Reestablishing credit after bankruptcy is one of the most anxious issues after an individual files for bankruptcy. It is also, why most people are apprehensive about filing for bankruptcy. An individual can be faced with so many concerns and questions after bankruptcy that it can leave him/her in the dark about future credit options. In realistic terms, it is a setback to an individual's credit report but it does not have to mean the end of good credit in the future. A person that files for bankruptcy can attain credit in a relatively short amount of time after a bankruptcy filing. The most common way is either through secured or even unsecured credit.
Once the bankruptcy is finalized, credit offers will start pouring in. Some offers will have outrageously high interest rates, high annual fees, or require a secured amount placed in a savings account. If the individual holds out, he/she will start to see offers that are more competitive. This is the chance to rebuild credit after bankruptcy. A person trying to reestablish credit should be responsible and carful with their second chance. That means not taking out too much credit or accepting every credit card offer that is received in the mail. Paying bills on time also goes a long way towards restoring credit after bankruptcy.
The best way to stay on top of credit is to create a budget and stick to it. The individual has to honestly consider what a maintainable amount of credit is and make every effort to stay within those established parameters.
- The FHA will insure mortgages to individuals who have filed for Chapter 7 liquidation bankruptcy two years after the discharge as long as the borrower has re-established good credit.
- The VA includes provisions that state that if the bankruptcy was discharged more than two years prior to the loan application, the bankruptcy may be disregarded. VA rules allow granting of a loan guarantee to a person in Chapter 13 when the plan payments are complete, or after 12 months of payments if the Trustee or the Bankruptcy Judge approves the new credit.
If you or a loved one has filed for bankruptcy or is considering bankruptcy, you should talk to a qualified bankruptcy attorney to make sure you understand your rights and obligation under the bankruptcy code. A bankruptcy lawyer can also answer any questions you may have about your options for reestablishing credit after bankruptcy.