I filed for bankruptcy. Now what?
So you have sat down with a Phoenix bankruptcy lawyer and gone through the bankruptcy process. Now you’re wondering, “What’s next?” Read on below to find answers to the following questions:
- What comes next after bankruptcy?
- How does bankruptcy affect my credit?
- Is rebuilding credit after bankruptcy impossible?
- How do I rebuild my credit?
What comes next after bankruptcy?
Now that you’ve officially filed for bankruptcy with a Phoenix bankruptcy attorney by your side, you’re probably feeling relieved. You can finally breathe again. No more calls from collection agencies or credit card companies. You’re finally free!
And now you’re ready to take the next step: rebuilding credit.
What to Expect Now
Your debts have been discharged and you can now start fresh. However, keep an eye out for these things:
- You’ll probably be flooded with “low-balance credit card” offers from creditors, suggesting rebuilding bad credit with their cards. In the fine print, you’ll notice large fees (activation fees, annual fees, membership fees, etc.) that could push you to the limit before you have even had a chance to use the card. Then late charges and interest could put you right back in debt. Don’t fall for it! Take your time and research cards before getting a new one.
- You won’t immediately qualify for most car loans and mortgages. However, within 2-3 years after debt discharge, you will most likely qualify again.
- The first loans and credit accounts you get after bankruptcy will most likely have higher interest rates and lower credit limits. This is due to your low credit score. Over time, this will have less of an impact and you can request lower interest rates.
If you’re wanting more specific advice on what to expect and how to rebuild your life after bankruptcy, contact the best bankruptcy attorney in Phoenix: Davis Miles McGuire, Gardner. Our dedicated team of Phoenix bankruptcy lawyers is ready to assist you through every step of bankruptcy.
How does bankruptcy affect my credit?
It’s important to understand that filing for bankruptcy does affect your credit.
After filing, a bankruptcy can stay on your credit report for up to 10 years.
- Chapter 13 bankruptcy credit report penalty: Lasts seven years from the date of final discharge
- Chapter 7 bankruptcy credit report penalty: Lasts ten years from the date of final discharge
Thankfully, the weight of these penalties decreases as time goes on.
The average credit score after bankruptcy ranges from 530-540.
Here’s how bankruptcy appears on your credit reports
Your credit score will drop after bankruptcy. While your debts are now discharged, the accounts will still show up on your credit report. However, they will be reported as “discharged” or “included in bankruptcy” with a $0 charge. Lenders will see this when looking at your report.
So what’s the impact to your credit score?
Note that having a higher score before bankruptcy means you’re likely to experience a larger impact. If you already have a lower score, there’s not much further for you to fall, meaning you may feel less impact.
No matter your credit score at the start, after filing for bankruptcy you will have a bad credit score. FICO scores cannot go any lower than 300, but it’s pretty rare for them to dip below 500.
An Arizona bankruptcy lawyer in Phoenix can help you better understand how bankruptcy may impact your credit.
Is rebuilding credit after bankruptcy impossible?
No. Believe it or not, bankruptcy is not a death sentence for your credit. Even if your bankruptcy dropped your credit score to 550 or lower, you can recover in as little as 12-18 months!
If your credit score dropped below 500, you can recover in 12-18 months.
How to Rebuild Credit After Bankruptcy
Now you’re ready to start rebuilding bad credit. Here are some things to keep in mind:
- Don’t jump into new credit cards just yet – Don’t sign up for any new credit cards before doing your research. As previously discussed, you don’t want to end up in the same boat again, with debt you can’t pay. Be careful.
- Download your FREE credit reports – Visit www.annualcreditreport.com and download your credit report from all 3 major agencies. You can download these for free once a year. Look at your score and make sure all discharged debts show a zero balance.
- Dispute any incorrect balances – If any discharged debts don’t show a zero balance or “paid,” dispute those items with each credit agency. Most of them will let you create a dispute online, which is quick and easy.
- Start a budget and stick to it – This is one of the best ways to start rebuilding credit after bankruptcy. Make sure your budget makes sense for your lifestyle and covers everything you need to keep you out of debt.
- Create an emergency fund – One of the best steps towards rebuilding bad credit is creating an emergency fund. Each month, you add money to it, like a savings account. You can only use the money in that account for emergencies, like medical problems or urgent home repairs.
- Pay your non-discharged debts on time – If you have debts that weren’t discharged through bankruptcy, you are still responsible for those. Make your payments in full, on time so you can begin rebuilding bad credit. Also don’t use over 30% of your available credit limit on any card you may still have.
- Consider a secured credit card – A “secured” credit card requires a small cash deposit in order to use the card. It works
A secured card requires a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500.
- Gradually take on new credit – Before jumping in, make sure you can afford the payments (and not just the minimum payments!). The key word here is “gradual.” Don’t open more than 1 account at a time within a six-month period, and try to wait until your credit score has risen to at least 650 before shopping around for rates.
We Can Help You with Credit Repair
At Davis Miles McGuire Gardner, PLLC, we are committed to providing our clients with the ultimate in professionalism, customer service, and client care. Whether you’re just starting the bankruptcy process, needing help rebuilding your credit, or are somewhere in the middle, our dedicated team of Phoenix bankruptcy lawyers can help you. Call us today at (844) 366-4529.
How Phoenix Residents Can Rebuild Credit after Bankruptcy | Davis Miles McGuire Gardner, PLLC – Phoenix, Arizona