Life After Chapter 7 Bankruptcy

Learn how to rebuild your credit after Chapter 7 bankruptcy.

Chapter 7 bankruptcy can help you wipe out your unsecured debts and receive a fresh start. While bankruptcy can have a negative impact on your credit initially, in most cases you can start rebuilding your credit immediately after you receive a discharge. Read on to learn more about the steps you can take to rebuild your credit after Chapter 7 bankruptcy.

How Long Does Chapter 7 Bankruptcy Last?

In most cases, it takes approximately three to four months to complete a Chapter 7 bankruptcy and obtain a discharge. However, if you have a complex case or creditors object to your discharge, it can take longer. This means that you can complete your case quickly and begin rebuilding your credit right away.

How Long Does Chapter 7 Bankruptcy Remain on Your Credit Report?

A Chapter 7 bankruptcy will usually stay on your credit report for ten years. But in general, this does not prohibit you from obtaining new credit and moving on with your life.

In fact, most debtors start receiving new credit card offers shortly after they receive their discharge. Credit card companies realize that you are more likely to pay back your debts after bankruptcy because your discharge probably freed room in your budget and you cannot receive another discharge for many years. (To learn more, see Can You File for Bankruptcy Twice?)

Obtaining and Rebuilding Credit After Bankruptcy

As discussed, you will typically begin to receive new offers for credit after bankruptcy. However, be aware that many new credit card offers will have low limits and high interest rates. In addition, they may contain high annual fees. As a result, review the offer terms carefully before signing up for a new credit card after bankruptcy.

In general, a good way to start rebuilding your credit after bankruptcy is to get a secured credit card from your bank. When you get a secured credit card, you deposit a certain amount of money in the bank that acts as collateral for the card. In exchange, you have a line of credit equal to the amount in the account. A secured credit card allows you to rebuild your credit because your payments are typically reported on your credit.

In addition, make sure to check your credit report for mistakes after your discharge. If you notice a mistake on your credit report, have it corrected immediately as it can impede your efforts to rebuild your credit.

Make a Budget to Avoid a Future Bankruptcy

If you filed for bankruptcy to wipe out excessive credit card debt, review your spending habits and make a budget to help you avoid bankruptcy in the future. Make sure to follow your budget and avoid buying items on credit that you can’t afford to pay for in cash. If you take out new credit cards, pay off your account balance each month so that you don’t accrue interest.

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