Be Credit Wise After Filing Bankruptcy

After the changes to the bankruptcy code back in 2005 debtors are now required to complete pre-bankruptcy credit counseling and post-bankruptcy financial management courses when filing a Chapter 7 or a Chapter 13 bankruptcy. These counseling courses were designed to educate individuals on making better financial decisions in the future as well as to improve their credit worthiness.

Post-bankruptcy an individual can put their new found information to use and live on a budget while working to rebuild their credit. A good way to monitor their credit progress is to closely watch their credit scores. Federal law allows one credit report free of charge from each of the three major reporting agencies on an annual basis. The debtor will want to be sure that there are no mistakes on the reports, and if so, they should be reported and corrected as quickly as possible. It is not uncommon these days for a creditor to sell the debt to a collection company and for that company to in turn try to collect on the debt even though it was technically discharged in the bankruptcy. This practice is not legal but many aggressive collectors will harass the debtor and report this discharged debt to the credit agencies and ruin the debtor's credit scores that they are working so hard to rebuild. The individual does have recourse against these collectors and should report them immediately to the Fair Credit Reporting Agency for prosecution. Everyone that has gone through a personal bankruptcy has two priorities: to budget wisely and save money, and to rebuild their credit history. This may seem daunting, however, by keeping careful track of expenses and paying bills on time this can be accomplished.

After an individual's bankruptcy has been discharged they should wait at least six months before applying for home refinancing. Sure the debtor will receive offers for credit in the mail within a few months of their bankruptcy discharge, which can be a great way to establish and build a solid credit history. But when it comes to home refinancing, credit experts suggest waiting a minimum of six months or better yet, two years if at all possible. This will allow the debtor ample time to rebuild credit and show a record of making payments as obligated. When the individual decides the time is right to refinance, they may want to contact their current mortgage lender first. The lender may be able to provide the best overall loan package, especially if the debtor has made all of their scheduled payments on time. The individual should consider shopping around to compare interest rates, lender fees, and closing costs to find a mortgage that will improve their financial situation. The debtor should beware not to get tempted to tap into any equity they may have unless it is absolutely necessary.

The goal of rebuilding credit is to improve one's financial stability and not to increase their debt to unmanageable levels. By learning and implementing budget management, going through the process of rebuilding credit, and patient comparison shopping, a motivated person can obtain financial stability and become debt free after filing bankruptcy.