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Good credit can be restored after bankruptcy discharge

One fallacy about bankruptcy is that the debtor will never get credit again. That’s not true for the vast majority of people who have successfully completed a consumer bankruptcy. Whether you file in Arkansas or another federal bankruptcy district, there is a good likelihood that you’ll be able to restore credit fairly soon after the case is discharged.

However, you may want to move into that territory gradually. Give yourself time to readjust to a new way of looking at your budget and your finances. If you’ve just discharged and wiped out large amounts of credit card debt and/or medical bills in a Chapter 7 bankruptcy, it may be best to take on credit obligations in slow steps so that you can be certain of being able to handle the new obligations.

Because you’ve wiped out a great deal of debt, some creditors may solicit you to take their credit cards shortly after the case ends. You may receive mailers offering automobile loans. Generally, a person coming off of a bankruptcy may want to start with a small secured credit card.

The secured card requires a deposit to assure that the creditor is protected in the event of a default. When you’ve shown your ability to handle the obligation consistently over a 12 to 24 month period, the creditor may decide to increase the line of credit over the amount of the security being held. All progress in that direction shows up on the credit record as some kind of an increase in your score.

In Arkansas and elsewhere, debtors may reaffirm a car loan and even a home loan in a Chapter 7 bankruptcy under certain circumstances. If you reaffirmed such a loan, it is critical to keep up the payments. Paying regularly on such accounts, as well as on a secured credit card account, will result in an increased score and better credit. However, tread lightly when taking on another credit card. They must be paid perfectly – missed payments will taint the score that you worked so hard to build up again.

Source: Fox Business, "Credit Card Life After Bankruptcy", Erica Sandberg, Aug. 21, 2014

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