December 22, 2014

Recovering from Bankruptcy

One of the most frequent questions I am asked has to do with recovering from bankruptcy. There is no hard and fast answer to this problem, but here are my observations:

1. Recovering from bankruptcy has become much easier in recent years than it was fifteen years ago.

2. Many lenders look to a potential borrower’s credit score, as opposed to looking at credit reports for specific red flags. Years ago, lenders had their own “scoring system” – the mere existence of a bankruptcy could result in turn down. Now, many lenders rely on the credit bureaus score which does not specifically identify whether someone has a bankruptcy. Thus, if you can get your credit score up, your bankruptcy will have no effect whatsoever for those lenders.

3. Many lenders realize that you are actually a far better credit risk after filing bankruptcy than before. After all, who would you rather loan money – someone who has $80,000 in credit card debt who might file bankruptcy tomorrow, or someone who just filed, has no debt and legally cannot file for 6 years?

4. If you work at restoring your credit after bankruptcy, you can get your credit score up within 6 months to a year.

5. Although the exact algorithms used by the credit bureaus are secret, it does appear that the weight (importance) assigned to a bankruptcy filing decreases as time goes by from your date of discharge.

6. A good first step to restoring credit is to get copies of your credit reports and challenge any entries which still show debt owing. Remember, credit reports are basically a history of your credit life. A bankruptcy can discharge your legal obligation to pay but it cannot change history. A credit history showing a zero balance and a bankruptcy discharge is better than a credit history showing (incorrectly) thousands of dollars of outstanding debt and a bankruptcy. Remember, creditors who have been discharged in bankruptcy are not going to make correcting your credit report a priority – you need to take an active role in this process.

7. Another helpful step is to find a secured credit card that becomes unsecured after four or five months of steady and timely payment. You can find secured credit card information on the Internet.

The following two tabs change content below.
Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

Page optimized by WP Minify WordPress Plugin