Bankruptcies are on the rise. Bankruptcy clients typically focus on getting the bankruptcy over with, and the relief it provides. However, it is important to remember that when all is said and done, a bankruptcy filer will be helping his future financial position immensely by beginning to work on rebuilding his credit.
For debtors who have filed a Chapter 7 bankruptcy, it is important to note that this will remain on your credit report for 10 years. The amount of debt and type of debt will not be listed on the credit report; rather it will state that the debt’s have been “discharged in a Chapter 7 bankruptcy.”
Chapter 13 bankruptcies take longer to remove from one’s credit report. The actual bankruptcy itself stays on for only seven years. However, this seven-year period does not officially begin until the debtor completes a Chapter 13 payment plan. Following through on this plan usually takes about five years. So if you have filed a Chapter 13 bankruptcy, it takes about 12 years to have it removed from your credit report.
It might seem like a long time before a bankruptcy will be cleared from your credit record, but it is important to immediately begin trying to rebuild your credit score. One of the first things you can do is apply for a secured credit card. Secured credit cards have a yearly fee and also require that the card holder make a deposit equal to the amount of the credit card’s limit.
While this might seem like a hassle and an expense and maybe even a little overwhelming to obtain, it is important to note that a secured credit card appears on a credit report like any other credit report. As the months go by, those on-time payments and lack of a credit card balance will reflect positively on your credit report. It may take as little as six months to see an improvement. Usually a non-secured credit card can be obtained about a year after filing for bankruptcy. This also will help improve a credit score. In addition, if the filer can qualify to purchase a vehicle or furniture and continue to make on-time payments, the credit score will continue to improve.
Typically, within two to three years, a bankruptcy filer who takes steps to rebuild his credit will have a score around 650 to 680. As negative credit history, (like late payments and charged off accounts) begin to drop off his credit, the score will increase even more.
Credit reporting agencies focus on the most recent three to five years of credit history. By establishing a recent, positive credit history as outlined above for three to five years, the older bankruptcy history will have an increasingly lessened affect on the filer’s credit score. It is a good idea for a bankruptcy filer to check his credit report once a year to ensure that it is correct. Often debts that should have been discharged in bankruptcy are not listed as such and should be corrected by contacting the credit reporting agency.
If you have filed for bankruptcy and also have a foreclosure on your credit, obtaining another mortgage can be very difficult. The foreclosure will stay on a credit report for seven years. Despite this, if the debtor continues to improve the credit score, this foreclosure won’t have as much impact if the filer wishes to apply for a new mortgage. A bankruptcy filer with a foreclosure may qualify for a new mortgage in about three to four years, provided that it has been at least two years since filing for bankruptcy.
Stephen Trezza has effectively managed a large number of cases, including many Arizona bankruptcy cases. For additional details regarding Tucson bankruptcy court, check out the FileBankruptcyinArizona website now.