Advice After Bankruptcy

Filing for bankruptcy can eliminate the obligation to repay most of your debts. The effects of a bankruptcy are long lasting, and most people consider bankruptcy as a last alternative to debt problems. But even with a bankruptcy on your credit report, you can reverse the effects and rebuild your credit history.

Effects of Bankruptcy

Creditors and the court system will report your bankruptcy to the credit bureaus. This information remains on your credit report for up to 10 years. A bankruptcy on your public record can present challenges when applying for new credit accounts, such as mortgage or auto loans. If approved for financing, a bankruptcy generally warrants higher interest rates and some lenders may require a larger down payment. Bankruptcies may also affect employment opportunities and result in increased insurance premiums.

Secured Credit Cards

Building a better credit score after bankruptcy entails opening new credit accounts. Because your options are few after a bankruptcy, consider a secured credit card to help re-establish your personal credit history. Secured credit cards differ from other types of credit cards. They require opening a savings account with a bank and depositing a security deposit into this account. Creditors provide a credit limit that matches the deposited amount.

Reaffirming Debt

Filing bankruptcy doesn't necessarily mean removing all your debt obligations. You can choose to keep some of your debts and continue paying these creditors and lenders as agreed. For example, you can keep your car loan, mortgage loan, student loan and other debt obligations. Excluding debts and holding onto these obligations involve reaffirming debts. Keeping these accounts active and in good standing helps repair your credit score after a bankruptcy.

Pay Off Balances

Excessive debts and the inability to manage debts likely contribute to bankruptcy. Start anew and learn how to manage debt better to avoid a second bankruptcy filing. Use credit cards for emergencies only, and only apply for credit if necessary, and if you can afford the payments. Pay off credit card balances in full each month to avoid massive debt. As a rule, stay below 30 percent of your credit limit on credit cards.