Tips to hasten credit repair after filing for bankruptcy relief

March 22, 2013 (Press-News.org) Tips to hasten credit repair after filing for bankruptcy relief

Article provided by Costello & Costello, P.C.
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According to the Federal Judiciary, over one million Americans filed for bankruptcy relief in 2012 alone. Bankruptcy petitions were designed by Congress to offer petitioners who qualify for protection with the ability to discharge debts and begin on a fresh financially.

Those who seek protections from creditors through bankruptcy relief can also rest assured knowing their credit scores will recover. Although filing for bankruptcy will likely initially have a negative impact on one's credit score, it will bounce back. In fact, consumers can take proactive steps to help speed up the credit repair process.

Tips on rebuilding credit

A consumer can rebuild credit by establishing that he or she can manage debt. This is done by responsibly paying bills on time. One step that can hasten this process involves taking out a credit card. It may seem counterintuitive, but taking out a credit card shortly after receiving bankruptcy relief can actually help rebuild credit. A consumer's credit score is positively impacted whenever credit card debt is paid off on time.

Consumers that are concerned about making payments on time could opt for a secured credit card. Secured credit cards are similar to prepaid cards. Consumers load the cards with cash, and the cash amount on the card becomes the card's credit limit. This keeps consumers from spending more than they have.

In addition to taking out credit cards, simply paying monthly bills on time also builds one's credit score. These bills include rent and utilities.

Realities of bankruptcies impact on credit

Myths are rampant surrounding the negative impact of a bankruptcy petition on one's future. One myth concerns the ability to purchase a home after receiving bankruptcy relief. Some falsely believe a home cannot be purchased for 7 to 10 years after a filing. In reality, some filers have been able to purchase a home in as little as a year.

The Federal Housing Administration can guarantee a home loan as little as one year after a chapter 13 and two years after a chapter 7 bankruptcy filing. These FHA loans offer extra insurance to lenders, allowing lenders more flexibility to provide potential homeowners with better deals.

In addition to qualifying for FHA loans, some loan service companies will reduce the wait time associated with a bankruptcy petition if the relief was granted in connection to a one-time occurrence. Examples include divorce or death of a spouse.

Those who are considering filing for bankruptcy relief should rest assured knowing their credit scores can be rebuilt. If you or a loved one is struggling to manage overwhelming debt, contact an experienced bankruptcy attorney to discuss your situation and better determine if bankruptcy is the right option for you.