Annual bankruptcy filings in 2022 totaled more than 387,000 according to the United States Courts. This represented a drop of 6.3% from 2021, down from more than 413,000. The most common type of bankruptcy filing in the U.S. continues to be Chapter 7, with more than 225,000 filings in 225,000.
Chapter 7 bankruptcy is a common type of bankruptcy that can clear away many types of unsecured debts. It is generally quick and enables filers to eliminate debts without repaying anything to creditors. It is considered a good option for people without valuable property or high income.
In this blog post, we will highlight the different steps you can take to repair credit after a Chapter 7 bankruptcy. Let’s get started.
How Long Does It Take To Rebuild Credit?
First things first, it’s worth asking and answering the above question. A bankruptcy stays on a person’s credit report for 10 years, however, in the case of a Chapter 7 liquidation bankruptcy, the filer immediately reduces their debt-to-income ratio. This could mean they are able to rebuild their credit score after Chapter 7 bankruptcy within a short period of time.
Because a person who has filed for Chapter 7 bankruptcy is unable to qualify for Chapter 7 for another 8 years, they may appear to be at a better risk immediately in the eyes of potential lenders.
Repairing Credit After Chapter 7 Bankruptcy
It is advised that you do not try to borrow money too quickly after a bankruptcy. It is important to focus on making on-time payments and keeping a close eye on your credit scores and reports. Making on-time payments is an important way to build credit.
Another option is to apply for a new line of credit, which can demonstrate you can responsibly make on-time payments as well as help your credit score. It’s recommended that you apply for credit lines that you know you can qualify for or apply to get pre-qualified.
Lenders may deem a person who has filed for Chapter 7 bankruptcy to be risky as a result of their credit past, making it difficult to apply for a loan. To increase your chances of getting approved, it can help to get a co-signer on a loan, given that their credit score is also considered.
When it comes to improving your finances after bankruptcy, it’s recommended that you build an emergency fund. This can help people to avoid falling back into the same debt pitfalls as before. Similarly, it is important to stick to a budget after bankruptcy, which helps to avoid accruing too much debt.
Rebuild Your Credit After Chapter 7 Bankruptcy
The bottom line is that following a Chapter 7 bankruptcy, a person’s credit score will be impacted. There are, however, a number of actions that people can take to rebuild their credit, including what we have highlighted above. Certainly one of the most effective ways is to consistently make on-time payments on existing credit cards and loans.
If you are interested in learning more about credit repair, speak to the expert team at Tony’s Credit Repair. Click here to schedule a free consultation today and learn more about how to fix credit after bankruptcy.