Reestablishing Credit Post-Bankruptcy via a Secured Credit Card

Reestablishing credit following a bankruptcy filing is fairly straight forward although it can take some time.

First, the debts listed in your bankruptcy filing are deleted from your credit history in either 7 or 10 years.  In a Chapter 13 bankruptcy, the debts are deleted (7) seven years from the filing date. In a Chapter 7 bankruptcy, the debts are deleted (10) ten years from the filing date.  Both are considerably long time periods.

Second, while there are strict rules in place regarding a Debtor taking on new debt while in a Chapter 13 case that must be followed, it is possible to do so.  It is certainly permissible after the filing a Chapter 7 case.  Making on-time payments on newly acquired debt after filing will assist you in rebuilding your credit.

One strategy Debtors often employ is the use of a secured credit card.  What is a secured credit card?  In short, it is a line of credit that requires a refundable security deposit.

Like any other credit card, you first have to apply and get approved.  Secured credit card applications are similar to other credit card applications in that they require basic financial information and a credit check. But they differ in that a secured credit card application will also require your bank account and routing number in order to submit the refundable security deposit.

Once you’re approved and make your deposit, a secured credit card functions much like its unsecured counterpart: You receive a statement each month and you should try to pay your balance in full by the due date to avoid interest charges on new purchases.

Faithful on-time payments will result in an increased credit score over time.  Once the credit score has risen, it may then become an option to obtain an unsecured credit card.  You may decide that a secured card provides a structured credit ceiling that assists in the management of spending.  Either way, you have been active in positively influencing your credit score and not simply waiting for the debts to fall off your credit history.

Should you need to consult a bankruptcy lawyer to discuss a new financial beginning, please call Winslow & McCurry at (804) 423-1382.