10 TIPS ON HOW TO REBUILD CREDIT AFTER BANKRUPTCY

  So, you filed bankruptcy, now what? The debts are gone, creditors have stopped calling, you still have your car, still living in your house. Everything is perfect, except your credit. As a bankruptcy attorney I hear these comments from satisfied clients on a daily basis. True, chapter 7 and chapter 13 bankruptcy both wipe out debt and yet that is only part of the benefit that the debtor realizes.

    Clients come to my office because they are drowning in debt and many of them take a solemn oath to never use another credit card as long as they live. My response startles them. I tell them that "they will be offered credit around 6 months after they file for bankruptcy and they should apply for it." After I  repeat myself and explain why it is a good idea to rebuild credit my advice usually sinks in.

   Some financial advisors, debt consultants, friends, spouses and family members go to great lengths to scold debtors after they file bankruptcy and opine that credit is bad. Nothing could be further from the truth. Abusing credit and piling up debt is bad. My clients come to my office at probably the worst time of their life. They are beaten down, depessed, overwhelmed and often defeated. Sometimes life just happens.

   Our firm motto is "We help good people get a fresh start." Life goes on after bankruptcy, credit worthiness is a necessity for most people. Rebuilding credit takes time, people with good credit pay less for insurance and houses and cars. Further, credit is needed to handle life's emergencies. Try renting a car in New York or at a major airport without a credit card. Credit is important, imagine receiving a phone call in the middle of the night because your child or family member has a financial emergency. Good credit is a necessity.

Here are 10 tips to responsibly and successfully rebuild credit:

1. Pay your utility bills and rent on time for at least a year.
2. Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money.
3. Find a friend or relative to cosign for you on a loan and pay it on time.
4. Look for car dealers and mortgage brokers that attest to be "bankruptcy friendly".
5. Buy a used car so you do not get hit with the depreciation that occurs during the first two years of a new car purchase.
6. Stay away from payday loans that are high interest rates and are a "bad credit" trap.
7. Write a letter to each credit reporting agency explaining the circumstances that lead to you filing.
8. Live within your means. Do not unnecessarily increase your debt to income ratio by taking on credit to purchase luxury items that you do not need. Your payments on consumer debt should equal no more than 20% of your expendable income after costs for housing and a vehicle.
9. Pay your reaffirmed, pre-bankruptcy debts on time.
10. Applying for store and gas credit cards that you would normally pay cash.

This blog post was written by Joseph W. Lehn, Esq. Attorney Lehn practices chapter 7 and chapter 13 bankruptcy in Sarasota, Manatee, Desoto, Charlotte and Lee county, Florida. Joseph W. Lehn is the managing partner of Lehn Law, P.A. with offices in Port Charlotte and Sarasota,Florida.