Personal bankruptcy and rebuilding your credit

Personal bankruptcy is often traumatic; it is the net result of months or years of an inability to pay debts sufficiently and it is usually the final option of consumers who are in over their heads financially. In a bankruptcy filing, the courts will generally wipe out all debts and obligations, excepting student loans, child support, spousal support and back taxes. After debt relief in court, you are free of your burden of debt, but you are also, unfortunately, free of accessible credit.

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A lack of credit after bankruptcy can cause a lot of problems. Landlords want to rent to consumers who can pay their bills, so you can expect a credit inquiry if you want to rent a place to live. If you need a phone, the telephone company will want to look at your credit history. If you seek work, your employer will check your credit record.

Building a new credit history will not be easy or speedy, but it can be accomplished and it is not all that hard. If you no longer have decent credit, you have to create credit all over again.
 

It is possible to speed up the process a bit if you know a person with great credit who will be willing to set you up as an authorized user on one of his or her bank cards. Just having your name on the account will help you rebuild your credit. As long as the account holder pays their bills regularly and when they are due, you will benefit. You do not have to use the account and you do not have to pay the bills. All they have to do is put you on the account. The downside, obviously, is that you could be negatively affected if your friend who owns the account does not pay it.

Repairing your credit report may be a tedious, time consuming process, but it is very important to ensure that your credit report is correct. Acquire a copy of your credit record and make sure that your debts are marked as discharged. If your report suggests your previous debts as current, you have to cleanup your credit report by contacting the three bureaus and notifying them that your debts have been forgiven.

A lot of people who leave bankruptcy court are surprised to notice that the credit card companies market credit accounts to the bankrupt. The rate of interest offered will probably be in the vicinity of 30% per year, your credit limit will probably be rather low, and the annual fee will be quite steep. When you get out of court, you may not have your debts wiped out again for eight years, so anything you charge during that time must be repaid. Offering credit cards to consumers who are recently out of debt relief court may appear unusual, but the credit card companies' explanations are sound ones. Credit card advertisements to the freshly bankrupt are no bargain, but if you accept, and make small and regular purchases and pay your statements every month and on time, you can steadily repair that damaged credit score.

The time spent rebuilding a credit score is well worth it, as you will reap benefits for a long time to come. Repairing credit is a difficult task and it may seem scary to anyone who is coming out of court.