If you are thinking of filing for bankruptcy, it is important to give careful thought to the issue of credit after bankruptcy. If you have already filed, the steps to fix your credit rating are outlined below. You may be surprised at just how quickly you can move on- in America you always get a second chance.

Things to consider before Filing

Avoid being flagged for Deliberate Misuse of a Credit Card

Once you have filed for bankruptcy and a court has given its approval, your debts- including your credit card debts- are discharged. However, If a credit card company suspects that you knowingly ran up debt on one of their cards whilst intending to apply for bankruptcy it can apply to have the discharge revoked.

This can happen at any time up to a year after your bankruptcy or until your case is closed. You can oppose this process in court but you will probably need a lawyer which can be costly. If you lose, you will be liable to pay the full amount outstanding on the card.

The kinds of thing that will prompt a credit card company to initiate action against you:

• if you become unemployed but carry on spending as before.
• you spend unusually large cash amounts near to the time of bankruptcy counseling or any amount after that time,
• if you miss payments regularly and appear to lose interest in your credit rating near to bankruptcy.
• take large cash advances shortly before counselling
• a pattern of borrowing to pay off other cards will raise suspicions of deliberate abuse of credit.

If you lose your case, not only will this mean having to repay the debt or face issues like property seizures, it will also mean a more difficult time repairing credit. It is only when all your pre-bankruptcy debts are rated as zero and potential new creditors are sure you are not liable, that you can really start credit repair by taking on new debts.

Keeping a pre-existing Credit Card after Bankruptcy

If you have a card that has no debt, it is not necessary to declare it in a bankruptcy proceeding. Remember though, failing to declare even a small debt is considered perjury. Always discuss these issues with a lawyer.

Some credit card companies will allow you to keep a card with debt after bankruptcy, as long as you reaffirm the debt with them and sign a new agreement. Other companies will terminate the card immediately. Some will terminate a card which had no debt and wasn’t mentioned during filing as soon as it appears on your credit report. It is best to make enquiries with individual companies before filling.

After Filing

Why Repair Credit after Bankruptcy?

You might wonder why you should trouble to take on a credit card after bankruptcy. Certainly, living within your means should be the first priority and credit cards offer temptation to go beyond that. Well, if your income permits, it might be just a few years (sometimes 18 months) before you could be approved for a home loan on the same terms as your pre- bankruptcy agreements but only if you have established a new credit history.

Also, any kind of credit history will help you get lower insurance rates for cars or personal possessions.

If you have been stripped of all your credit cards, the first step is to find a credit card company that will accept you. This is not as difficult as you may think- offers of cards will flood in soon after filing. The credit market is short of clients right now. As debt free people, fresh bankrupts are targeted by companies looking to build business, though inevitably they will want high APRs.

The wisest way to use these cards is to spend very little-say ten dollars a month- and make the minimum repayments without ever missing a month. This will cost you very little and even if your income is small now, it will enable you take immediate advantage of any upturn in fortunes in a year or two’s time.

Checking Your Credit Reports

A bankruptcy will appear on your credit history for ten years. This will not necessarily prejudice future credit applications, if you have reestablished your credit history. What will count against you are any inaccurate reports of unpaid or un-discharged debts.

It is easy to get a free copy of your credit history and also easy to challenge any mistaken black marks set against your name (see links below). If a credit reporting company cannot confirm the accuracy of a bad report they are legally obliged to remove it under the Fair Credit Reporting Act. 

Things to avoid

Companies offering seminars on dealing with bankruptcy are springing up all over. At best these will only offer advice that can be had free from reputable legal websites or government publications. (see links below)

Any behaviors that led to your initial bankruptcy. Of course, for many people the whole responsiblity rests elsewhere and only a return to normal trading times will fix the issues.

Video Guide

The series of videos below are a good guide to fixing credit after bankruptcy. See the related videos that appear after step one to get all five.

Useful Links

General resources

uscourts.gov/faqs.htm

FAQ from US government web site. Reliable information on almost every aspect of bankruptcy

Free Credit Reports

annualcreditreport.com You are entitled to three free credit reports per year.

Legal Aid

Lawhelp helps low and middle income families with legal advice and is a portal to America's nonprofit legal aid providers. At present organisations of this kind are struggling to cope with the number of cases but the online advice is free.

lawhelp.org/

Advice on the Laws surrounding Bankruptcy in Plain English

moranlaw.net/postbrcredit.htm

Advice for Seniors

Seniors have been hard hit by the economic downturn and this articles focuses on this groups paticular issues.

consumerlaw.org/issues/seniors_initiative