Secrets For Repairing Credit After Bankruptcy

Secrets For Repairing Credit After Bankruptcy

A Few Quick Tips for Rebuilding Credit Post BK Despite how overwhelming bankruptcy may be on your credit, there are a few lesser known secrets that can help you rebuild and quickly repair your credit score.  There is not an exact order in which these steps should be followed; however every single one of these actions will help improve your credit score.  Over time, with good borrowing and spending habits, it is possible to 100% recover from a bankruptcy filing regardless if it is chapter 7 or 13.   Open a Bank Account – Make Timely Payments This may seem very obvious; however you would be surprised how many individuals post-bankruptcy move to a “cash only” system.  While there is absolutely nothing wrong with this philosophy, if the goal is to rebuild credit, using cash only to make payments will not help the process. Regardless if it is a checking or savings account, opening a bank account and using it to pay bills will keep your payment history visible to creditors and lenders.  This is a good thing from a credit score standpoint.  Remember from What Makes Up a FICO Credit Score that payment history is the largest factor at 35% of the credit score.   Open Credit Cards (3 is Magic #) The ideal situation is to open credit cards right before or during bankruptcy because prior to the BK showing up on your credit report it will be easier to get approved for unsecured lines of credit.  However based on amount owed, this may not be possible.  Post-bankruptcy if you cannot get approved for any unsecured credit card, go with a secured credit card, a opposed to cash.  This is the type of card that requires you to deposit funds in an account to establish spending limits.  It may seem somewhat futile; however this goes a long way to helping show credit worthiness. Additionally it is better to have small balances on credit cards instead of having them maxed out or zero.  Also be careful when applying for multiple cards in a short period, as this will generate inquires which will actually negatively affect your credit. Become an Authorized User on a “Good Credit” Account This does not give you access to the funds on the account, however it does allow you to borrow the good credit of the account holder.  This is an easy one to do as long as you...

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Bankruptcy Overview

Bankruptcy Overview

Two Most Popular Forms of BK Explained Bankruptcy is a federal court proceeding that will help eliminate or payback debt. It is a legally declared or recognized condition of insolvency. Bankruptcy can be utilized by individuals, married couples or businesses that are unable to pay their debts. Bankruptcy is for people that have absolutely no other method of paying back monies owed, and to prove this must pass a means test. Bankruptcy is the solution and legal method designed to forgive debt.   Bankruptcy Filing Requirements…   Undergoing a “means” test. Receiving debt counseling from an approved organization. Submitting a repayment plan. Attending a meeting with creditors.   There are 4 forms of bankruptcy but the two most commonly used forms are Chapter 7 and Chapter 13.   Chapter 7 Chapter 7 bankruptcy is designed to payback the creditors with what you currently have and give you a new start. This will stop the harassment of creditor’s calls and put you on the track to a new financial future. To qualify for Chapter 7 a person must make less than the median income for their area of residence. If they make more than this they can still qualify but they will have to take the means test. The means test is to assess if you are able to pay back the creditors in five years or less. Chapter 7 allows the client the ability to keep some possessions called “Exempt Items.” An exempt item is an item that is not accounted for in the bankruptcy proceedings. While exempt items vary from state to state, generally in Chapter 7 exempt items are the same regardless of the residing state. These items typically include: the primary residence, one vehicle, personal items, retirement savings in pension funds, 401Ks and IRAs. Individuals will only be allowed to keep their home and vehicle if they can afford those payments after bankruptcy.   Chapter 13 Chapter 13 is commonly for “high” income earners with “less” debt and is called the wage-earners bankruptcy. For Chapter 13, you will repay what you owe the creditors, although generally not the full amount. The repayment amount will be carefully calculated. You will be responsible for gathering documents and collecting financial information for all your bills and debts. This information will determine how much you can afford to pay to the creditors without going back into debt. The plan payments...

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