Hi, this is Michael Sandler with Fisher-Sandler and I am here again today talking about different topics in bankruptcy. Today I’d like to talk to you about “How Can I Rebuild My Credit After Bankruptcy“. In this situation, we’re talking about chapter 7 bankruptcy.
With chapter 7 you file your case, typically you’re discharged about a hundred days later. Then you need to start rebuilding your credit. It used to be that before the whole financial crash of 2006 2007 & 2008 that my clients would have their mailbox just flooded with credit card offers even before they got their discharge. The reason for that, of course, was that if they went from having a bunch of credit cards or other debt to having no debt the credit card company saw them as a really good risk. So it was actually easy to rebuild your credit back then because you could get a credit card easily.
I don’t hear that from clients anymore. What I do hear from clients is that their mailboxes are now flooded with offers to purchase cars after they file bankruptcy and they’re getting those in the mail before they even get their discharge. Getting a car loan is something that you might want to do.
A lot of times people come in and they have really high car loans. So we decide to surrender the car and cancel that loan altogether. Sometimes because they made a purchase which maybe was a little beyond their means or they had a car that went bad and they had to trade it in and build negative equity from the previous car into the current car. This of course just puts you behind the 8-ball that much more.
So if you are looking to get rid of the current car you have and get a new one. There are typically a lot of people out there that will make a loan to you. Now you are not going to get 0 or 1 or 2% interest. Most likely you’re not going to get that type of interest rate. You’re going to probably pay in the mid-teens and you’re not going to simply be able to get the loan until you actually get your discharge. Which is again about three months after you file. That’s one way you can rebuild their credit just by getting a car loan after you file a bankruptcy case.
Another thing to do is again to still get a credit card or to use it a bit every month either buy groceries, gas, something like that. Then pay it off at the end of the month. The only problem is again that credit card companies aren’t as willing to open accounts as they were prior to the whole financial crash. you may need to go to your bank and get a secured card. that’s the type of card where you give them a $500 deposit and they will give you a card with a $500 limit. Those accounts are reported to your credit report and it will be a positive reference going forward.
If you can get one or two or even three credit references moving forward. Then your credit should be sufficiently rebuilt in a year and a half to two years. This will help you to start qualifying for really good car loan rates on or around the two-year mark and even purchase a house. I’ve had plenty of clients just in the past year who have done that! If you have any other questions about your particular situation please shoot me an email or give me a call.
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