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Will bankruptcy destroy my credit rating?

On Behalf of | Mar 22, 2024 | Bankruptcy Law

If you’re struggling with overwhelming debt, you might be thinking about whether bankruptcy is a viable option for you. It’s true that personal bankruptcy, particularly those filed under Chapter 7 of the bankruptcy code, can help you shed debt and reclaim your financial future. Yet, a lot of people who consider bankruptcy find themselves worried about the impact that a bankruptcy filing can have on their future. For example, a lot of these individuals worry that the mar on their record will prevent them from securing lines of credit later on, which could prevent them from owning a home or even buying a car.

It’s true that a successful bankruptcy will stick on your credit report for several years, perhaps even as long as 10 years. This, of course, will give creditors pause to extend loans to you, as they may view your bankruptcy as an indication that you struggle to adhere to your financial obligations. While you might have difficulties, then, securing the lines of credit that you want, you shouldn’t stress too much over this, as there are concrete steps that you can take to repair your credit and gain access to the loans that you need.

What can you do to rebuild your credit after bankruptcy?

The good news is that there are steps you can take to repair your credit more quickly. Here are some tips to do so:

  • Keep stable employment: Job hopping can look bad on your credit report, as it can be an indication that you have unsteady income. If you want to convince creditors that they should lend you money, then you should give them reassurances that you have stable income. Keeping a consistent and steady employment record can help here.
  • Use a co-signer: If you absolutely need a line of credit but can’t secure one on your own, you can probably still access the loan you need with the assistance of a co-signer. This gives the creditor comfort knowing that they can turn to someone else to make good on the debt if you’re unable to live up to your financial obligation.
  • Use a secured credit card: A secured credit card may be a good option for some people post-bankruptcy. For this type of card, your line of credit is backed by assets that you already have. In this way, if you don’t repay your credit card debt, then the credit card company can just take what you’ve used as collateral. In other words, this is a safe way of lending for the credit card company, but it also gives you the opportunity to show that you can be responsible with credit card debt.
  • Build an emergency fund: While the amount of savings you have may not have a direct impact on your credit score, it can indirectly affect it. This is because the more you have saved up, the less likely you are to struggle to repay any outstanding debt when a financial emergency arises.

If so, then you can continue to read our blog and our website for more information. The key takeaway is that there are ways to stem what few negative impacts you can experience from a bankruptcy filing. You just need to be prepared to address them in a careful and timely manner.