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How to rebuild your credit after bankruptcy

Bankruptcy is a chance to reconcile the past with a fresh start. Reorganize debt and protect your assets from creditors. Regain firm financial footing. Rebuild your confidence and dignity.

It does not have to be so daunting because you are not alone. Almost 97% of bankruptcy filings are by people, not businesses. Make no mistake, the process will weaken your credit score, especially in the short term. It will take diligence and patience before convincing banks and credit card companies to lend you money again. But there is a way out.

Digging out of the hole

It generally takes 7 to 10 years to completely wipe bankruptcy off your credit report, but you should be eligible for traditional lending within two years – all of which is a critical step to rebuild your standing. But it is only the first step. There are other incremental and important ways to dig out of debt:

  • Obtain a secured credit card. Putting down a security deposit sets a credit limit you can borrow against and slowly improve your score.
  • Pay bills on time. Limit interest charges by paying credit cards in full and set-up auto-pay on your accounts to avoid late fees.
  • Limit your risks. Aggressive investing might have swamped you in the first place so do not create newer problems by overextending your credit.
  • Scrutinize your credit report. When your bankruptcy clears your outstanding debts, make sure your credit report reflects that.

Seize your second chance by showing you have learned valuable lessons about personal finances. Declaring bankruptcy reflects damage to your credit score, but it does not penalize failure. It protects your rights and reinforces the privileges you need for financial security and success. Most important, it allows you to rebuild your finances—including your credit.

Help is available

Managing money is demanding. Even well-educated, successful risk-takers can suddenly lose their jobs or suffer when their investments crash. Cash flow slows and you quickly fall behind on mortgages, investment properties and tuition. To avoid foreclosure and repossession, it might be necessary to file bankruptcy, but you do not have to fear it.

Because bankruptcy laws are complex and always evolving, it might be worth consulting with a qualified consumer attorney who can help you determine whether bankruptcy is a practical choice.