Vail A. Kaufman, P.A.
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Tips for Rebuilding Credit After Bankruptcy

One of the and most asked questions from clients considering bankruptcy is "Will I be able to rebuild my credit after bankruptcy?"

The answer to the question is anyone who files bankruptcy will have the opportunity to rebuild his/her credit.  

Credit agencies are allowed to report a bankruptcy on your credit report for up to ten years following the date of filing of a Chapter 7 and seven years after the filing of a Chapter 13.

Even though credit agencies are able to report this information on your credit report that does not mean you are unable to obtain credit following a bankruptcty.

Following a discharge in a Chapter 7 bankruptcy, you will receive multiple credit card offers.  In actuality, the client receives more opportunities to receive a new credit card then you had before the bankruptcy filining.

This is because of a simple fact.  

A debtor cannot file a Chapter 7 bankruptcy for eight years following the filing of a previous Chapter 7 in which the debtor received a discharge.  

So, if you receive a discharge in Chapter 7, you have to wait for eight years from the date you filed in order to file another Chapter 7.  You are the safest credit risk because you are stuck with any new debt you incur for eight years.

If you are coming out of a Chapter 13 bankruptcy, you cannot file a Chapter 7 for six years from the date of filing and a cannot file another Chapter 13 for two years, but this is even more complicated because a court will likely not approve your plan if your still actively in another Chapter 13 plan.

As for other types of credit, client's often are given many opportunities to receive car loans following a discharge in bankruptcy.  

Mortgages are not as easily obtained following a bankruptcy and your ability to get one depends on many factors.  

Typically, a private loan will require a debtor to wait four years following a discharge in Chapter 7 and two years after a discharge in Chapter 13.  If your Chapter 13 does not receive a discharge, you are required to wait four years from the date of dismissal.  

USDA loans and VHA loans have different waiting periods.  UDSA requires a three year waiting period from a Chapter 7 discharge and 12 months waiting period from a Chapter 13 discharge.  VHA requires a two year waiting period from a Chapter 7 Discharge and you can actually receive a VHA loan in Chapter 13 after your first 12 months of successful plan payments.

The waiting period is not the only factor in a mortgage decision.  Your ability to build positive credit through new credit cards, auto loans, on-time bill payment and any other types of credit will be a large determining factor in the approval process for a mortgage.

The best ways to rebuild credit following bankruptcy and achieve your financial goals are simple:

1) Pay off your credit card balances monthly

2) Make sure your auto loan payments are on time and current

3) Avoid high-interest loans for cars with any hidden fees

4) Do not sign up for credit cards that charge an annual fee or extremely high interest rates

5) Budget accordingly to keep track of your income.  This will let you know what you can afford in terms of a car or miscellaneous expenses.

6) Make sure mortgage payments are on time and current

Following some simple steps and using some financial caution will result in you quickly rebuilding your credit score following a bankruptcy.  

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Vail A. Kaufman, P.A.
8955 Edmonston Road
Suite A
Greenbelt, MD 20770

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Phone: 301-850-2470
Fax: 301-513-0434
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