapter 7 bankruptcy is the most common form of consumer bankruptcy because the whole process—from filing to discharging debt—only takes about 3 to 6 months. Although bankruptcy can be extremely helpful for families who are overwhelmed with debt, many people choose not to file because they fear the effects that bankruptcy will have on their credit score. However, the truth is that leaving your debts unpaid will cause even more damage to your credit score and your family’s financial future than filing for bankruptcy.
Rebuilding Credit After Chapter 7 Bankruptcy
A Chapter 7 bankruptcy will stay on your credit report for 10 years; however, in most cases, this doesn’t affect your ability to build new credit and move on with your life. Here are a few steps you can take to help rebuild your credit.
Develop Sound Financial Habits
The last thing you want is to find yourself back in debt. Take a moment to reflect on your financial habits and see if there are any issues that might cause history to repeat itself. Do you have a budget in place? Do you have a way to track your spending? When you feel like you have a handle on your finances, you can move onto the next steps with confidence.
Watch Your Credit Report Closely
The Fair Credit Reporting Act (FRCA) gives you the right to request a free credit report every year from one of the three nationwide credit reporting companies—Equifax, Experian, and TransUnion. It’s in your best interests to monitor your credit report for any suspicious activity or flat-out mistakes. You’ll want to watch for signs of identity theft or fraud, such as new accounts that you didn’t open or collections activity that you weren’t aware of. If you do come across something, you can file a dispute with the three credit bureaus to clean up your report.
Apply for a Secured Credit Card
Many debtors start receiving credit card offers shortly after they receive their discharge. These offers will often have low limits and high interest rates, so it is important to review the offer terms carefully before signing up. You should be wary of most traditional credit card offers. Fortunately, there is a great alternative.
The best option to rebuild your credit is to open a secured credit card from your bank. A secured credit card is a credit card backed by a secured payment used as collateral on the account. This is a safe, simple method to rebuild your credit while avoiding high interest rates and annual fees. Similar to a prepaid debit card, whatever you deposit will serve as the credit line of the card, so you don’t have to worry about spending more than what you actually have. Ideally, you should try to use only 10-15% of your card’s total limit and pay your bill on time every month.
Seek Guidance from Our Experienced Fort Worth Bankruptcy Attorney!
If you’re concerned with your financial situation and you’re worried about how you will rebuild your credit after declaring bankruptcy, you can get the help and guidance you need from an experienced bankruptcy lawyer in Fort Worth. At Huebner Law Firm, PC, we understand that it is difficult to wrestle with enormous debt while providing for your family. We can help you make a path to financial freedom that suits your goals and your budget.
Become financially free by contacting us today at (817) 576-1889 for a consultation!