How to Rebuild Your Credit After Chapter 13

Chapter 13 bankruptcies have become more common since 2005 federal laws changed the bankruptcy rules, making it harder to declare Chapter 7. Rebuilding your credit after a Chapter 13 bankruptcy is thus slightly different than rebuilding your credit following a standard bankruptcy. By following these tips, you can get on the right track and bounce back from a Chapter 13 bankruptcy.

Instructions

1

Stay on your payment plan. When you declare Chapter 13 bankruptcy, the court will put you on a payment plan in which you pay back a portion of your debts. You will want to make sure you stay on this plan. Not only are you legally bound to do so but the payments are reported on your credit report. This can help rebuild your credit. If you fail to make payments, this will show up on your report, making things worse. Failure to make payments could also result in additional legal action or even involuntary Chapter 7 bankruptcy, which will lower your credit score.

2

Open a credit card. You may have difficulty getting a credit card because of the bankruptcy, but this is an essential step to rebuilding credit. If necessary, get a secured card. This is a card that requires collateral in the form of cash, and your credit line is limited to the amount of money you put up. There may be a fee associated with opening the card and an annual fee; but, if this is the only card you can get, it's important to do so. Just make sure the card reports to the three major credit bureaus.

3

Make small charges on your credit card and pay the balance in full. This will help you build a positive record of on-time payments, which will raise your credit score. Some secured cards even have programs where the card converts to a standard card after a set period of timely payments. Just remember, you don't need to carry a balance on the card to build credit and you usually should not because most secured cards have high interest rates.

4

Wait. Nothing will help you rebuild your credit more than time. Eventually, your record of on-time payments and the credit card you opened will raise your credit score. Then, after ten years, your Chapter 13 bankruptcy will drop off of your credit report.